Ill 
 
 ..111, 

 
 UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES 
 
 SCHOOL OF LAW 
 LIBRARY
 
 A TEEATISE 
 
 LAW OF RAILKOAD 
 
 AND OTHER 
 
 
 CORPORATE SECURPWES^cujrt 
 
 INCLUDING 
 
 MUNICIPAL AID BONDS. 
 
 BT 
 
 LEONARD A. JONES, 
 
 AUTHOR OF A TREATISE ON MORTGAGES. 
 
 BOSTON: 
 
 HOUGHTON, OSGOOD AND COMPANY. 
 
 Zi)c nitocrgtoc prc£& €nmbri&8C. 
 
 1879.
 
 Copyright, 1879, 
 By LEONARD A. JONES. 
 
 RIVERSIDE, CAMBRIDGE: 
 PRINTED BY H. O. HOUGHTON AND COMPANY.
 
 TO THE HONORABLE 
 
 JOH^ F. DILLON, LL. D., 
 
 $ucg£ of % Circuit Court of tbt Suittb States, 
 
 IN TESTIMONY OF THE ESTEEM WHICH THE AUTHOR SHARES WITH 
 
 THE PROFESSION FOR TOUR JUDICIAL OPINIONS AND LEGAL 
 
 WRITINGS UPON THE SUBJECTS HERE CONSIDERED, 
 
 C&tfi Creatine 
 is INSCRIBED. 
 
 75601?
 
 PREFACE. 
 
 The author, in writing his Treatise on the Law of Mortgages 
 of Real Property, at first intended to follow out the application of 
 the general law of the subject to mortgages made by railroad com- 
 panies and similar corporations ; but he found that any treatment 
 he could give these special topics within the limits of that work 
 would, from its brevity, be wholty unsatisfactory. This fact, to- 
 gether with the consideration that nearly all the adjudications 
 upon corporate mortgages relate to matters mostly foreign to the 
 general Law of Mortgages, led the author to omit these matters 
 from his work upon the general subject. The present volume is 
 intended to make good that omission. 
 
 It has been the purpose of the author not to include in the pres- 
 ent treatise subjects elementary or general in the Law of Mort- 
 gages. The public nature of railroad and other like corporations, 
 having public duties to perform, in return for the franchises 
 granted them, and the nature and extent of their property, have 
 introduced into mortgages of their franchises and property new 
 elements of law which have now developed into a separate branch 
 of jurisprudence. A glance at the Table of Contents of this vol- 
 ume will show how widely the topics considered differ from those 
 which arise under ordinary mortgages ; and even when the titles 
 are the same, an examination of the contents will generally show 
 that, as applied to these corporate securities, the substance of the 
 law is different. 
 
 The securities considered in this book are of quite recent ori- 
 gin. For the most part they are the outgrowth of the recent ex- 
 traordinary development of the railroad system of this country. 
 Prior to the year 18G0, the courts had only in a few instances 
 been called upon to enforce Railroad Mortgages; and the discs ad- 
 judicated since the year 1870 are far more numerous than all that 
 
 v
 
 PREFACE. 
 
 had been decided before that time. It could therefore hardly be 
 expected that the law of the subject should in so short a time 
 have developed into a complete and harmonious system. Yet it 
 seems that no very important divisions of the subject remain un- 
 considered ; while the leading principles of the law have been as 
 fully and conclusively settled as they will be after a century of 
 adjudications. It has been a very fortunate circumstance in the 
 growth of this branch of jurisprudence that the courts leading the 
 way in it have generally been of the highest authority, both in 
 position and ability. The Supreme Court and the several Circuit 
 Courts of the United States have, directly and indirectly, had the 
 larger share of the responsibility of moulding the law of these 
 securities ; and hence there is less diversity of opinion in it than 
 there would have been had the courts of the several states in the 
 first place passed upon the subjects independently. 
 
 But while the present development of the law of corporate se- 
 curities is such as to render possible a systematic statement of it, 
 the decisions are not so numerous as to debar the author from a 
 separate statement and examination of the most important of 
 them, or from quoting freely from the opinions of learned judges 
 to explain and confirm new and leading principles. A great many 
 of the cases have been of such magnitude, both in the public and 
 the private interests involved, that they have compelled the most 
 careful and elaborate attention, both by counsel in their prepa- 
 ration and by courts in their determination ; and for this reason 
 also the facts of the cases and the judgments of the courts com- 
 mand a careful examination. Thus it is that the present treatise 
 differs somewhat from the author's work on Mortgages, in consid- 
 ering particular cases with greater fulness of statement and illus- 
 tration ; but it is believed that this mode of treatment will en- 
 hance rather than diminish the usefulness of the work. In the 
 future, as the decided points become more numerous, the state- 
 ment of the law will necessarily be more restricted to principles. 
 
 Within a few years the legislation affecting railroad mortgages 
 has become voluminous. In nearly all the States there have been 
 enacted, in different terms, general statutes authorizing railroad 
 companies to convey their franchises and property in mortgage ; 
 statutes giving laborers and contractors special liens upon rail- 
 roads for work done and materials used in their construction or 
 repair ; and statutes authorizing the purchasers of railroads upon 
 vi
 
 PREFACE. 
 
 foreclosure sales to organize new corporations to hold and operate 
 them. There have also been enacted numerous statutes relating 
 to mortgages of rolling stock ; to the making of foreclosure sales ; 
 to the rights and duties of mortgage trustees, and to the appoint- 
 ment of receivers. The granting of municipal aid to railroads has 
 been either the subject of constitutional or legislative provisions 
 in almost all the States. A statement of the principal features 
 of the statutory law of the subject has been deemed hardly less 
 important than a full presentation of the decisions of the courts. 
 
 Leonard A. Jones. 
 
 Boston, February 7, 1879. 
 
 vii
 
 TABLE OF CONTENTS. 
 
 CHAPTER I. 
 
 POWER OF CORPORATIONS TO MORTGAGE THEIR PROPERTY AND FRAN- 
 CHISES. 
 
 SECTION 
 
 I. When Legislative Authority is essential to a Mortgage of Cor- 
 porate Property and Franchises 1-25 
 
 II. Statutes authorizing Railroad Companies to mortgage their 
 
 Property and Franchises 26-67 
 
 CHAPTER II. 
 
 FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 I. Common Kinds of Corporate Mortgages .... 
 II. Equitable Mortgages 
 
 III. Statutory Liens and Mortgages 
 
 IV. Who may execute a Corporate Mortgage .... 
 V. Construction of various Provisions of Corporate Mortgages 
 
 68-72 
 73-77 
 
 78-83 
 84-88 
 89-98 
 
 CHAPTER III. 
 
 PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 I. What is embraced in a Mortgage of the Undertaking . . 99-103 
 II. What Property passes as Appurtenant to the Franchise . . 104-108 
 
 III. What Personal Property passes as Fixtures or Parts of the 
 
 Realty 109-113 
 
 IV. What is covered by a Mortgage of the Tolls and Income of a 
 
 Railroad 114-120 
 
 CHAPTER IV. 
 
 MORTGAGES OF AFTER- ACQtH II Kl> PROPERTY. 
 
 I. Principles upon which After-acquired Property may be charged 121-127 
 II. What Terms are Sufficient to include After-acquired Property 128-141 
 III. Mortgages attach t<> After-acquired Property Bubject to Liens 
 
 upon it when acquired . 142-145 
 
 ix
 
 TABLE OF CONTENTS. 
 CHAPTER V. 
 
 LEGAL NATURE OF ROLLING STOCK OF RAILROADS. 
 
 SECTION 
 
 I. After-acquired Rolling Stock is subject to Mortgage . . 146-153 
 
 II. Rolling Stock regarded as Fixtures ...... 154-163 
 
 III. Rolling Stock regarded as Personal Property . . . 164-170 
 
 IV. Constitutional and Statutory Provisions regarding Rolling Stock 171-187 
 
 CHAPTER VI. 
 
 MORTGAGE BONDS OF CORPORATIONS. 
 
 I. Formalities in making and issuing Bonds ..... 188-196 
 
 II. Negotiability of Corporate Bonds 197-210 
 
 III. Incomplete and Altered Bonds 211-216 
 
 IV. Remedies upon Corporate Bonds 217-221 
 
 CHAPTER VII. 
 
 MUNICIPAL BONDS IN AID OF RAILROAD AND OTHER CORPORATIONS. 
 
 I. Power of Municipalities to issue Negotiable Bonds in Aid of Pri- 
 vate Corporations 222-230 
 
 II. Constitutional and Statutory Provisions respecting Municipal 
 
 Aid to Corporations 231-266 
 
 HI. Conditions Precedent to granting Municipal Aid . . . 267-277 
 IV. Ratification of Bonds irregularly issued, and Waiver of Condi- 
 tions 278-282 
 
 V. Negotiability of Municipal Securities 283-286 
 
 VI. Rights of bond fide Holders of Negotiable Bonds of Munici- 
 palities • . . 287-299 
 
 VII. Enforcement of Municipal Bonds 300-305 
 
 CHAPTER VIII. 
 
 PROMISSORY NOTES AND UNSECURED BONDS OF CORPORATIONS. 
 
 I. Promissory Notes of Corporations 306-311 
 
 II. Unsecured Bonds of Corporations 312-316 
 
 CHAPTER IX. 
 
 INTEREST AND INTEREST COUPONS. 
 
 I. The Contract to pay Interest 317-320 
 
 II. Negotiability of Coupons 321-326 
 
 III. Order of Payment of Coupons 327-331 
 
 IV. Interest on Overdue Coupons and Bonds 332-336 
 
 V. Suits upon Coupons 337-340 
 
 X
 
 TABLE OF CONTENTS. 
 CHAPTER X. 
 
 CONTRACTS OF GUARANTY AND INDORSEMENT. 
 
 SECTION 
 
 I. Nature of the Contracts of Guaranty and Indorsement . . 341-349 
 II. Corporations cannot enter into the Contracts without Legislative 
 
 Authority 350-356 
 
 CHAPTER XL 
 
 THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 I. Nature of the Trust assumed by Mortgage Trustees . . . 357-362 
 
 II. Effect of Notice to Mortgage Trustees 363,364 
 
 III. Rights of Mortgage Trustees in Possession 365-370 
 
 IV. Removal of Trustees and filling of Vacancies . . . 371-376 
 V. Statutory Provisions regulating the Duties of Mortgage Trus- 
 tees, and the choosing of New Trustees .... 377-382 
 
 CHAPTER XII. 
 
 PAYMENT AND REDEMPTION. 
 
 I. Stipulation for Payment in Gold or Currency .... 383, 384 
 
 II. Changes in Form and Amount of Debt 385-388 
 
 HI. Payment of Lost Bonds 389 
 
 IV. Subrogation 390-394 
 
 V. Redemption 395-397 
 
 CHAPTER XIII. 
 
 REMEDIES AND JURISDICTION OF COURTS FOR ENFORCEMENT OF CORPO- 
 RATE SECURITIES. 
 
 I. The several Remedies to enforce Corporate Securities are cumu- 
 
 lative 398-405 
 
 II. Jurisdiction of State and Federal Courts of Suits against Cor- 
 
 porations 406-414 
 
 III. Effect of Consolidation of Railroad Corporations upon the Juris- 
 
 diction of Suits against them 415-420 
 
 IV. In Cases of Concurrent Jurisdiction, the Court which first as- 
 
 sumes Jurisdiction retains it 421,422 
 
 V. Sale of Franchise or Property of Railroad Company on Execution 423-430 
 
 CHAPTER XIV. 
 
 FORECLOSURE PROCEEDINGS DNDEB COUPORATE MORTGAGES. 
 I. Parties Plaintiff 431-487 
 
 II. Parties D-fcndant 438-448 
 
 III. Defences 449-451 
 
 IV. Decrees 452-455 
 
 xi
 
 TABLE OF CONTENTS. 
 CHAPTER XV. 
 
 THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 SECTION" 
 
 I. Grounds for the Appointment of Receivers . . . . . 456-479 
 
 II. Selection of Receivers 480-482 
 
 III. Jurisdiction of Receivers 483-492 
 
 CHAPTER XVI. 
 
 THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 I. The Title and Power of a Receiver in general . . . 493-498 
 II. A Receiver cannot be sued without leave of the Court appoint- 
 ing him 499-508 
 
 III. A Receiver's Liability to Suit for the Negligence of his Employees 509-515 
 
 IV. The Company itself is not liable after the Receiver has assumed 
 
 Control 516-520 
 
 V. Discharge and Removal of Receiver 521-526 
 
 VI. Compensation and Account of Receiver 527-530 
 
 CHAPTER XVII. 
 
 RECEIVERS' DEBTS AND CERTIFICATES. 
 
 I. For what Purposes Receivers may be authorized to incur Debts 
 
 and issue Certificates 533-538 
 
 II. Priority of Receivers' Certificates 539-544 
 
 III. Negotiability of Receivers' Certificates ..... 545, 546 
 
 CHAPTER XVIII. 
 
 DEBTS OF MORTGAGE TRUSTEES IN POSSESSION. 
 
 I. Right of Trustees to Repayment of their Debts and Expenses out 
 
 of the Trust Fund ........ 547-555 
 
 II. Liability of Trustees operating a Railroad as Common Carriers . 556 
 
 CHAPTER XIX. 
 
 THE PRIORITY OF RAILROAD MORTGAGES NOT AFFECTED BY EQUITIES 
 ARISING SUBSEQUENTLY. 
 
 I. Equities of Employees 557-561 
 
 II. Equities of Contractors and Material-men 562-565 
 
 III. Equities Under subsequent Contracts and Leases . • . 566-569 
 
 IV. Equities under Judgments against Receivers .... 570-572 
 
 xii
 
 TABLE OF CONTENTS. 
 CHAPTER XX. 
 
 LIENS AFFECTING THE PRIORITY OF RAILROAD MORTGAGES. 
 
 SECTION 
 
 I. Application of general Lien Laws to Railroads . . . 573-578 
 
 II. Special Lien Laws applicable to Railroads 579-582 
 
 III. Statutes of the several States giving Liens upon Railroads . 583-610 
 
 IV. Vendor's Lien . ■ 611 
 
 V. Transportation Certificates 612 
 
 VI. Judgment Lien 613 
 
 9 
 
 CHAPTER XXI. 
 
 SCHEMES FOR REORGANIZATION AFFECTING THE PRIORITY OF MORTGAGES. 
 
 I. Rights under Agreement for Reorganization .... 614-618 
 
 II. Rights of Preferred Stockholders as against Mortgagees . .619-624 
 
 CHAPTER XXII. 
 
 FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 I. Sale of entire Property 625-628 
 
 II. Conduct of Sale 629-631 
 
 III. What Franchises pass by the Sale 632-635 
 
 IV. Distribution of Proceeds of Sale 636-641 
 
 V. Setting aside of Sale 642-652 
 
 CHAPTER XXIII. 
 
 RIGHTS OF PURCHASERS AT FORECLOSURE SALES UNDER RAILROAD MORT- 
 GAGES. 
 
 I. Purchasers are not liable for the Debts of the Old Company . 653-660 
 
 II. Organization of Purchasers into a New Corporation . . 661-684 
 
 CHAPTER XXIV. 
 
 PROCEEDINGS IN BANKRUPTCY AND INSOLVENCY AGAINST RAILROAD COM- 
 PANIES 685-694 
 
 xiii
 
 TABLE OF CASES CITED. 
 
 Ackerson v. Lodi Branch R. R. Co. 28 N. J. Eq. 542 . 
 
 Adams v. Boston, Hartford & Erie R. R. Co. 4 N. B. R. 314 
 
 Agar v. Athenaeum Life Ins. Co. 3 C. B. N. S. 725 
 
 Aggs v. Nicholson, 1 H. & N. 165 
 
 Agra & Masterman's Bank in re, L. R. 2 Ch. 391 . 
 
 Ahern v. Evans, 66 111. 125 
 
 Aiken v. Wasson, 24 N. Y. 482 
 
 Alabama & Chattanooga R. R. Co. v. Jones, 5 N. B. R. 97 
 
 v. Jones, 7 N. B. R. 145 
 
 Alden v. Boston, Hartford & Erie R. R. Co. 5 N. B. R. 230 
 
 Alexander v. Atlantic, Tenn. & Ohio R. R. Co. 67 N. C. 198 
 
 v. Central R. R. of Iowa, 3 Dill. 487 ; 1 Cent. L. J. 543 
 v. Com'rs of McDowell, 67 N. C. 330 
 
 Allen v. Central R. R. Co. 42 Iowa, 683 . 
 
 v. Inhabitants of Jay, 60 Me. 124 223, 224 
 
 v. Montgomery R. R. Co. 11 Ala. 437 6 
 
 v. Sea Fire & Life Ins. Co. 9 C. B. 574 192 
 
 v. Sullivan R. R. Co. 32 N. H. 446 189 
 
 Aller v. Town of Cameron, 3 Dill. 198 277 
 
 Alvis v. Whitney, 43 Ind. 83 239 
 
 American Bridge Co. v. Heidelbach, 4 C. L. J. 367 ; 94 U. S. 798 . .114 
 
 American Central Railway Co. v. Miles, 52 111. 174 . . . . . 658 
 
 Ames v. Birkenhead Docks, 20 Beav. 342 .... 456,493,613 
 v. New Orleans, Mobile & Texas R. R. Co. 2 Woods, 206 . . 385 
 
 . 435 
 
 . 685 
 191 
 . 311 
 197, 345 
 . 589 
 . 580 
 . 685 
 . 484 
 . 487 
 217 
 . 433 
 . 334 
 482, 493, 507, 509, 512, 518 
 
 New Alexandria & Pittsburg Turnpike Co. 13 S. & R. (Pa.) 
 
 423 
 691 
 193 
 
 Am man t 
 
 210 
 Anderson, in re, 7 Biss. 233 ....... 
 
 Anderson v. Duke, &c. Gold Mining Co. 1 Australian Jurist, 161 
 
 v. Jacksonville, Pensacola & Mobile R. R. Co. 2 Woods, 628 
 
 448, 453, 611 
 
 Andrews v. Michigan Central R. R. Co. 99 Mass. 534 406 
 
 Anglo-Danubian Stc;un Nav. &c. Co. in re, L. R. 20 Eq. 339 . . . 318 
 
 Anthony v. Jasper County, 4 Dill. 136 296 
 
 Applegate v. Ernst, 3 Bush (Ky.), 648 429 
 
 Arbucklc v. Illinois Midland Railway Co. 81 111. 429 . . . .419,589 
 Arents v. Commonwealth, 18 Gratt. (Va.) 750 . 317, 320, 322, 324, 325, 
 
 332, 342, 345 
 
 Arms v. Conant, 36 Vt. 744 84 
 
 Arnot v. Erie Railway Co. 67 N. Y. 315 ; affirming 5 Hun, 608 . . . 356 
 Arthur v. Commercial ami Railroad Hank of Vicksburg, 9 S. & M. (Miss.) 
 
 894 2, 3, 15 
 
 Ashhurst's Appeal, 60 Pa. St. 290 646,647 
 
 Ashhursl <-. .Montour Iron Co. .';.'» Pa. Si. 30 S99 
 
 A-liton v. Corrigan, L. K. 13 Eq. 76 . . . . . . . .74 
 
 XV
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Ashuelot R. R. Co. v. Elliot, 57 N. H. 397 ; S. C. 52 N. H. 387 . 332, 358, 
 
 360, 396 
 
 Aspinwall v. County of Daviess, 22 How. 364 270 
 
 Atchison, Topeka & Santa Fe R. R. Co. v. Commissioners of Jefferson 
 
 County, 12 Kans. 127 ; 17 lb. 29 278,302 
 
 Atchison, Topeka & Santa Fe R. R. Co. v. Cuthbert, 14 Kans. 212 . 592 
 
 Athenaeum Life Assurance Soc. in re, 4 K. & J. 549 194 
 
 Athenaeum Life Assurance Soc. v. Pooley, 3 De G. & J. 294 . . 197, 201 
 Atkinson v. Marietta & Cincinnati R. R. Co. 15 Ohio St. 21 . . 3, 653 
 
 Atlantic & Gulf R. R. Co. v. Allen, 15 Fla. 637 660 
 
 Atlantic, Mississippi & Ohio R. R. Co. in re, 26 Financial Chronicle, 444 . 568 
 Au<uista Bank v. Augusta, 49 Me. 507 ....... 227 
 
 Aurora City v. West, 7 Wall. 82 198,320,332 
 
 Australian 'Auxiliary Clipper Co. v. Mounsey, 4 K. & J. 733; 27 L. J. 
 
 (Ch.) 729 5, 19 
 
 Avery v. Blees Manufacturing Co. 27 N. J. Eq. 412 .... 465 
 
 Bagley v. Atlantic, Miss. & Ohio R. R. Co. 5 Weekly Notes, 263; 5 Re- 
 porter, 661 491 
 
 Bagnalstown v. Wexford Ry. Co. L. R. 4 Eq. 505 21 
 
 Ba?shaw v. Eastern Union Ry. Co. 7 Hare, 114 ; 2 Mac. & G. 389 . 1 
 
 Bafleyr. Town of Lansing, 13 Blatchf. 424 290 
 
 Balch v. N. Y. & Oswego Midland R. R. Co. 46 N. Y. 521 . . . 580 
 
 Balfour v. Ernest, 5 C. B. N. S. 601 310 
 
 Ballou v. Farnum, 9 Allen (Mass.), 47 511 
 
 Bank of Augustas. Earle, 13 Pet. 519 406 
 
 Bank of Australasia v. Breillat, 6 Moo. P. C. 152 5 
 
 Bank of Chillicothe v. Mayor of Chillicothe, 7 Ohio, 354 . . . . 283 
 Bank of Genesee v. Patchin Bank, 13 N. Y. 309 . . . . 308,350 
 
 Bank of Middlebury v. Edgerton, 30 Vt. 182 16 
 
 v. Rutland & Washington R. R. Co. 30 Vt. 159 . 84 
 Bank of Montreal v. Chicago, Clinton & Western R. R. 7 Cent. L. J. 
 
 267; 6 Reporter, 616 535,545 
 
 Bank of Rome v. Village of Rome, 18 N. Y. 38; 28 N. Y. 605 . . 229 
 
 Bank of U. S. v. Dandridge, 12 Wheat. 64 193 
 
 Bardstown & Louisville R. R. Co. v. Metcalfe, 4 Mete. (Ky.) 199 . 17, 628 
 
 Bargate v. Shortridge, 5 H. L. 297 192 
 
 Barker v. Mechanic Fire Ins. Co. of N. Y. 3 Wend. (N. Y.) 94 . . 306 
 
 Barnard v. Campbell, 55 N. Y. 456 279 
 
 v. Norwich & Worcester R. R. Co. 14 N. B. R. 469; 3 Cent. L. 
 
 J. 608 122, 136 
 
 Barnes v. Mobile & North Western R. R. Co. 5 N. Y. Weekly Dig. 191 . 406 
 
 v. Ontario Bank, 19 N. Y. 152 5 
 
 v. Town of Lacon, 84 111. 461 226, 230, 278, 293 
 
 Barratt v. County Court of Schuyler County, 44 Mo. 197 . . . . 280 
 
 Barter v. Wheeler, 49 N. H. 9 511, 556 
 
 Barton v. Barbour, 6 Wash. L. R. 41 ; 6 Cent. L. J. 201 ... 500 
 
 Barton County v. AValser, 47 Mo. 189 278 
 
 Bateman v. Mid-Wales Rv. Co. L. R. 1 C. P. 499 . . . . 306, 307 
 Bates v. Boston & N. Y. Cent. R. R. Co. 10 Allen (Mass.), 251 . . 189 
 
 Bath v. Miller, 51 Me. 341 ; 53 Me. 308 115,140 
 
 Bath County v. Amy, 13 Wall. 244 300 
 
 Bay City v. State Treasurer, 23 Mich. 499 229 
 
 Bayley v. Taber, 5 Mass. 286 296 
 
 Beadleson v. Knapp, 13 Abb. (N. Y.) Pr. N. S. 335 . . . .373 
 
 Beall i\ White, 94 U. S. 382 74 
 
 Beardsleyy. Ontario Bank, 31 Barb. (N. Y.) 619 165 
 
 v. Smith, 16 Conn. 368 305 
 
 Beckwith v. English, 51 111. 147 300 
 
 xv i
 
 TABLE OF CASES CITED. 
 
 Beckwitli v. Hartford, Providence & Fishkill R. R. 29 Conn. 268 
 
 Beers v. Phoenix Glass Co. 18 Barb. (N. Y.) 358 . . 
 
 Bell v. Indianapolis, Cincinnati & Lafayette R. R. Co. 53 Ind. 57 
 
 v. Railroad Co. 4 Wall. 598 
 
 v. Shibley, 33 Barb. (N. Y.) 610 
 
 Belmont v. Erie Rv. Co. 52 Barb. (N. Y.) 637 . 
 Belo v. Com'rs of Forsvthe County, 76 N. C. 489 
 
 SECTION 
 
 336 
 . 5 
 516 
 . 227 
 494 
 . 97 
 207,268, 278,288, 291, 
 292, 293 
 Bement v. Pittsburgh & Montreal R. R. Co. 47 Barb. (N. Y.) 104 . . 165 
 
 Benbow v. Iowa City, 7 Wall. 313 300 
 
 Benedict v. Danbury & Norwalk R. R. Co. 24 Conn. 320 . . . . 586 
 Benjamin v. Ehnira, Jefferson & Canandaigua R. R. Co. 54 N. Y. 675; 
 
 49 Barb. (N. Y.) 441 145,171,196 
 
 Berry v. Brett, 6 Bosw. (N. Y.) 827 494 
 
 Bickford v. Grand Junction Ry. Co. 1 Supreme Ct. of Canada, 696 . 9, 10, 
 
 12, 18 
 Bill v. New Albany, &c. Rv. Co. 2 Biss. 390 . 119, 421, 422, 460, 484, 485 
 
 Birdsall v. Russell, 29 N. Y. 220 216 
 
 Birmingham Banking Co. ex parte, L. R. 6 Ch. App. 83 5 
 
 Bissell v. City of Jefferson ville, 24 How. 287 . . . . 280, 291, 293 
 
 v. Mich. South. & North. Ind. R. R. Co.'s 22 N. Y. 258 23, 107, 308 
 
 . 288 
 
 2 
 
 . 198 
 
 226, 230 
 
 . 318 
 
 197, 345 
 
 . 580 
 
 428 
 
 . 108 
 
 . 223 
 
 455, 635 
 
 . 629 
 
 Black v. Cohen, 52 Ga. 621 
 
 v. Del. & Raritan Canal Co. 22 N. J. Eq. 130; 24 lb. 455 . 
 Blake v. Livingston County, 61 Barb. (N. Y.) 149 . 
 
 v. Mayor, &c. of Ma'con, 53 Ga. 172 
 
 Blakely Ordnance Co. in re, 8 Eq. 244 
 
 L. R. 3 Ch. 154 .... 
 
 Blakey v. Blakey, 27 Mo. 39 
 
 Blanchard v. Cawthorne, 4 Sim. 566 
 
 Bloomer v. Union Coal & Iron Co. L. R. 16 Eq. 383 . 
 
 Bloomfield, &c. Gas Light Co. v. Richardson, 63 Barb. (N. Y.) 437 
 
 Blossom v. Milwaukee, &c. R. R. Co. 1 Wall. 655 
 
 v. Railroad Co. 3 Wall. 196 
 
 Blumcnthal v. Brainerd, 38 Vt. 402 .... 501,509,510,512 
 
 Board of Supervisors of Iowa Co. v. Mineral Point R. R. Co. 24 Wis. 93 
 
 Bonham v. Board of Education of Harrisonville, 4 Hill. 156 
 
 Bonner v. City of New Orleans, 2 Woods, 135 . 
 
 Bonnifield v. Bidwell, 32 Iowa, 149 ... 
 
 Booth v. Clark, 17 How. 322 .... 
 
 Borough of North Lebanon v. Arnold, 4 7 Pa. St. 489 . 
 
 Boskm, Concord & Montreal R. R. Co. v. Gilmore, 37 N. H. 410. 
 
 Boston, Hartford & Erie R. R. Co. in re, 9 Blatchf. 101 
 
 Botsford v. N. II., Middletovvn & Willimantic R. R. Co. 41 Conn. 454 
 
 72, 314, 456 
 
 Bound v. Wisconsin Cent. R. R. Co. 6 Reporter, 704 
 
 Bowen v. Brecon Ry. Co. L. R. 3 Eq. 541 
 
 Boyd v. Chesapeake & Ohio Canal Co. 17 Md. 195 . 
 
 v. Kennedy, 38 N. J. L. 146 
 
 Bradlee v. Boston Glass .Manufactory, 16 Pick. (Mass.) 347 
 Bradley v. Ballard, :>:> 111. 413; 8 Am. R. 656 . 
 
 r. Chester Valley R. R. Co. 36 Pa. St. 141 . 
 Brainerd v. N. Y. & Harlem It. It. Co. 25 N. Y.496; 10 Bosw. 332 
 
 v. Peck, 34 Vt. 496 
 
 B i ih v. Roberts, 3 Bing. N\ C. 963 
 
 Branch v. City of Charleston, 92 U. S. 677. 
 
 v. Macon & Brunswick \l. \l. Co. 2 Woods, 385 . 
 :i v. Conn. & Passumpsic Rivera R. It- Co. 8] Vt. 214 
 Brannon v. Hursell, L12 Mass. <)•'! ....•• 
 
 Brett c Carter, 2 Lowell, 1. r >S 
 
 b \\\ i 
 
 277 
 
 . 348 
 
 240 
 
 483, 495 
 
 227 
 
 125, 168 
 
 . 688 
 
 573, 
 
 586 
 
 . 266 
 
 477, 504 
 
 . 424 
 
 284, 285 
 
 . 311 
 
 . 5, 309 
 
 . 399 
 
 198, 285 
 
 138, 13 7 
 
 . 306 
 
 . 272 
 
 898 
 
 . 608 
 
 336 
 
 . 122
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Brewster v. Wakefield, 22 How. 118 336 
 
 Bridgeport v. Housatonic R. R. Co. 15 Conn. 475 227 
 
 Bridgeport City Bank v. Empire Stone Dressing Co. 30 Barb. (N. Y.) 
 
 421 . 308, 350 
 
 Brill v. West End P. Ry. Co. 4 W. Notes of Cases 139 . 
 
 Brine v. Insurance Co. 96 U. S. 627 ...... 
 
 Brinley v. Mann, 2 Cush. (Mass.) 337 
 
 Bristol & North Somersel Ry. Co. in re, L. R. 6 Eq. 448 . 
 British Provident Life & Fire Ass. Co. in re, 4 De G., J. & S. 407 
 Bronenberg v. Madison County, 41 Ind. 502 .... 
 Bronson v. La Crosse & Milwaukee R. R. Co. 2 Wall. 238 . 
 
 160 
 
 . 395 
 
 86 
 
 . 614 
 
 103 
 
 . 239 
 
 208, 391, 
 
 442, 445, 450, 451 
 
 r. Railroad Co. 2 Black, 524 444 
 
 Brouchton v. Manchester W. Works Co. 3 B. & A. 1 . . . . 306 
 
 Brown v. Mayor, &c. of London, 9 C. B. (N. S.) 726 ... . 557 
 
 ». Mayor, &c of New York, 63 N. Y 239 2 78 
 
 v. N. Y. & Erie R. R. Co. 22 How. (N. Y.) Pr. 451 . . . 327 
 Bruffet v. Great Western R. R. Co. 25 111. 353 . . . . 418, 653, 659 
 Brunswick & Albany R. R. Co. v. Hughes, 52 Ga. 557 . . . . 79 
 
 Buck v. Colbath, 3 Wall. 334 485 
 
 v. Memphis & Little Rock R. R. Co. 4 C. L. J. 430 . 104, 118, 162 
 
 Buckley v. Briggs, 30 Mo. 452 353 
 
 Bunting v. Camden & Atlantic R. R. Co. 81 Pa. St. 254; 15 Am. R. R. 5 70 
 
 198, 206 
 
 Burlingame v. Parce, 12 Hun (N. Y.), 144 459 
 
 Burlington & Cedar Rapids Northern R. R. Co. 7 Cen. L. J. 65 . . 591 
 
 Burmester v. Norris, 6 Ex. 796 306 
 
 Burroughs v. Com'rs of Richmond County, 65 N. C. 234 . . . . 332 
 
 Butler v. Dunham, 27 111. 474 227,280 
 
 v. Edgerton, 15 Ind. 15. . . . . . . . .319 
 
 v. Horwitz, 7 Wall. 258 383 
 
 v. Myer, 17 Ind. 77 319 
 
 v. Rahm, 46 Md. 541 . . . .8, 68, 84, 93, 94, 122, 402, 613 
 
 Butterfield v. Usher, 91 U. S. 246 635 
 
 Byron v. Metropolitan Saloon Omnibus Co. 8 De G. & J. 123 . . 19 
 
 Ca<nll v. Wollbridge (Tenn.), 4 Cent. L. J. 6 483 
 
 Cairo & St. Louis R. R. Co. v. Cauble, 85 111. 555 589 
 
 v. City of Sparta, 77 111. 505 . . 267, 278 
 
 v. Watson, 85 111. 531; 11 Chicago Leg. News, 
 
 141; 5 Reporter, 261 
 Cairo & Vincennes R. R. Co. v. Fackney, 78 111. 116 
 
 California v. Wells, 15 Cal. 336 
 
 California Northern R. R. Co. v. Butte County, 18 Cal. 671 
 California Pacific 11. R. Co. in re, 3 Sawyer, 240 
 Cambrian Ry. Co.'s Scheme in re, L. R. 3 Ch. 278 
 Can.], v. Barney, 4 Hun (N. Y.), 373 .... 
 
 Campbell v. City of Kenosha, 5 Wall. 194 . 
 
 v. Railroad Co. 1 Woods, 368 .... 
 v. Texas & New Orleans R. R. Co. 2 Woods, 263 
 
 Cardot v. Barney, 63 N. Y. 281 
 
 Carpenter v. Black Hawk Gold Mining Co. 65 N. Y. 43 
 
 v. Catlin, 44 Barb. (N. Y.) 75 
 
 v. Longan, 16 Wall. 271 
 
 v. Rommel, 5 Phila. (Pa.) 34 ... 
 
 Carr v. Le Fevre, 27 Pa. St. 413 
 
 Carter v. City of Dubuque, 35 Iowa, 416 
 
 Case of the State Tax on Foreign held Bonds, 15 Wall. 300 
 
 Case v. Marchand, 23 La. Ann. 60 
 
 xviii 
 
 589 
 401, 582 
 . 207 
 273, 276 
 685, 686, 687 
 . 614 
 510, 513 
 . 278 
 361, 432, 434, 438 
 95, 135, 447, 627 
 511, 512, 513 
 3, 8, 611 
 . 616 
 . 449 
 207 
 . 198 
 . 222 
 . 221 
 . 495
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Cass v. Dillon, 2 Ohio St. 607 231 
 
 Caylus v. N. Y., Kingston & Syracuse R. R. Co. 10 Hun (N. Y.), 295 . 203 
 
 Cet'n Cilcen Mining Co. in re, L. R. 7 Eq. 88 307 
 
 Central Bank v. Empire Stone Dressing Co. 26 Barb. (N. Y.) 23 . 308, 350 
 Central Gold Mining Co. v. Piatt, 3 Daly (N. Y.), 263 . . . .8 
 
 Central Mills Co. v. Hart, 124 Mass. 123 555 
 
 Central Nat, Bank of Worcester v. Worcester Horse R. R. Co. 13 Allen 
 
 (Mass.), 105 686 
 
 Central Railroad & Banking Co. v. Georgia, 92 U. S. 665 . . . 416 
 
 Central R. R. Co. v. Collins, 40 Geo. 582 350 
 
 Chamberlain v. City of Burlington, 14 Iowa, 395 240 
 
 v. St. Paul & Sioux City R. R. Co. 92 U. S. 299 . . . 394 
 Chambers v. Manchester & Milford R. R. Co. 5 B. & S. 588 ; 33 L. J. 
 
 (Q. B.) 268; 1 Cox's Joint Stock Cas. 78 21 
 
 Chambers County v. Clews, 21 Wall. 317 .... 268,291,299 
 
 Chandler v. Siddle, 3 Dill. 477 491 
 
 Chapin v. Vt. & Mass. R. R. Co. 8 Gray (Mass.), 575 . . . 198, 204 
 
 Chartiers Ry. Co. v. Hoddens, 85 Pa. St. 501 654 
 
 Chase v. Yanderbilt, 62 N. Y. 307 418, 419 
 
 Chautauqua County Bank v. Risley, 19 N. Y. 369 . . . . 493, 501 
 Cheever v. Rutland & Burlington R. R. Co. 39 Vt. 653, 4 Am. Railw. R. 
 
 300 459 
 
 Chesapeake & Ohio Canal Co. v. Blair, 45 Md. 102 . . 219, 320, 3S9 
 Chester & Lenoir R R. Co. v. Caldwell County, 72 N. C. 486 . . . 268 
 Chicago & North Western Ry. Co. v. Borough of Ft. Howard, 21 Wis. 
 
 44 ° 186 
 
 Chicago, Burlington & Quincy R. R. Co. v. County of Otoe, 2 Neb. 
 
 496 227 
 
 Chicago, Milwaukee & St. Paul R. R. Co. v. Pfaender, 23 Minn. 21 7 . 660 
 Chicago, Rock Island & Pacific R. R. Co. v. City of Joliet, 79 111. 25 . 227 
 
 v. Kennedy, 70 111. 350 . . 651 
 
 Chicopee Bank v. Chapin, 8 Met (Mass.) 40 208 
 
 Chilton v. People, 66 111. 501 189 
 
 Chittenden v. Brewster, 2 Wall. 191 485 
 
 Cincinnati City v. Morgan, 3 Wall. 275 79 
 
 Cincinnati, Sandusky & Cleveland R. R. Co. v. Sloan, 31 Ohio St. 1; 15 
 
 Am. Railw. R. 376 455, 458, 459, 476 
 
 Cincinnati, Wilmington & Zanesville R. R. Co. v. Clinton County, 1 Ohio 
 
 St. 77 
 
 Citizens' Savings Association of Cleveland v. Topeka, 3 Dill. 376 
 
 City v. Lamson, 9 Wall. 477 
 
 City of Atchison v. Butcher, 3 Kans. 104 
 
 City of Atlanta v. Grant, 57 Ga. 340 .... 
 
 City of Aurora v. West, 9 Ind. 74; 22 lb.' 88 
 
 City of Bath v. Miller, 53 Me. 308 : S. C 51 Me. 341 
 
 Citv of Dubuque v. Illinois Cent. R. R. Co. 39 Iowa, 56 ; 8 A 
 
 496 
 
 City of Elizabeth v. Force, 29 N. J. Eq. 587 . 
 
 City of Galena v. Amy, 5 Wall. 705 
 
 v. Corwith, is 111. 423 .... 
 
 Cityof Kenosha V. Lamson, 9 Wall. 477 .... 
 
 City of Kokomo '•. State, '■>"> 1ml. 152 .... 
 
 City of Lexington v. Butler, 14 Wall. 282 ... 29 
 
 City of Memphis /•. Adams, 9 Heisk. (Tenn.) 518 
 
 City of Mount Vernon v. Hovey, 52 tnd. 503 
 
 of l: »chester v. Bronson, ii How. (N. Y.) Pr. 78 
 
 Cityof Sacramento v. Kirk, 7 Cal. 419 ..... 
 
 City of S.m Antonio v. Lane, 32 Tex. 405 
 
 City of St. Louis v. Alexander, 23 Mo. 485 .... 
 
 xix 
 
 227, 257, 302 
 
 . 224 
 
 268, 337, 340 
 
 298 
 
 . 429 
 
 227 
 
 140 
 
 223 
 
 . 115, 
 
 i. Ry. R. 
 
 171, 176, 
 . 198, 
 
 268, 337, 
 1, 308, 320, 
 239, 272, 
 
 300 
 216 
 300 
 283 
 340 
 239 
 340 
 
 IS!) 
 
 284 
 
 w;r> 
 
 271 
 
 227 
 227
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 City of Vicksburg w. Lombard, 51 Miss. Ill .... 248,283,291 
 City of Williamsporl v. Commonwealth, 84 Pa. St. 487 . . . . 283 
 
 Clapp V. Countv of Cnlar, 5 Iowa, 15 240 
 
 Clark v. City of Des Moines, 19 Iowa, 199 283 
 
 v. City of Rochester, 13 How. Pr. 204; 24 Barb. 446 . . . 229 
 r. Farmers' Woollen Manuf. Co. 15 Wend. (N. Y.) 256 . . .306 
 
 v. Iowa City, 20 Wall. 583 198,320,340 
 
 v. Janesville, 10 Wis. 136 231 
 
 v. Titcomb, 42 Barb. (N. Y.) 122 5 
 
 Clarke v. City of Janesville, 1 Biss. 98 198,320 
 
 Ch.v v. Cast Tennessee & Va. R. R. Co. 6 Heisk. (Term.) 421 . .117 
 
 v. Nicholas County Court, 4 Bush (Ky.), 154 226 
 
 Clearwater v. Meredith, l Wall. 25 416 
 
 Cleveland & Pittsburg R. R. Co. v. Speer, 56 Pa. St. 325 . . . . 406 
 Clews v. Brunswick & Albany R. R. Co. 54 Ga. 315 ... . 392 
 
 Coal Co. v. Blatchford, 11 Wall. 172 432 
 
 Coddington v. Gilbert, 17 N. Y. 489 406 
 
 Coe v. Columbus, Piqua & Iud. R. R. Co. 10 Ohio St. 372 4, 15, 75, 16 7, 
 
 318, 424, 431, 504 
 v. Knox County Bank of Mount Vernon, 10 Ohio St. 412 . . . 424 
 
 v. McBrown, 22 Ind. 252 113 
 
 v. N. J. Midland Ry. Co. 27 N. J. Eq. 37; 28 lb. 27; S. C. lb. 31; 
 
 14 Am. Ry. Rep. 9 402, 498, 525, 538 
 
 v. Peacock, 14 Ohio St. 187 401, 424, 425 
 
 v. Pennock, 6 Am. Law Reg. 27 ; 2 Redf. Am. Ry. Cases, 667 . 148 
 
 Coffin v. Reynolds, 37 N. Y. 640 580 
 
 Coleman v. Board of Supervisors of County of Marion, 50 Cal. 593 . 234, 
 
 273, 277 
 
 Collins v Central Bank of Ga. 1 Kelly (Ga.), 435 79 
 
 Colman v. Eastern Ry. Co. 10 Beav. 1 350 
 
 Colonial Bank of Australasia v. Willan, L. R. 5 P. C. 417 . . .191 
 Columbus, Chicago & Ind. Cent. Ry. Co. v. Powell, 40 Ind. 37 . .418 
 
 v. Skidmore, 69 111. 566 . 418, 419 
 Commercial Bank of Canada v. Great Western Ry. Co. of Canada, 3 Moo. 
 
 P. C C. (N. S.) 295 313 
 
 Commercial National Bank of Cleveland v. City of Iola, 2 Dill. 353 223, 224 
 Commissioners of Craven v. Atlantic & N. C. R. R. Co. 77 N. C. 289 
 
 312, 318, 319 
 Commissioners of Dodge County v. Chandler, 5 Reporter, 227 . . 225 
 Commissioners of Douglas County v. Bolles, 94 U. S. 104 277, 288, 291, 292 
 Commissioners of Johnson County v. January, 94 U. S. 202 . 282, 292, 293 
 
 v. Thayer, 93 U. S. 56 7; 94 U. S. 631 
 
 273, 288, 364 
 Commissioners of Knox County v. Nichols, 14 Ohio St. 260 . . . 292 
 Commissioners of Marion County v. Clark, 94 U. S. 278 . . . 284, 291 
 Commissioners of Roads, &c. v. Shorter, 50 Ga. 489 .... 276 
 Commonwealth v. Central Passenger Ry. 52 Pa. St. 506 . . . 520, 654 
 v. Chesapeake & Ohio R. R. Co. 27 Gratt. (Va.) 344 221 
 
 v. Emigrant Industrial Savings Bank, 98 Mass. 12 . . 216 
 
 v. Perkins, 43 Pa. St. 400 227 
 
 v. Pittsburg, 41 Pa. St. 278; 43 lb. 391 . . 227,230,279 
 
 v. Smith, 10 Allen (Mass.), 448 . . . .3, 45, 312 
 
 v. Tenth Mass. Turnpike Co. 5 Cush. (Mass.) 509 . . 653 
 
 Compagnie Gene'rale de Bellegarde in re, L. R. 4 Ch. D. 470 . . 644 
 
 Conklin v. Butler, 4 Biss. 22 487 
 
 Connecticut Mut. Life Ins. Co. v. Cleveland, Columbus & Cincinnati R. 
 R. Co. 41 Barb. (N. Y.) 9 ; 26 How. Pr. 225 . 190, 198, 311, 332, 343, 
 
 350, 356 
 Consolidated Ass'n v. Numa Avegno, 28 La. Ann. 552 . . . .207 
 XX
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Converse v. City of Fort Seott, 92 U. S. 503 279, 288 
 
 Cook v. Corthell, 11 R. I. 482 122 
 
 v. Wood, L. R. 7 H. L. 27 . .336 
 
 Cooper v. Sullivan County, 65 Mo. 542 279 
 
 V. Town of Thompson, 13 Blatchf. 434 . . . 278, 320, 326, 337 
 
 Coopers i'. Wolf, 15 Ohio St. 523 91, 112, 123 
 
 Corcoran v. Chesapeake & Ohio Canal Co. 94 U. S. 741; 1 Me Arthur (D. 
 
 C), 358 332, 339, 438, 447 
 
 Corey v. Long, 12 Abb. (N. Y.) Pr. N. S. 427 528 
 
 Cork & Youghal Ry. Co. in re, L.-R. 4 Ch. App. 748 . . . 21, 218 
 
 Corrugi v. Atlantic" Fire Ins. Co. 40 Ga. 135; 2 Am. R. 567 .. . 193 
 Corry v. Londonderry & Enniskillen Rv. Co. 29 Beav. 263; 7 Jur. N. S. 
 
 508; 30 L.J. Ch. 290 620,621 
 
 599 
 225 
 236 
 223 
 193 
 284 
 272 
 198, 332 
 
 Cosgrove v. Tebo & Neosho R. R. Co. 54 Mo. 495 
 
 County Commissioners v. Chandler, 96 [J. S. 205 
 
 County Commissioners of Columbia Count}-?;. King, 13 Fla. 451 
 
 County Court of St. Louis County v. Griswold, 58 Mo. 175 . 
 
 County Life Ass. Co. in re, L. R. 5 Ch. 288 .... 
 
 County of Armstrong v. Brinton, 47 Pa. St. 36 7 . 
 
 County of Bates v. Winters, 17 Albany L. J. 291 
 
 County of Beaver v. Armstrong, 44 Pa. St. 63 
 
 County of Callaway v. Foster, 93 U. S. 567; 3 Dill. 200 . . 272, 273, 274 
 
 County of Cass v. Johnston, 95 U. S. 360 .. . 249, 269, 273, 302 
 
 v. Jordan, 95 U. S. 373 249, 273 
 
 v. Shores, 95 U. S. 375 291, 302 
 
 County of Henry r. Nicolay, 95 U. S. 619 272, 274, 291 
 
 County of Leavenworth v. Barnes, 94 U. S. 70 . . . . 277, 292 
 County of Macon v. Shores, 17 Alb. L. J. 35 . . . . 207, 277, 288 
 County of Moultrie v. Rockingham Ten Cent Savings Bank, 92 U. S. 
 
 631 271, 276, 279, 293 
 
 County of Randolph v. Post, 93 U. S. 502 277,279 
 
 County of Ray v. Vansycle, 96 U. S. 675 274,282 
 
 County of Richland v. People, Chicago Legal News, 43, for October 26, 
 
 1878 278 
 
 County of Scotland v. Thomas, 94 U. S. 682; S. C. 3 Dill. 7 . . 2 72, 2 74 
 Covey v. Pittsburg, Fort Wayne & Chicago R. R. Co. 3 Phila. (Pa.) 173 
 
 122, 123, 159, 425 
 Covington Drawbridge Co. v. Shepherd, 21 How. 112 . . . 428, 457 
 Cowdrev ». Galveston, Houston & Henderson R. R. Co. 93 U. S. 352; 
 
 S. C 9 Am. Railw. R. 361 498, 551, 571 
 
 v. Railroad Co. 1 Woods, 331 . . 480, 498, 527, 528, 529, 535 
 
 Cowlesv. Mercer County, 7 Wall. 118 410 
 
 Cozart v. Georgia R. It. & Bunking Co. 54 Ga. 379 356 
 
 Craig v. City of Vicksburg, 31 Miss. 216 198 
 
 Crawford v. North Eastern Railway Co. 3 Jurist N. S. 1093 ; 3 Kay & J. 
 
 723 620 
 
 Crawford Countv v. Louisville, New Albany & St. Louis Air Line Railway 
 
 Co. 39 Ind. 192 239, 270 
 
 Crawshay v. Soutter, 6 Wall. 737 647 
 
 Cromwell v. County of Sac, 96 U. S. 51 . 199, 208, 284, 319, 332, 336 
 
 v. County of Sac, 94 IT. S. 351 291 
 
 e v. Daviess County, 36 Ind. 320 • . . 239 
 
 Crosby v. New London, &c. R. li. Co. 26 Conn. 121 . . . 323,338 
 Croucb v. Credit Foncier of England, L. R. 8 CJ. B. 374 . , . 205, 206, 328 
 
 Curran v. Arkansas, 15 Eow. 304 
 
 Curtis v. Le i\ Lit, 15 X. V. 9 , r >, 364 
 
 v. Mcllhenny, 5 Jones (N. C.) Eq. 200 495 
 
 v. Whipple, 24 Wis. 350 22 1 
 
 Cutts v. Brainerd, 42 Vt. 566 510 
 
 \\i
 
 TABLE OF CASES CITED. 
 
 Dana v. Bank of U. S. 5 W. & S. (Pa.) 223 .... 
 
 Daniels v. Hart, 118 Mass. 543 
 
 Darby v. Wright, 3 Blatchf. 170 
 
 Darlington v. La Clede County, 4 Dill. 200 
 
 Davenport v. Alabama & Chattanooga R. R. Co. 2 Woods, 519 
 
 v. Miss. &Mo. R. R. Co. 12 Jowa,539 
 Davidson v. Ramsey County, 18 Minn. 482 .... 
 Daviess County Courl v. Howard, 13 Bush (Ky.), 101 - . 
 
 Davis r. Gray, 16 Wall. 203 
 
 v. Railroad Co. 1 Woods, GG1 
 
 De Graff v. St. Paul & Pacific R. R. Co. 5 Reporter, 561 
 
 De Graffenried v. Brunswick & Albany R. R. Co. 57 Ga. 22 
 
 Delaware Construction Co. v. Davenport & St. Paul Ry. Co. 46 Iowa, 
 
 40G 
 
 Delaware County v. McClintock, 51 Ind. 325 . 
 Delaware, Lackawanna & Western R. R. Co. v. Erie Ry. Co. 21 N 
 298 • • • • • • • • • • 
 
 Delaware Railroad Tax in re, 18 Wall. 206 ... 
 
 Denniston v. Chicago, Alton & St. Louis R. R. Co. 4 Biss. 414 
 Denny v. Cleveland & Pittsburg R. R. Co. 28 Ohio St. 108 
 Des Moines Gas Co. V. West, 44 Iowa, 23 ... . 
 
 Despatch Line of Packets v. Bellamy Manuf. Co. 12 N. H. 205 
 Devon & Somerset Ry. Co. in re L. R. 6 Eq. 610 ; lb. 615 . 
 De Yoss v. City of Richmond, 18 Gratt. (Va.) 338 . 
 De Winton v. Mayor, &c. of Brecon, 27 Beav. 533 
 Diamond v. Lawrence County, 37 Pa. St. 353 . 
 
 Dickinson v. Valpy, 10 B. &"C. 128 
 
 Dillon v. Barnard, 1 Holmes, 386 
 
 DiiiMiiore v. Duncan, 57 N. Y. 573 ...... 
 
 v. Racine & Mississippi R. R. Co. 12 Wis. 649 106, 124, 126, 132, 133 
 
 Doe v. St. Helen's, &c. Ry. Co 2 Q. B. 364 456 
 
 Douglass v. Cline, 12 Bush (Ky.), 608 161,509,558 
 
 Dow v. Humbert, 91 U. S. 294 304 
 
 Drury v. Cross, 7 Wall. 299 648 
 
 Dubuque County v. Dubuque & Pacific R. R. Co. 4 Greene (Iowa), 1 . 240 
 Duncan r. Chesapeake & Ohio R. R. Co. 9 Am. Railw. R. 386 . . 559 
 
 SECTION 
 
 313 
 
 3, 370 
 
 82 
 
 294, 295 
 
 515, 570 
 
 . 221 
 
 227 
 
 . 298 
 
 439, 457 
 
 687, 691 
 
 . 118 
 
 . 500 
 
 591 
 226, 230 
 Eq. 
 
 459, 496 
 
 . 415 
 
 564, 568 
 
 . 97, 220 
 
 474, 476 
 
 85, 86 
 
 614 
 
 . 290, 294 
 
 456 
 
 98, 208, 284 
 
 306 
 
 . 77, 122 
 
 198 
 
 v. Mobile & Ohio R. R. Co. 2 Woods, 542 
 Dunham v. Cincinnati, Peru, &c. Ry. Co. 1 Wall. 254 
 
 v. Isett, 15 Iowa, 284 
 
 Dunlop v. Paterson Fire Ins. Co. 12 Hun (N. Y.), 627 . 
 Dunn v. Commercial Bank of Buffalo, 11 Barb. (N. Y.) 580 
 
 v. North Mo. R. R. Co. 24 Mo. 493 . 
 Dupont v. Bushong, 1 Weekly Notes of Cases, 378 
 
 . 359 
 
 123, 142, 147, 328, 
 
 562, 638 
 
 7, 115, 119 
 
 483 
 
 . 202 
 
 573,575 
 
 . 429 
 
 Durham County, &c. Building Soc. in re, L. R. 12 Eq. 521 . . . 218 
 Dutchess County Ins. Co. v. Hachfield, 1 Hun (N. Y.), 6 75 ; 47 How. Pr. 
 
 N. Y. 330; 4*T. & C. 158 204, 207, 284, 285 
 
 Dutton v. Marsh, L. R. 6 Q. B. 361 311 
 
 Dwight v. Newell, 3 N. Y. 185 122 
 
 East Anglian Ry. v. Eastern Counties Ry. Co. 11 C. B. 775; 7 Railw. 
 
 Cas. 150 1, 
 
 East Boston Freight R. R. Co. v. Eastern R. R. Co. 13 Allen (Mass.), 422 
 
 v. Hubbard, 10 Allen (Mass.), 459 
 Eastern Counties Ry. Co. v. Hawkes, 35 Eng. L. & Eq. 8 ; 5 H. L. 331 
 Eastern Union Ry. Co. v. Hart, 8 Exch. 116 . 
 
 East London W." Works Co. v. Bailey, 4 Bing. 283 .... 
 Eaton & Hamilton R. R. Co. v. Hunt, 20 Ind. 457. 
 XXli 
 
 350 
 
 
 3, 7 
 
 
 45 
 
 
 191 
 
 102 
 
 187 
 
 
 306 
 
 399, 
 
 417
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Ed^erton v. Muse, 2 Hill (S. C.) Ch. 51 453 
 
 Edwards v. Edwards, L. R. 1 Ch. D. 454; 2 Ch. D. 291 . . . .493 
 
 v. Marcy, 2 Allen (Mass.), 486 196 
 
 Eldridge v. Smith, 34 Vt. 484 16 
 
 Elizabethtown & Paducah R. R. Co. v. Elizabethtown, 12 Bush (Ky.), 233 . 161 
 
 Elliot v.Van Voorst, 3 Wall. Jun. 299 440 
 
 Ellis v. Boston, Hartford & Erie R. R. Co. 107 Mass. 1 . 115, 413, 489, 566, 
 
 568, 690 
 v. Indianapolis, Cincinnati & Lafayette R. R. Co. 6 Am. Law Rec- 
 ord, 288 . 516 
 
 Elmira Iron & Steel Rolling Mill Co. v. Erie Ry. Co. 26 N. J. Eq. 284 . 568 
 Elwell i'. Grand St. & Newtown R. R. Co. 67 Barb. (N. Y.) 83. 88, 105, 130 
 Emerson v. European & N. A. Ry. Co. 67 Me. 387 . . . 116,122 
 
 Emlen v. Lehigh Coal & Navigation Co. 47 Pa. St. 76 334, 335 
 
 Enthoven v. Hoyle, 13 C. B. 373 204 
 
 Ericsson v. Brown, 38 Barb. ( N. Y.) 390 580 
 
 Erwin v. Davenport, 9 Heisk. (Tenn.) 44 512 
 
 Essex County R. R. Co. v. Town of Lunenburgh, 49 Vt. 143 . . . 268 
 
 Etnvre v. McDaniel, 28 111. 201 336 
 
 Evans v. R. R. Co. (Pa.) 5 Leg. & Ins. R. 107; 11 Pitts. L. J. 4 . . 573 
 Evansville, Indianapolis & Cleveland Straight Line R. R. Co. v. City of 
 
 Evansville, 15 Ind. 395 . . . . 292 
 
 Evelyn v. Lewis, 3 Hare, 472 493 
 
 Evertson v. Nat. Bank of Newport, 66 N. Y. 14 ; S. C. 4 Hun, 692 . 207, 322, 
 
 323, 326 
 
 Pahs v. Roberts, 54 111. 194 425 
 
 Fairfield V. Weston, 2 Sim. & St. 96 493 
 
 Falconer v. Buffalo & Jamestown R. R. Co. 69 N. Y. 491 ; 7 Hun 499 255, 273, 275 
 
 Farlow v. Lea, 6 C. L. J. 195 491 
 
 Farmers' & Mechanics' Bank v. Empire Stone Dressing Co. 5 Bosw. 
 
 (N. Y.) 275 308, 350 
 
 Farmers' & Merchants' Insurance Co. v. Needles, 52 Mo. 17 . . 483 
 
 Farmers' Bank v. Beaston, 7 G. & J. (Md.) 421 493 
 
 Farmers' Loan & Trust Co. v. Cary, 13 Wis. 110 133 
 
 v. Central R. R. of Iowa, 5 Cent. L. J. 56; 
 11 Western Jurist 428; 4 Dill 533 .... 433,436,453,630 
 
 Farmers' Loan & Trust Co. v. Commercial Bank of Racine, 15 Wis. 424 133 
 v. Commercial Bank, 11 Wis. 207 124, 127, 133 
 
 i'. Fisher, 17 Wis. 114 136 
 
 v. Hendrickson, 25 Barb. (N. Y.) 484 . .165 
 
 v. Hughes, 11 Hun (N. Y.), 130 . . 372 
 
 v. St. Jo. & Denver City Ry. Co. 3 Dill. 412 156 
 
 Farnsworth o.Minn. & Pacific Ry. Co. 92 U. S. 49 .... 12 
 
 Farnum v. Blackstone Canal Corp. 1 Sumner, 46 .... 406 
 
 Field o. Post, 9 Vroom (N. J.), 346 144 
 
 Fielder /■. Montgomery & Eufaula R. R. Co. 51 Ala. 178 . . . . 232 
 First Nat. Bank of St". Johnsbury v. Town of Concord, 50 Vt. 257 272, 291 
 Fii-i National Bank of St. Paul's v. County Commissioners of Scott Couniv, 
 
 1 I .Mimi. 77 199, 217 
 
 Fi.-k /•. City of Kenosha, 26 Wis. 23 226 
 
 v. N. Y. Waterproof Paper Co. 29 N. J. Eq. 16 . . . .434 
 
 v. Potter, 2 Abb. (N. Y.) App. Dec. 138 611 
 
 Fitchett V. North Pa. R. R. Co. ."- Pliila. (Pa.) 132 .... 332 
 
 Flagg v. Mayor, &c. of the City of Palmyra, S3 Mo. 440 . . . .292 
 Fletcher v. Rutland & Burlington R. R. Co. 89 Vt. 638 . . . .374 
 
 Florida v. Anderson, 91 U. 8. 667 611 
 
 v. Jacksonville, Pensacola & Mobile R. R. Co. 15 Fla. 201 . 457, 459, 
 
 475,476,483,487 
 xxiii
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Foote v. Johnson County, 6 Cent. L. J. 345 249, 269 
 
 Forbes v. Memphis, El Paso & Pacific R. R. Co. 2 Woods, 323 . 446, 465 
 
 v. San Rafael Turnpike Co. 50 Cal. 340 88 
 
 Force v. Citv of Elizabeth, 27 N. J. Eq. 408 219 
 
 Foss v. Harbottle, 2 Hare, 461 318 
 
 Foster v. Fowler 60 Pa. St. 27 573 
 
 Fountaine v. Carmarthen Ry. Co. L. R. 5 Eq. 316; 37 L. J. Ch. 429 21, 
 
 191, 194 
 Fowler v. Pittsburg Fort Wayne & Chicago R. R. Co. 35 Pa. St. 22 . 118 
 
 Fox v. Seal, 22 Wall. 424 606 
 
 Frazier v. Fredericks, 4 Zab. (N. J.) 162 144 
 
 Freeholders of Middlesex County v. State Bank of New Brunswick, 28 N. 
 
 J. Eq. 166 480 
 
 Freeman v. Cooke, 2 Ex. 654 191 
 
 v. Fort, 14 Nat. Bank Reg. 46 691 
 
 Fremoult v. Dedire, 1 P. Wms. 429 122 
 
 Fries v. Southern Pa. R. R. & Mining Co. 85 Pa. St. 73 633 
 
 Fripp v. Bridgewater. &c. Ry. Co. 3 W. R. 356 505 
 
 v. Chard Ry. Co. 11 Hare, 241 428,459,477 
 
 Frisbee v. Timanus, 12 Fla. 300 459 
 
 Five v. Tucker, 24 111. 180 353 
 
 Furman v. Nichol, 8 Wall. 44 355 
 
 Galena & Chicago Union R. R. Co. v. Menzies, 26 Bl. 121 . . 114, 119 
 Galveston R. R. Co. v. Cowdrey, 11 Wall. 459 . 84, 114, 142. 147, 151, 
 
 207, 432, 562, 563 
 Gardner v. London, Chatham & Dover Ry. Co. L. R. 2 Ch. App. 201; 36 
 
 L. J. Ch. 323 1,99,103,456,613 
 
 Garrett v. May, 19 Md. 177 316 
 
 Garvin v. Wiswell, 83 111. 215 283, 284 
 
 Gelpcke v. City of Dubuque, 1 Wall. 175 . . 198, 227, 230, 231, 240, 276, 
 
 291, 332 
 General Estates Co. in re, L. R. 3 Ch. 758 . . . 189, 197, 306, 311 
 
 General Provident Ass. Co. in re, L. R. 14 Eq. 507 5 
 
 General South Am. Co. in re, L. R. 2 Ch. Div. 337 . . 5, 72, 101 
 
 George v. Oxford Township, 16 Kans. 72 . . . . . . . 299 
 
 Gere w. Cushing, 5 Bush (Ky.), 304 593 
 
 German Mining Co. in re, 4 De G., M. & G. 19 5 
 
 Getchell v. Allen, 34 Iowa, 559 577, 578 
 
 Gilbough v. Norfolk & Petersburg R. R. Co. 1 Hughes, 410 . 207, 320, 324 
 
 Oilman v. Des Moines Valley R. R. Co. 41 Iowa, 22 . . . .553 
 
 v. Illinois & Miss. Telegraph Co. 91 U. S. 603 . . . .114 
 
 v. Sheboygan & Fond du Lac R. R. Co. 37 Wis. 315 . . 655 
 
 Goddin v. Crump," 8 Leigh (Va.), 120 227 
 
 Goodman v. Cincinnati & Chicago R. R. Co. 2 Dis. (Ohio) 176 . . 625 
 
 v. Harvey, 4 Ad. & El. 870 199, 284 
 
 v. Simonds, 20 How. 343 199 
 
 Goodwin v. Roberts, L. R. 10 Ex. 337; 1 App. Cas. 476 . . 189, 197, 205, 
 
 206, 311 
 
 Gordillo v. Weguelin, L. R. 5 Ch. D. 287 333, 336 
 
 Gordon v. Sea Fire & Life Ass. Co. 1 H. & N. 599 20 
 
 Gorgier v. Mieville, 3 B. & C. 45 205 
 
 Gould v. Town of Sterling, 23 N. Y. 456 291, 297 
 
 Grand Chute v. Winegar, 15 Wall. 355 ; S. C. lb. 373 . 279, 288, 291 
 
 Grand Junction Ry. Co. v. Bickford, 23 Grant's Ch. (Ont.) 302 . 10, 11, 13, 218 
 Grand Rapids & Indiana R. R. Co. v. Sanders, 54 How. (N. Y.) Pr. 214 
 
 209, 322 
 Grand Trunk Ry. Co. v. Eastern Townships Bank, 10 Lower Can. Jur. 11 ; 
 16 lb. 173 187 
 
 xxiv
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Grannahan v. Hannibal & St. Jo. R. R. Co. 30 Mo. 546 . . . 599 
 
 Gravenstine's Appeal, 49 Pa. St. 310 477 
 
 Grav v. Davis, 1 Woods, 420 '495 
 
 Graydon v. Church, 7 Mich. 36 483 
 
 Great Northern Rv. Co.*t>. Eastern Counties Ry. Co. 21 L. J. Ch. 8 ; 9 
 
 Hare, 306; 7 Railw. Cas. 643 . 1 
 
 Great Western Ry. Co. v. Preston & Berlin Ry. Co. 17 Upp. Can. Q. B. 
 
 477 350 
 
 Greeley v. People, 60 111. 19 223 
 
 Greenpoint Sugar Co. v. King's County Manf. Co. 7 Hun (N. Y.), 44 . 88 
 
 Gue v. Tide Water Canal Co. 24 How. 257 158,423 
 
 Guernsey v. Burlington Township, 4 Dill. 372 225, 295 
 
 Gun n v. Barry, 15 Wall. 610 301 
 
 Gurney v. Atlantic & Great Western Ry. Co. 2 Thomp. & C (N. Y.) 446; 
 
 58 N. Y. 358 . . . 560 
 
 Hackett v. City of Ottawa, 11 Chicago Leg. N. 82 284 
 
 Haight v. Railroad Co. 6 Wall 15 ; S. C. TAbbott C. & D. Ct. R. 81 . 96 
 Hale e. Duncan, 6 Wash. L. R. 285 ; 6 Reporter, 422; 7 Cent. L. J. 146 499, 503 
 
 v. Houghton, 8 Mich. 458 223 
 
 Halford v. Cameron's Coalbrook, &c. Rv. Co. 16 Q. B. 442 . . .311 
 
 Hall v. Sullivan R. R. Co. 21 Law Reporter, 138 3, 18 
 
 Hall Coal Co. in re, 35 Beav. 449 551 
 
 Hamilton & North Western Ry. Co. hire, 39 Q. B. Upper Canada, 193 301 
 
 Hamlin v. Meadville, 6 Neb. 227 283 
 
 Hand v. Armstrong, 18 Iowa, 324 ........ 336 
 
 Hanna v. Cincinnati & Fort Wavne R. R. Co. 20 Ind. 30 . . .272 
 
 Hannibal & St. Jo. R. R. Co. u. Marion County, 36 Mo. 294 . . 272 
 
 Hanson v. Vernon, 27 Iowa, 28 227, 240 
 
 Harcourt v. Good, 39 Tex. 455 227, 262 
 
 Hardenbergh v. Van Keuren, 4 Abb. N. C. (N. Y.) 43 . . . . 278 
 
 Hardy v. Merriweather, 14 Ind. 203 353 
 
 Harshman v. Bates County, 92 U. S. 569; 3 Dill. 150 . . 249, 269, 270, 272 
 Hart v. Boston, Revere Beach & Lynn R. R. Co. 121 Mass. 510 . .596 
 
 v. Eastern Union Ry. Co. 7 Ex. 246; 6 Railw. & Canal Cas. 818 
 
 1, 99, 102, 187 
 Harton v. Town of Thompson, 17 Albany Law J. 334 . . . .297 
 
 Harwoodw. Railroad Co. 17 Wall. 78 642,651 
 
 Hasbrouck v. City of Milwaukee, 25 Wis. 122 300 
 
 Hatch v. Chicago, Rock [sland & Pacific R. R. Co. 6 Blatchf. 105 . . 409 
 
 v. Coddington, 95 U. S. 48 85 
 
 Hatcher v. Toledo, Wabash cSc Western R. R. Co. 62 111. 477 . 423, 657, 659 
 
 Haven v. Adams, 4 Allen (Mass.), 80 86 
 
 v. Emery, 33 X. II. 66 143 
 
 v. Grand Junction R. R. & Depot Co. 12 Allen (Mass.), 337 ; 109 
 
 Mass. 88 198,320,329,330,366,398,634 
 
 Havermeyer v. Iowa County, 3 Wall. 294 276 
 
 Hawkins v. Carroll County, 50 Miss. 735 ... .... 226 
 
 Hayes v. Brotzman, 6 Reporter, 493 ....... 495 
 
 Hays v. Galion Gas Light & Coal Co. 29 Ohio St. 330 . . 5, 23, 431 
 
 •-. Ottawa, Oswego & Fox River Valley R. R. Co. 61 111. 422 . 2 
 
 Heine v. Levee Commissioners, 19 Wall. 655 300,302 
 
 Hendee v. Pinkerton, 14 Allen (Mass.), 381 12,84,189 
 
 Henderson v. Walker, 55 Ga. im 512 
 
 Henry v. Greal Northern Ry. Co. 1 De G. & J. 606; 4 Kay & J. 1 . 620 
 
 II ey Township v. People, 84 111. 544 223,273 
 
 Hervey v. 111. Midland Ry. Co. 7 Biss. 103 ni 
 
 Hibblewhite v. M'Morine, 6 Mees. & W. 200 204 
 
 Hickey v. Stewart, 8 How. 750 442 
 
 X \ V
 
 TABLE OF CASES CITED. 
 
 . L. R. 4 Ex. 387 . 
 
 367 . 
 , 11. Co. 11 Wis. 214 
 
 5 B. & A. 866 . 
 
 Higgs v. Northern Assam Tea Co 
 
 Hill v. Forsythe County, 67 N. C. 
 
 V. La Crosse & Milwaukee R. 
 
 v. Manchester \V. Works Co. 
 
 Hills v. Parker, 111 Mass. 508 
 
 Hinckley v. Gilman, Clinton & Springfield R. R. Co. 94 U. S 
 Hobbs v. Manhattan Ins. Co. 56 Me. 417 .... 
 
 Hodge's Appeal, 84 Pa. St. 359 
 
 Hodgeman v. Chicago & St. Paul Ry. Co. 20 Minn. 48; 23 lb. 153 
 Hodges v. New England Screw Co. 1 R. 1. 312 
 
 v. Shuler, 22 N. Y. 114 
 
 Holdsworth v. Mayor of Dartmouth, 11 A. & E. 490 
 
 Holland v. State of Florida, 15 Fla. 455 
 
 Hollingsworth v. City of Detroit, 3 McLean, 472 . 
 
 Holroyd v. Marshall, 10 II. L. 191 
 
 HoodV New York & N. H. R. R. Co. 22 Conn. 502 . 
 Hoover v. Mont Clair & Greenwood Lake Ry. Co. 29 N.J. Eq. 4 
 Hopkins v. Connell, 2 Tenn. Ch. 323 
 
 v. Crittenden, 10 Tex. 189 
 
 v. St. Paul & Pacific R. R. Co. 2 Dill. 396 
 
 v. Worcester & Birmingham Ry. Co. L. R. 6 Eq. 447 
 
 Hopple v. Hippie, 7 Cent. L. J. 75 
 
 Hotchkiss v. National Banks, 21 Wall. 354, affirming 10 Blatchf. 384 
 Howard v. La Crosse & Milwaukee R. R. Co. 1 Woolworth, 49 
 
 v. Milwaukee & St. Paul Ry. Co. 7 Biss. 73 . 
 Howe v. Freeman, 14 Gray (Mass.), 566 .... 
 
 Howell v. Western R. R. Co. 94 U. S. 463 ... 
 
 SECTION 
 
 . 206 
 
 227 
 
 . 573 
 
 . 192 
 
 . 500, 501, 507 
 
 467 455,530 
 
 . 409 
 
 637 
 . 273 
 
 350 
 
 198 
 
 20 
 
 . 236 
 
 332 
 . 72, 122 
 
 310 
 34, 537, 539 
 
 512 
 . 336 
 
 655 
 . 456 
 
 226 
 200, 286 
 
 521 
 . 442 
 
 169 
 . 89 
 
 Hoylei>. Plattsburg & Montreal R. R. Co. 51 Barb. (N. Y.) 45; 54 N. 
 
 Y. 314; 7 Am. Ry. Rep. 283 ....... .165,166 
 
 Hovt v. Thompson, 5 N. Y. 320 85, 483 
 
 Hubbard v. N. Y. & Harlem R. R. Co. 36 Barb. (N. Y.) 286; 14 Abb. Pr. 
 
 K S. 275 198, 206, 285, 315 
 
 Hugh v. McRae, Chase's Dec. 466 4 79 
 
 Huidekopere. Buchanan County, 3 Dill. 175 .... 289,291 
 
 v. Dallas County, 3* Dill. 171 274 
 
 Humboldt Township v. Long, 92 U. S. 642 . . 286, 291, 292, 294, 295 
 
 Hunt v. Bullock, 23 111. 320 157 
 
 v. Columbian Ins. Co. 55 Me. 290 483 
 
 Ide v. Passumpsic & Conn. River R. R. Co. 32 Vt, 397 . . . . 197 
 Illinois Midland R. R. Co. v. Waynesville, 6 Reporter, 457 . . .268 
 Imperial Land Co. of Marseilles in re, L. R. 11 Eq. 478 ; 4 Cox Joint Stock 
 
 Cas. 241 19,189, 197, 207 
 
 Imperial Mercantile Credit Asso. v. Newry & Armagh Ry. Co. 2 Ir. Eq. 524 314 
 Indiana North & South Ry. Co. v. City of Attica, 56 Ind. 476 . . . 239 
 Indianapolis, Cincinnati & Lafayette R. R. Co. in re, 5 Biss. 287 . . 694 
 Indianapolis, Cincinnati & Lafayette R. R. Co. v. Jones, 29 Ind. 465 . . 415 
 International Life Ass. in re, L. R. 10 Eq. 312 5 
 
 Jackson v. Ludeling, 21 Wall. 616 . • 645 
 
 v. Vicksburf, Shreveport & Texas R. R. Co. 2 Woods, 141 . 211 
 v. York & Cumberland R. R. Co. 48 Me. 147 . . 198, 323, 338 
 
 James v. Milwaukee, 16 Wall. 159 274 
 
 v. Pontiac & Groveland Plank Road Co. 8 Mich. 91 423 
 
 v. Railroad Co. 6 Wall. 752 391, 649 
 
 Jarrott v. City of Moberly, 5 Reporter, 583 ... . 224, 226, 249 
 Jefferson City Gas Light Co. v. Clark, Sup. Ct. U. S. Oct. T. 187 7 . 343 
 
 Jeffries v. Lawrence, 42 Iowa, 498 240, 274 
 
 Jenkins v. Jenkins, 1 Paige (N. Y.) Ch. 243 467 
 
 xxvi
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Jerome v. McCarter, 94 U. S. 734 . . . 443, 450, 499, 535, 543, 691 
 
 Jessup v. Bridge, 11 Iowa, 572 119 
 
 Jesup v. City Bank of Racine, 14 Wis. 331 89, 436 
 
 v. Wilmington & Manchester R. R. Co. 2 S. C. 469 . . .617 
 Johnson v. Stark County, 24 III. 75 ....... 231 
 
 Jones v. Keen, 115 Mass. 170 528 
 
 v. Swan, 21 Iowa, 181 591 
 
 Jordan v. Cass County, 3 Dill. 185 ; S. C. lb. 245 . . 249, 292, 302, 305 
 
 Judson v. City of Plattsburg, 3 Dill. 181 292 
 
 Junction R. R. Co. v. Bank of Ashland, 12 Wall. 226 . . . .319 
 
 v. Cleneay, 13 Ind. 161 198 
 
 v. Ruggles, 7 Ohio St. 1 633 
 
 Justices of Clarke County Court v. Paris, Winchester & Kentucky River 
 Turnpike Co. 11 B. Mon. (Ky.) 143 .271 
 
 Kain v. Smith, 11 Hun (N. Y.), 552 511 
 
 Kansas City & Council Bluffs R. R. Co. v. Alderman, 47 Mo. 349 . 273, 274 
 Kappner ». St. Louis & St. Joseph R. R. Ass'n, 3 Dill. 228 . . . 693 
 
 Kayser v. Trustees of Bremen, 16 Mo. 88 277 
 
 Keane v. Athenrv & Ennis Junction Rv. Co. 19 W. R. 43, 318 . .611 
 Keep v. Mich. Lake Shore R. R. Co. 6* Chicago L. N. 101 . 407, 411, 421, 
 
 474, 478, 484 
 
 Kenicott v. Supervisors, 16 Wall. 452 226. 289, 449 
 
 Kennard v. Cass County, 3 Dill. 147 320, 337 
 
 Kennebec & Portland R. R. Co. v. Portland & Kennebec R. R. Co. 59 Me. 
 
 9 3, 6, 11, 18, 366, 398 
 
 Kennedy v. St. Paul & Pacific R. R. Co. 2 Dill. 448 .. . 535, 539 
 Kennico'tt v. Supervisors of Wayne Co. 6 Biss. 138 . . . . 207, 208 
 Kent v. N. Y. Central R. R. Co. 12 N. Y. 628 . . . . 603, 608 
 
 Ketchum v. City of Buffalo, 14 N. Y. 356 283 
 
 v. Duncan, 96 U. S. 659 320, 331 
 
 v. Mobile & Ohio R. R. Co. 2 Woods, 532 371 
 
 v. Pacific Railroad, 4 Dill. 78 76, 83 
 
 v. Pacific Railroad Co. 3 Cent. L. J. 637; 4 C. L. J. 458 . 561, 567 
 
 Kimball v. Goodburn, 32 Mich. 10 479 
 
 King v. Marshall, 33 Beav. 565 ......... 103 
 
 v. Ohio & Miss. Ry. Co. 7 Biss. 529 505 
 
 Kinney v. Crocker, 18 Wis. 74 501, 507, 509, 512 
 
 Klein v. Jewett, 26 N. J. Eq. 474 500, 509, 512 
 
 Knapp v. Mayor, &c. of Hoboken, 39 N. J. L. 394 283 
 
 v. Railroad Co. 20 Wall. 117 369,432 
 
 Knight v. Wilmington & Manchester R. R. Co. 1 Jones L. (N. C.) 357 . 202 
 
 Knox v. Lee, 12 Wall. 457 384 
 
 Knox County v. Aspinwall, 21 How. 539 ; 24 lb. 376 . . 198, 291, 292, 
 
 294, 300, 349 
 Knoxville & Ohio R. R. Co. v. Hicks, 15 Am. Railw. R. 197 . . . 660 
 
 Koehler v. Black River Falls Iron Co. 2 Black, 715 87 
 
 Kohler v. Smith, 2 Cal. 597 336 
 
 La Crosse & Milwaukee R. R. Co. v. Vanderpool, 11 Wis. 119 . . .574 
 La Crusoe Railroad Bridge in re, 2 Dill. 465 ...... 496 
 
 Lafayette Ins. Co. v. French, 18 How. 404 406,409 
 
 Lafayette, Muncie & Bloomington EL R. Co. v. Geiger, 34 Ind. 185 . 226, 239 
 La Grange v. State Treasurer, 24 Mich. 468 ...... 246 
 
 Lamphear v. Buckingham, '•>'■> Conn. 23 7 . . . . .511, . r >/>t; 
 
 Land Credit Co. of Ireland in re, L. R. 4 Ch. 460 . . . . 192, 306 
 
 Lane v. Baughman, 17 Ohio St. 642 424,425 
 
 i;. Schomp, 20 N. J. Eg. 82 254, 288 
 
 Langston v. So. Carolina R. R. Co. 2 S. C. 248 . . 198,217,882,386 
 
 xxvii
 
 TABLE OF CASES CITED. 
 
 Lansing v. County Treasurer, 1 Dill. 522 .... 
 
 Lash v. Lambert, 15 Minn. 416 ...... 
 
 Lathrop v. Union Pacific Ry. Co. 1 Me Arthur (D. C), 234 
 Lauman v. Lebanon Valley R. R. Co. 30 Pa. St. 42 
 Lawrason v. Mason. 3 ('ranch, 492; 2 Am. Lead. Cases, 334 
 Lawrence v. Lawrence, 42 N. II. 109 .... 
 
 Lawson v. Milwaukee & Northern Ry. Co. 30 Wis. 507 
 Lav r. Wisspian, 36 Iowa, 305 
 
 SECTION 
 
 . 300 
 336 
 
 . 406 
 . 415 
 
 . 355 
 389 
 
 . 227 
 208 
 Leavenworth <Sc Des Moines R. R. Co. v. County Court of Platte County, 
 
 42 Mo. 171 268 
 
 Leavenworth County v. Miller, 7 Kans. 479 ; 12 Am. R. 425 . . 225, 227 
 
 Leavenworth. Lawrence & Galveston R. R. Co. v. Douglas County, 18 
 
 Kans.169 ; 15 Am. Railw. R. 256 .... 
 
 Le Blanc in re, I Abb. New Cas. (N. Y.) 221 
 
 Ledwieh v. McKhn, 53 N. Y. 307 
 
 Lee lom v. Plymouth R. R. Co. 5 W. & S. (Pa.) 265 . 
 
 Leu- v. Mathieson, 2 Giff. 71 ; 29 L. J. Ch. 385 
 
 Lehigh Coal & Navigation Co. v. Central R. R. Co. of N. J 
 
 Eq. 252 
 
 Leitch v. Wells, 48 N. Y. 585 
 
 L'Engle v. Florida Cent. R. R. Co. 14 Fla. 266 
 Levering v. Mayor, &e. 7 Humph. (Tenn.) 553 
 Lewis v. Bourbon County, 12 Kans. 186 . 
 
 v. City of Clarendon, 6 Reporter, 609 .... 
 Lister v. Republic F. Ins. Co. 7 Biss. 26 .... 
 Livingston County v. Hannibal & St. Jo. R. R. Co. 60 Mo. 516 
 
 Lloyd v. Mason, 2 M. & C. 487 
 
 Loan Association v. Topeka, 20 Wall. 655 .... 
 Loder v. N. Y. Utica & Ogdensburg R. R. Co. 4 Hun (N. Y.) 
 
 Logan v. Courtown, 13 Beav. 22 
 
 Logan County v. City of Lincoln, 81 111. 156 . 
 
 London & North Western Ry. Co. v. M'Michael, 5 Ex. 855 
 
 London Financial Asso. v. Wrexham, &c. Ry. Co. L. R. 18 Eq 
 
 London India Rubber Co. in re, 3 7 L. J. Ch. 235 
 
 Long Branch & Sea Shore R. R. Co. in re, 24 N. J. Eq. 398 . 
 
 Long Branch & Sea Shore R. R. Co. v. Sneden, 26 N. J. Eq. 539 
 
 Loudensehlager v. Benton, 3 Grant (Pa.), 384; 4 Phila. Rep. 420 . 
 
 Louisville & Nashville R. R. Co. v. County Court of Davidson, 1 Sneed 
 
 (Tenn.). 637 227, 268, 269 
 
 Louisville, Cincinnati & Charleston R. R. Co. v. Letson, 2 How. 497 . 409 
 Louisville, New Albany & Chicago R. R. Co. v. Cauble, 46 Ind. 277 . 519 
 
 Low v. California Pacific R. R. Co. 9 Am. Railw. 366 ; 4 C. L. J. 487 . 351 
 Lowe v. London & North Western Ry. Co. 18 Q. B. 632 . . . .191 
 
 Lowell v. City of Boston, 111 Mass. 454 223 
 
 Lowndes v. Garnett, &c. Gold Mining Co. 33 L. J. (Ch.) 416 . . .5 
 Lucas v. Tippecanoe County, 44 Ind. 524 ...... 239 
 
 Ludlow v. Ilurd, 1 Dis. (Ohio) 552 123, 124, 141, 423 
 
 Luling v. City of Racine, 1 Biss. 314 282 
 
 Luse v. Isthmus Transit Ry. Co. 6 Oregon, 125 . . . . .85 
 Lvcett v. Stafford & Uttoxeter Ry. Co.l,. R. 13 Eq. 261 ; 41 L. J. 474 . 611 
 Lyell v. Supervisors of Lapeer County, 6 McLean, 446 .... 410 
 Lynde v. County, 16 Wall. 6 294, 317 
 
 Maas v. Mo., Kansas & Tex. Ry. Co. 11 Hun (N. Y.), 8 . . . .212 
 Macon & Western R. R. Co. v. Parker, 9 Ga. 377 . . . . 159, 428 
 Madison & Indianapolis R. R. Co. v. Norwich Saving So. 24 Ind. 457 207, 353 
 
 Madison Co. v. Watertown Co. 7 Wis. 59 350 
 
 Maitland v. Citizens' Nat. Bank of Baltimore, 40 Md. 540; 17 Am. R. 
 
 620 308 
 
 xxviii 
 
 226, 227, 282 
 
 494 
 
 . 212, 285 
 
 423 
 
 . 612, 613 
 
 29 N. J. 
 
 . 581 
 
 202 
 
 . 523 
 
 189 
 
 226, 273, 296 
 
 272, 277 
 
 . 687 
 
 221 
 
 . 493 
 
 224, 227 
 
 22 . 429 
 
 . 350 
 
 280 
 
 . 191 
 
 614 
 
 . 620 
 
 470, 521 
 
 . 470 
 
 160 
 
 506
 
 TABLE OF CASES CITED. 
 
 438 
 
 SECTION 
 
 485 
 Superior Ct. 
 
 90, 195 
 
 606 
 
 . 221 
 
 . 495 
 
 . 411 
 
 432, 434 
 
 292, 295 
 
 336 
 
 . 101 
 
 282, 292 
 
 406, 409 
 
 227, 278 
 
 . 434 
 
 149, 407 
 
 . 384 
 
 70, 71, 432, 434 
 
 . 620 
 
 283 
 
 . 473, 486 
 
 . 493 
 
 . 350 
 
 222, 283 
 
 . 225 
 
 2, 7, 68 
 
 77 
 
 Mallett v. Dexter, 1 Curtis, 178 
 
 Mallory v. West Shore Hudson River R. R. Co. 35 X. Y 
 
 174 
 
 Malone v. Shamokin Vallev & Pottsville R. R. Co. 34 Leg. Int. 
 Maltby v. Reading & Columbia R. R. Co. 52 Pa. St. 140 . 
 Manlove v. Burger, 38 Ind. 211 . 
 
 Manufacturers' Nat. Bank of Chicago r/Baack, 8 Blatchf. 137 
 March v. Eastern R. R. Co. 40 N. H. 548 ... 
 Marcy v. Township of Oswego, 92 U. S. 637 
 Marietta Iron Works v. Lottimer, 25 Ohio St. 621 . 
 Marine Mansion Co. in re, L. R. 4 Eq. 601 
 
 Marsh v. Fulton County, 10 Wall. 6 76 
 
 Marshall v. Baltimore & Ohio R. R. Co. 16 How. 314 
 
 v. Silliman. 61 111. 218 
 
 Martin v. Mobile & Ohio R. R. Co. 7 Bush (Ky.), 116 
 Maryland v. Northern Central Ry. Co. 18 Md. 193 
 
 v. Railroad Co. 22 Wall. 105 ... 
 Mason v. York & Cumberland R. R. Co. 52 Me. 82 
 Matthews v. Great Northern Ry. Co. 5 Jur. N. S. 284 
 Matthis v. Town of Cameron, 62 Mo. 504 
 May v. Printup, 5 Reporter, 392 ..... 
 Maynard v. Bond, 6 Reporter, 530 .... 
 Mayor v. Bait. & Ohio R. R. Co. 21 Md. 50 
 
 v. Ray, 19 Wall. 468 
 
 Mayor of Watumpka v. Newton, 23 Ala. 660 
 
 McAllister v. Plant, 54 Miss. 106 . 
 
 McAlpin v. Jones, 10 La. Ann. 552 .... 
 
 McArthur v. Montclair Ry. Co. 27 N. J. Eq 
 
 McCad v. Byram Mfg. Co. 6 Conn. 428 
 
 McClure v. Owen, 26 Iowa, 243 
 
 v. Township of Oxford, 94 U. S. 429 
 McCormick v. Parry, 7 Exch. 355 . 
 McCoy v. Briant, 11 Chicago Leg. N. 84 
 
 W.Washington Co. 3 Wall. Jun. 381; 7 Am. Law Reg. 193 
 
 321, 340, 410 
 McCullough v. Merchants' Loan & Trust Co. 29 N. J. 217 . . 480, 525 
 
 MeCurdy's Appeal, 65 Pa. St. 290 84, 88, 399, 435 
 
 M'Dermond v. Kennedy, Bright. (Pa.) 332 226,259 
 
 McElrath in re, 2 Dill. 460 497 
 
 McElrath v. Pittsburg & Steubenville Ry. Co. 55 Pa. St. 189 : 68 lb. 37 ; 1 
 
 Am. Railw. 189 208,399,409,414,438,452 
 
 McGraw v. Memphis & Ohio R. R. Co. 5 Cold. (Tenn.) 434 . . . 430 
 McGregor v. Covington 6c Lexington R. 11. Co. 1 Dis. (Ohio) 509 . . 318 
 
 V. Deal & Dover, &c. Ry. Co. 18 Q. B. 618 . . . . 350 
 
 v. Erie Ry. Co. 35 N. J. L. 115 407 
 
 Mcllrath v. Snure, 22 Minn. 391 426 
 
 Mcllvain v. Hestonville & Mantua R. R. Co. 5 Phila. 13 . . . .573 
 
 McKee v. Vernon County, 3 Dill. 210 282,317 
 
 McKinney v. Ohio & Miss. R. R. Co. 22 Ind. 99 519 
 
 McLane v. Abrams, 2 Nev. 199 336 
 
 McLendon v. Com'ra of Anson County, 71 N. C. 38 . . . . 832, 334 
 
 McMahanw. Morrison, 16 Ind. 172 415,416 
 
 McMasters v. Reed, l Cram (Pa.), 36 815 
 
 McMillan v. Boyles, 11 Iowa, L07 240 
 
 v. X.'V. Water Proof Paper Co. 29 N. J. Eq. 610 . . .164 
 
 McMillen v. Boyles County Judge, 6 Iowa, 304 240 
 
 McMinnville & Manchester K. K. v. Huggins, 59 Tenn. 177 . . 496 
 
 McNab o. Noonan, 28 Wis. 434 195 
 
 McPheeters v. Merimac Bridge Co. 28 Mo. 465 573 
 
 \.\ix 
 
 226, 297, 
 
 399 
 
 483 
 528 
 
 84 
 240 
 299 
 
 20 
 268
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 McPherson v. Foster, 43 Iowa, 48 280, 295 
 
 McPike v. Lincoln County, 7 Cent. L. J. 264 410 
 
 Mead v. Keeler, 24 Barb. (N. Y.) 201 5 
 
 Meara v. Holbrook, 20 Ohio St. 137 ; 5 Am. R. 633 . . 500, 509, 512 
 Mechanics', &c. Building Asso. v. Meriden Agency Co. 24 Conn. 159 . 350 
 Meier «. Kansas Pacific Ry. Co. 12 Chicago Legal News, 41 ; 4 Dill. 378; 
 
 6 Reporter, 642 440,481,526 
 
 Melvin v. Lisenby, 5 Cent. L. J. 15 269,288 
 
 Memphis City v. Dean, 8 Wall. 64 484, 485 
 
 Mendenhall v. West Chester & Phila. R. R. Co. 36 Pa. St. 145 . . . 653 
 Mercer County v. Hacket, 1 Wall. 83 . 198, 284, 291, 293, 294, 320, 349 
 
 Merchants' Rank v. Petersburg R. R. 24 Pitts. L. J. 192 ; 5 Cent. L. J. 
 74; 4 W. Notes of Cas. 264; 34 Leg. Int. 240 . . . 114, 115, 118 
 
 Merchants' Bank v. State Bank, 10 Wall. 604 288 
 
 Merchants' Banking Association v. N. Y., &c. White Lead Co. 35 N. Y. 
 
 505 308 
 
 Merchants' National Bank v. Eastern R. R. Co. 124 Mass. 518 . . . 346 
 Mersey Docks' Trustees v. Gibbs, L. R. 1 H. L. 93 . . . .512 
 Met/ v. Buffalo, Corry & Pittsburg R. R. Co. 58 N. Y. 61 . 493, 520, 654, 656 
 Meyer v. City of Muscatine, 1 Wall. 384 . . . 230, 291, 294, 349, 383 
 v. Johnston, 53 Ala. 237; 15 Am. Railw. R. 467 . 15, 129, 130, 134, 
 147, 149, 152, 415, 474, 480, 533, 534, 537, 539, 541, 563, 568 
 
 Michigan Bank v. Eldred, 9 Wall. 544 204 
 
 Middleton v. N. J. West Line R. R. Co. 25 N. J. Eq. 306 . . . 91 
 v. N. J. West Line R. R. Co. 26 N. J. Eq. 269 . . 469 
 
 Miller v. N. Y. & Erie R. R. Co. 18 How. (N. Y.) Pr. 374 ; 8 Abb. Pr. 431 
 
 217, 313 
 v. Rutland & Washington R. R. Co. 40 Vt. 399 ; 36 Yt. 452 . 16, 18, 
 
 73, 86, 149, 322, 327, 363, 389, 615, 638 
 
 v. Tiffany, 1 Wall. 298 319 
 
 v. Town of Berlin, 13 Blatchf. 245 ... 291, 320, 324, 337 
 
 Mills v. Gleason, 11 Wis. 470 223,283 
 
 v. Town of Jefferson, 20 Wis. 50 332 
 
 Milwaukee & Minn. R. R. Car. Soutter, 2 Wall. 440 ; S. C. lb. 510 ; Wool- 
 worth, 49 455,457,459,522 
 
 Milwaukee & Minn. Ry. Co. v. Milwaukee & Western R. R. Co. 20 Wis. 
 
 174 108 
 
 Milwaukee & St. Paul R. R. Co. v. Milwaukee & Minn. R. R. Co. 20 Wis. 
 
 ir" 421 
 
 Minnesota Qo.'v. St'. Paul Co.'e Wall. 742 ; S. C. 2 Wall. 609 155, 156, 450 
 Minot v. Phila., Wilmington & Bait. R. R. Co. 2 Abbott's C. & D. Ct. R. 
 
 323 412 
 
 Mississippi Val. & Western Ry. Co. v. U. S. Express Co. 81 111. 534 . 115 
 Missouri, Ivans. & Tex. Ry. Co. v. Baker, 14 Kans. 563 . . . . 5S0 
 
 v. Brown, 14 Kans. 557 . . . 592 
 
 v. City of Fort Scott, 15 Kans. 435 . . 273 
 
 Missouri River, Ft. Scott & Gulf R. R. Co. v. Miami Co. 12 Kans. 234 . 273 
 
 Mitchell v. Burlington, 4 Wall. 270 227 
 
 v. Winslow, 2 Story, 630 122 
 
 Mobile & Cedar Point R. R. Co. v. Talman, 15 Ala. 472 . . . .6 
 
 Mobile & Ohio R. R. Co. v. Mosely, 52 Miss. 127 221 
 
 Monument Nat. Bank v. Globe Works, 101 Mass. 57 ; 3 Am. R. 322 5, 23, 308 
 
 Moore v. Titman, 44 111. 367 115 
 
 Moran v. Commissioners of Miami County, 2 Black, 722 . . 291, 294 
 Morford v. Farmers' Bank of Saratoga County, 26 Barb. (N. Y.) 568 . 308 
 
 Morgan v. Jones, 8 Ex. 620 336 
 
 v. Louisiana, 93 U. S. 217 660 
 
 Morgan County v. Thomas, 76 111. 120 276, 654 
 
 Morison v. Morison, 7 De G., M. & G. 214 547 
 
 XXX
 
 . 510 
 
 306, 307 
 
 295 
 
 . 306 
 
 220 
 
 . 283 
 
 414, 452 
 
 . 279 
 
 315 
 
 611, 614 
 
 . 423 
 
 273, 282 
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Morrill v. Noyes, 56 Me. 458 122,150,502 
 
 Morris Canal & Banking Co. v. Fisher, 9 N. J. Eq. (1 Stockt.) 667 . . 198, 
 
 284, 618 
 
 v. Lewis, 12 N. J. Eq. 223 ... 284 
 
 Morrison v. Eaton & Hamilton R. R. Co. 14 Ind. 110 
 
 Morse v. Brainerd, 41 Vt. 550 
 
 Moseley Green Coal & Coke Co. in re, 4 De G., J. & S. 756 
 Mosher v. Independent School Dist. of Ackley, 44 Iowa, 122 
 
 Moss v. Averell, 10 N. Y. 449 
 
 Muhlenberg v. Phila. & Reading R. R. Co. 47 Pa. St. 16 
 Mullarky v. Town of Cedar Falls, 19 Iowa, 21 . 
 
 Muller v. Dows, 94 U. S. 444 409 
 
 v. Pondir, 55 N. Y. 325 
 
 Mumford v. Am. Life Ins. & Trust Co. 4 N. Y. 463 . . 
 Munns v. Isle of Wight Ry. Co. L. R. 5 Ch. 414; L. R. 8 Eq. 653 
 
 Munroe v. Thomas, 5 Cal. 470 
 
 Munson v. Town of Lyons, 12 Blatchf. 539 .... 
 
 Murdock v. Woodson, 2 Dill. 188 78, 82, 361, 405 
 
 Murray v. Charleston, 96 U. S. 432 221 
 
 v. Deyo, 10 Hun (N. Y.), 3 368 
 
 v. Lardner, 2 Wall. 110 199, 200, 207, 284 
 
 Myatt w. St. Helen's, &c. Ry. Co. 2 Q. B. 364 . . -1,11, 100, 102 
 Myer v. Crystal Lake Pickling & Preserving Works, 14 N. B. R. 9 . . 691 
 
 Myers v. County of Johnson. 14 Iowa, 47 240 
 
 v. York & Cumberland R. R. Co. 43 Me. 232 . . . 198, 320, 323 
 Mygatt v. City of Green Bay, 1 Biss. 292 293, 299 
 
 Napa Valley R. R. Co. v. Supervisors of Napa County, 30 Cal. 435 . .276 
 
 Natal Investment Co. in re, L. R. 3 Ch. 355 197 
 
 National Bank of Cleveland v. City of Lola, 9 Kans. 689 . . 223, 224, 278 
 National Bank of N. A. v. Kirby, 108 Mass. 497 . . . . 199 
 
 National Exchange Bank v. Hartford, Providence & Fishkill R. R. Co. 8 
 
 R. I. 375 . ° 337 
 
 National Park Bank of N. Y. v. Nichols, 4 Biss. 315 . . . 409,411 
 
 Native Iron Ore Co. in re, L. R. 2 Ch. D. 345 194 
 
 Neilson v. Iowa Eastern Ry. Co. 44 Iowa, 71 . . . . 576, 577, 578 
 
 Nelson v. Eaton, 26 N. Y. 410 5 
 
 v. Iowa Eastern R. R. Co. 8 Am. Railw. R. 82 . . . 210, 577 
 
 Newark Savings Institution v. Panhorst, 7 Biss. 99 304 
 
 Newby v. Oregon Cent. Ry. Co. 1 Sawyer, 63 402 
 
 New Clydock Sheet & Bar 'iron Co. in re, L. R. 6 Eq. 514 . . . . 101 
 
 Newell i\ Smith, 49 Vt. 255 . . 510 
 
 New En ;land Car Spring Co. v. Bait. & Ohio R. R. Co. 11 Md. 81 . 578, 593 
 
 Newhalfr. Karens, 70 111. 156 589 
 
 New Haven, Middletown & Willimantic 11. R. Co. v. Town of Chatham, 42 
 
 Conn. 465 ; 10 Am. Railw. 168 280,281,302 
 
 New Jersey & N Y. Ry. Co. in re, 2!) N. J. Eq. 6 7 . . . .496 
 
 New Jersey Midland Ry. Co. v. Strait, 35 N. J. L. 322 ... 420 
 
 v. Wortendyke, 27 N. J. Eq. 658 . . 565 
 New London City National Bank v. Ware River R. R. Co. 41 Conn. 5 12 . :!.'!7 
 
 New Orleans v. Clark, 95 U. S. <; n 278,343 
 
 New Orleans, Jackson & Great Northern R. It. Co. v. Mississippi College, 
 
 17 Miss. 560 2()7, 219, 389 
 
 New Orleans, Jackson & Great Northern It. It. Co. V. Harris, 27 Miss. 
 
 517 3 
 
 New Orleans, Mobile & Chattanooga R. R. Co. v. Dunn, 51 Ala. 128. . 226 
 New Orleans R. R. Co. v. Morgan Co. 10 Wall. 256 . . . .645 
 Newport & Cincinnati Bridge Co. u. Douglass, 12 Bush (Ky.), 678 . 504,558, 
 
 565, 568 
 
 xxxi
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Newton v. Kerch, 9 Hun (N. Y.), 355 230 
 
 New York & Erie R. R. Co. v. Shepard, 5 McLean, 455 . . . . 409 
 
 Ney v. Dubuque, &c. R. R. Co. 20 Iowa, 347 580 
 
 Nichol v. Mayor, &c. of Nashville, 9 Humph. (Tenn.), 252. . . . 227 
 Nichols r. New Haven & Northampton R. R. Co. 42 Conn. 103 . . 660 
 
 Nicolay v. St. Clair County, 3 Dill. 163 274, 292, 295 
 
 Noble y. City of Vincennes, 42 Ind. 125 239 
 
 Northern Indiana R. R. Co. v. Michigan Cent. R. R. Co. 5 McLean, 444; 
 
 15 How. 233 406,413,489 
 
 North Hallenbeagle Mining Co. in re, L. R. 2 Ch. 321 . . . . 194 
 North Hudson Countv R. R. Co. v. Booream, 28 N. J. Eq. 450 . . 655 
 North Pennsylvania R. R. Co. v. Adams, 54 Pa. St. 94 . . 332, 334 
 
 North Western Ry. Co. v. M'Michael, 5 Ex. 114; S. C. lb. 855 . . 191 
 Norton v. Florence Land & Public Works Co. 26 W. R. 123 . . . 314 
 
 Norway v. Rowe, 19 Ves. Jun. 144 . 515 
 
 Norwich Yarn Co. in re, 22 Beav. 143 5,192 
 
 Noyes v. Rich, 52 Me. 115 115,118,493 
 
 Nugent v. Supervisors of Putnam County, 19 Wall. 241 . . . 271, 272 
 
 Oakland Ry. Co. v. Keenan, 56 Pa. St. 198 423, 429 
 
 Ogdensburgh & Lake Champlain R. R. Co. v. Vt. & Canada R. R. Co. 4 
 
 Hun (N. Y.), 268 496 
 
 Ohio & Miss. R. R. Co. v. Davis, 23 Ind. 553 516 
 
 v. Fitch, 20 Ind. 498 519 
 
 v. McPherson, 35 Mo. 13 84 
 
 v. Wheeler, 1 Black, 286 . . 406, 407, 409, 412 
 Ohio Valley Iron Works v. Town of Moundsville, 11 W. Va. 1 . . . 223 
 
 Olcott v. Bvmun, 17 Wall. 44 277 
 
 v. Supervisors, 16 Wall. 678 227 
 
 r. Tioga R. R. Co. 27 N. Y. 546 306, 308, 353 
 
 O'Mahoney v. Belmont, 37 N. Y. Superior Ct. 380; 48 How. Pr. 29 . 487 
 
 Opdyke y. Pacific R. R. Co. 3 Dill. 55 355 
 
 Opinion of Judges, 58 Me. 590 224 
 
 Osage Valley v. So. Kansas R. R. 9 N. B. R. 281 687 
 
 Osgood v. Maguire, 61 N. Y. 524 483 
 
 Otis v. Cullum, 92 U. S. 447 219 
 
 Owens v. Hastings, 18 Ivans. 446 427 
 
 500, 507. 
 
 110, 113, 157, 
 R. 5 
 
 Pacific R. R. Co. v. Cass County, 53 Mo. 17 ... 
 
 Pacific Railroad v. Missouri Pacific R. R. Co. 15 Am. Railw. R. 80 
 
 Pacific R. R. Co. of Missouri v. Ketchum, 95 U. S. 1 . 
 
 Packard y. Jefferson County, 2 Colo. 338 
 
 Paige v. Smith, 99 Mass. 395 . . . " . 
 
 Paine y. Lake Erie & Louisville R. R. Co. 31 Ind. 283 
 
 Palmer v. Clark. 4 Abb. N. C. (N. Y.) 25 . 
 
 v. Forbes, 23 111. 301 
 
 Panama, New Zealand & Australian Royal Mail Co. in re, L 
 
 321 ; 4 Cox's Joint Stock Cas. 35 
 Paradise v. M. & F. Bank of Memphis, 5 La. Ann. 710 
 Parish v. Wheeler, 22 N. Y. 494 
 Parker v. Browning, 8 Paige (N. Y.), 388 . 
 
 v. Mass. K. R. Co. 115 Mass. 580 . 
 Parkhurst v. Northern Central R. R. Co. 19 Md. 472 . 
 Parsons v. Lyman, 5 Blatchf. 170 . 
 Partridge v. Badger, 25 Barb. (N. Y.) 146 
 
 v. Bank of England, 9 Q. B. 396 . 
 
 Patent File Co. in re, L. R. 6 Ch. 83 
 
 Patterson v. Hempfield R. R. Co. 1 Weekly Notes of Cases, 127 
 
 v. Supervisors, 13 Cal. 175 
 
 xxxii 
 
 . 171 
 
 . 472 
 
 . 472 
 
 268, 273 
 
 509, 512 
 
 415 
 
 . 495 
 
 365, 370 
 
 Ch. 
 
 . 1, 128 
 
 . 483 
 
 107 
 
 . 495 
 
 596 
 
 . 117 
 
 . 485 
 
 . 5 
 
 . 323 
 
 . 5 
 
 551 
 
 . 231
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Pavne v. Baxter, 2 Tenn. Ch. 517 502 
 
 v. Hook, 7 Wall. 432 443 
 
 Peacock v. Pittsburg Locomotive & Car Works, 52 Ga. 417 . . . 524 
 
 Pearce r. Hennessy, 10 R. I. 223 336 
 
 Pendleton County v. Amy, 13 Wall. 297 22G, 282 
 
 Pennington v. Baehr, 48 Cal. 565 317 
 
 Pennock v. Coe, 23 How. 117 122,124,147,148,434 
 
 Pennsylvania v. Quicksilver Co. 10 Wall. 553 411 
 
 Pennsylvania & Del. R. R. Co. v. Leuffer, 84 Pa. St. 168; 24 Pittsburg L. 
 
 •J. 177 ; 5 Cent. L. J. 74 ; 4 Weekly Notes, 77 . . . . 580, 606 
 
 Pennsylvania R. R. Co. 0. City of Philadelphia, 47 Pa. St. 189 . . 226, 259 
 
 0. Pemberton & N. Y. R. R. Co. 28 N. J. Eq. 338 344 
 
 0. People, 6 C. L. J. 436 407 
 
 People w. Batchellor, 45 N. Y. 128 224, 229, 270 
 
 0. Cline, 63 111. 394; 7 Am. Railw. R. 373 . . 280, 281, 299, 302 
 
 v. Common Council of Detroit, 28 Mich. 228 ; 15 Am. R. 202 . 223 
 
 v. County of Tazewell, 22 111. 147 270 
 
 v. Eastman, 25 Cal. 603 221 
 
 0. Erie Ry. Co. 54 How. (N. Y.) Pr. 59 496 
 
 r. Garner, 4 7 111. 246 269 
 
 0. Lake Shore & Mich. South. R. R. Co. 11 Hun (N. Y.), 1 . .407 
 
 v. Mead, 24 N. Y. 114; 36 lb. 224 291,297 
 
 0. Mitchell, 35 N. Y. 551 227 
 
 v. Ohio Grove Township, 51 111. 192 276 
 
 0. State Treasurer, 24 Mich. 4G8 246 
 
 v. State Treasurer, 23 Mich. 499 246 
 
 v. Township Board of Salem, 20 Mich. 452 ; 4 Am. R. 400 229, 246 
 
 v. Wiant, 48 111. 263 269 
 
 Perkins v. Deptford Pier Co. 13 Sim. 277 187,316 
 
 v. Pritchard, 3 Rv. & Canal Cas. 95 99, 187 
 
 Perry 0. Keene, 56 N. H. 514 223,227,228,252 
 
 Peruvian Rv. Co. 0. Thames & Mersey M. Ins. Co. L. R. 2 Ch. 617 . 306, 307 
 Peters 0. St Louis & Iron Alt. R. R. Co. 23 AIo. 107 ; 24 Alo. 586 . 599, 608 
 
 Peto 0. Brighton, &c. Ry. Co. 1 H. & M. 468 74 
 
 Pettingill v. Androscoggin R. R. Co. 51 Ale. 370 118 
 
 Pfeiferv. Sheboygan tCFond du Lac R. R. Co. 18 Wis. 164 . 633,655 
 
 Philadelphia & Baltimore Central R. R. Co. v. Johnson, 54 Pa. St. 127 
 
 334,400 
 Philadelphia & Sunbury R. R. Co. 0. Lewis, 33 Pa. St. 33 . .195, 208, 313 
 Philadelphia & Wilmington It R. Co. v. Maryland, 10 How. 376 . 272, 415 
 Philadelphia, WiL &Balt. R. R. Co. v. Woelpper, 64 Pa. St. 366 . . 123 
 
 Phillips v. Town of Albany, 28 Wis. 340 230, 266 
 
 v. Winslow, 18 B. Mon. (Ky.) 431 . . . 6,124,126,150,161 
 
 Pickard 0. Sears, 6 Ad. & El. 469 191 
 
 Pierce v. Emery, 32 N. H. 484 . . . 3, 15, 125, 126, 168, 363, 364 
 
 v. Milwaukee & St. Paul It. R. Co. 24 Wis. 551 . . . 6, 7, 611 
 Pittsburg & Steubenville It. It. Co. 0. Allegheny County, 79 Pa. St. 210 . 350 
 Pittsburg, Cincinnati & St. Louis Rv. Co. 0. Marshall, 85 Pa. St. 187 . 443 
 Piatt 0. N. Y. & Boston It. It. Co. 26 Conn. 544 . . . .415,686,688 
 
 Police Jury 0. Britton, 15 Wall. 566 226,283 
 
 Pollard v. City of Pleasant Hill, 3 Dill. 195 292,383 
 
 v. Maddox, 28 Ala. 321 7 
 
 Pond 0. Cooke, 6 Reporter, 516 492 
 
 Po et v. Basingstoke Canal Co. 3 Bing. N. C. 438 .... 102 
 
 Pooley Hall Colliery Co. in re, 21 L J. N S. 690 20 
 
 Porter v. Androscoggin & Kennebec It. R. Co. 37 Me. 349 ... 86 
 Port Huron & Gratiol Ry. Co. v. Judge of St. Clair Circuit, 81 Mich. 456 . 1 i7 
 Portland & Ogdcnsburg R. R. Co. 0. Standish, 65 Me. 63 . . . 243 
 Portland & Oxford Central R. R. Co. V. Hartford, 58 Me. 28 . 268, 273, 299 
 c xxxiii
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Potts v. N. J. Arms & Ordnance Co. 17 N. J. Eq. 395 . . . . 469 
 v. Warwick & Birmingham Canal Co. Kay, 142. . . 456, 477, 504 
 
 Powell v. North Mo. R. H. 42 Mo. 63 418 
 
 Prescott v. Flinn, 9 Bing. 19 353 
 
 Preston v. Corporation of Great Yarmouth, L. R. 7 Ch. App. 655 . . 314 
 
 Price v. Great Western Ry. Co. 16 M. & W. 244 336 
 
 Prince of Wales, &c. Co. v. Harding, EL, Bl. & El. 183 . . . 191, 192 
 Prouty v. Lake Shore & Mich. Southern Ry. Co. 52 N. Y. 363 . . . 418 
 
 Pruyn v. City of Milwaukee, 18 Wis. 367 336 
 
 Pullan v. Cincinnati & Chicago Air Line R. R. Co. 4 Biss. 35; S. C. 5 lb. 
 
 237 3, 7, 13, 119, 120, 149, 459, 463 
 
 Pusey v. N. J. West Line R. R. Co. 14 Abb. (N. Y.) Pr. N. S. 434 . 19, 306 
 Putnam v. City of New Albany, 4 Biss. 365 278 
 
 Quincy, Missouri & Pacific R. R. Co. v. Morris, 84 111. 410 . . 227, 278 
 
 Racine & Miss. R. R. Co. v. Farmers' Loan & Trust Co. 49 111. 331 . 417, 646 
 
 Raikes v. Todd, 8 Ad. & El. 846 691 
 
 Railroad Co. v. Bradleys, 7 Wall. 575 455 
 
 v. Brown, 17 Wall. 445 517 
 
 v. County of Otoe, 16 Wall. 667; 2 Neb. 496 . . . 227 
 
 v. Harris, 12 Wall. 65 409, 415 
 
 v. Howard, 7 Wall. 392 . 202, 354, 445, 640, 641, 647, 653 
 
 v. Jackson, 7 Wall. 262 221 
 
 v. James, 6 Wall. 750 186,428,442 
 
 . 437 
 
 288 
 
 . 221 
 
 . 525 
 
 . 391 
 
 . 455 
 
 . 409 
 
 97 
 
 . 165 
 
 . 469 
 
 . 91 
 
 98, 104 
 
 . 226 
 
 207 
 
 6, 87 
 
 300, 302, 304, 305 
 
 . 318 
 
 542, 552, 692 
 
 v. Orr, 18 Wall. 471 .. . 
 v. Otoe County, 1 Dill. 338 
 p. Pennsylvania, 15 Wall. 300 
 v. Sloan, 31 Ohio St. 1 
 v. Soutter, 13 Wall. 517 
 v. Swasey, 23 Wall. 405 . 
 Railway Co. v. Whitton, 13 Wall. 270 
 Ramsey v. Erie Ry. Co. 38 How. Pr. (N. Y.) 193 
 Randall r. El well, 52 N. Y. 521 . 
 Randolph v. Larned, 27 N. J. Eq. 557 
 
 v. Middleton, 26 N. J. Eq. 543 . 
 v. N. J. West Line R. R. Co. 28 N. J. Eq. 49 
 Ranlett v. Leavenworth, 1 Dill. 263 .... 
 Raphael v. Bank of England, 17 C. B. 161 
 
 Reed v. Bradley, 17 111. 321 
 
 Rees v. City of" Watertown, 19 Wall. 107 .. . 
 Regent's Canal Iron Works Co. in re, 24 W. R. 687 . 
 
 L. R. 3 Ch. D. 411 . 
 Reiger v. Commissioners of the Town of Beaufort, 70 N. C. 319 . . . 256 
 
 Reinach v. Meyer, 55 How. (N. Y.) Pr. 283 387 
 
 Reineman v. Covington, &c. R. R. Co. 7 Neb. 310 . . 226, 227, 250 
 
 Rensselaer & Saratoga R. R. Co. v. Miller, 47 Vt. 146 . . . . 547 
 
 Rhos Hall Co. in re, 17 W. R. 343 197 
 
 Rice's Appeal, 79 Pa. St. 168 344, 636, 639 
 
 Richards v. Chesapeake & Ohio R. R. Co. 1 Hughes, 28 . . 436, 443, 480 
 
 v. Cooper, 5 Beav. 304 443 
 
 v. Merrimack & Conn. River R. R. Co. 44 N. H. 127 . 2, 6, 14, 375 
 
 v. People, 81 111. 551 482,504 
 
 Richardson v. Sibley, 11 Allen (Mass.), 65 3,661 
 
 Riche v. Ashbury Ry. Carriage Co. L. R. 11 Ex. 224 . . . . 1 
 
 Richmond, Fredericksburg & Potomac R. R. Co. v. Snead, 19 Gratt. (Va.) 
 
 354 86, 306 
 
 Rider v. Vrooman 12 Hun (N. Y.), 299 493 
 
 Riggs v. Johnson County, 6 Wall. 166 300, 304 
 
 XXXJv
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Ring i\ County of Johnson, 6 Iowa, 265 ....... 337 
 
 Ripon v. Railroad Companies, 16 Wall. 446 651 
 
 Ritchie v. Franklin County, 22 Wall. 167 278 
 
 Robinson v. Atlantic & Great Western R. R. Co. 66 Pa. St. 160 . 504, 505 
 
 v. Bidwell, 22 Cal. 379 .227 
 
 v. City of St. Louis, 28 Mo. 488 223 
 
 Rockwell v. Elkhorn Bank, 13 Wis. 653 5 
 
 Ro"-an v. City of AVatertown, 30 Wis. 259 266 
 
 Rogers v. Burlington, 3 Wall. 654 223, 227, 230, 280 
 
 v. Mich. South. & N. Ind. R, R. Co. 28 Barb. (N. Y.) 539 . 403 
 
 v. Wheeler, 43 N. Y. 598; 2 Lans. 486 511,556 
 
 Rome v. Cabot, 28 Ga. 50 223 
 
 Rose t'. Page, 2 Sim. 471 443 
 
 Rothgerber v. Dupuy, 64 Bl. 452 589 
 
 Roval Bank of Liverpool v. Grand Junction R. R. & Depot Co. 100 Mass. 
 
 444 189 
 
 Royal British Bank v. Turquand, 5 El. & Bl. 248; S. C. 6 lb. 327 5, 191, 294 
 
 Rubev v. Shain, 54 Mo. 207 273 
 
 Rumball v. Metropolitan Bank, L. R. 2 Q. B. D. 194 197 
 
 Russell v. East Anglian Rv. Co. 3 Mac. & G. 151 ; 6 Railw. Cases, 501 314, 504 
 
 Rutter v. Fallis, 5 Sandf . (N. Y.) 610 493 
 
 Ryan v. Lynch, 68 111. 160 230, 278 
 
 Safford v. People, 85 111. 558 ; 5 Cent. L. J. 384 ; 17 Albany Law J. 209 494, 506 
 
 Sage v. Cent. R. R. Co. of Iowa, 93 U. S. 412 433 
 
 v. Railroad Co. 96 U. S. 712 635 
 
 Sala v. City of New Orleans, 2 Woods, 188 223, 292 
 
 Salisbury Mills v. Townsend, 109 Mass. 115 202 
 
 Sampson v. Buffalo, N. Y. & Phil. Ry. Co. 13 Hun (N. Y.), 280; 6 N. Y. 
 
 Weekly Dig. 74 603 
 
 San Antonio v. Mehaffy, 96 U. S. 312 292 
 
 Sandon v. Hooper, 6 Beav. 246 ........ 533 
 
 Sangamon & Morgan R. R. Co. v. County of Morgan, 14 111. 163 . . 157 
 
 Sankey Brook Coal Co. in re, L. R. 10 Eq. 381 103 
 
 Savannah, Griffin & North Ala. R. R. Co. v. Grant, 56 Ga. 68 . . . 588 
 Scott v. Clinton & Springfield R. R. Co. 6 Biss. 529 . . 147, 157, 171 
 
 v. Colburn, 26 Beav. 276 20 
 
 v.Elmore, 10 Hun (N. Y.), 68 493 
 
 Screven v. Clark, 48 Ga. 41 495 
 
 Sea Ins. Co. v. Stebbins, 8 Paige (N. Y.), 565 478 
 
 Searle v. Adams, 3 Kans. 515 336 
 
 Searles v. Jacksonville, Pensacola & Mobile, K. R. Co. 2 Woods, 621 441, 487 
 
 Secombe v. Milwaukee & St. Paul Co. 2 Dill. 469 655 
 
 Secor v. Toledo, Peoria & Warsaw Ry. Co. 7 Biss. 513 . . . 505, 536 
 
 Sedgewick v. Mench, 6 Blatchf. 156 484 
 
 Selma & Gulf R. R. Co. ex parte, 45 Ala. 696 ... 232, 276 
 
 Selma, Rome & Dalton R. R. Co. v. Harbin, 40 Ga. 706 . . . .418 
 Serrell v. Derbyshire, &c. Ry. Co. 9 C. B. 811 ; 10 C. B. 910 . . . 194 
 
 Sewall v. Braincrd, 38 Vt. 364 322, 327, 338, 638 
 
 Sevbel v. National Currencv Bank, 54 N. Y. 288 ; 2 Daly, 383 . 207, 284 
 
 Seybert, v. City of Pittsburg, 1 Wall. 272 230 
 
 Seymour v. Canandaigua & Niagara Falls R. R. Co. 25 Barb. (N. Y.) 
 
 284 ; .S\ C. 14 Dow. Pa. 531 . . . .129, 130, 132 
 
 v. Milford & Chillicothe Turnpike Co. 10 Ohio, 470 . . . 423 
 
 Shamokin Valley EL R. Co. v. Livermore, 17 Pa. St. 465 . . . 104, 1-59 
 
 Sbarpless ». Mayor, &c. of Phila. 21 Pa. St. 147 .... 224,227 
 
 Shaw v. Bill, 95 U. S. 10 124,180,217,422 
 
 r. Norfolk County K. R. Co. r, Gray (Muss.), 162 . 14, 876, 401, 188 
 v. Spencer, 100 Mass. 882 ; l Am. 'it. 1 15 202
 
 TABLE OF CASES CITED. 
 
 Shawnee County v. Carter, 2 Kans. 115 
 Sheboygan County p. Parker, 3 Wall. 93 . . . 
 Shepley v Atlantic & St. Lawrence R. R. Co. 55 Me. 395 
 Sherrard v. Lafayette County, 3 Dill. 236 . 
 
 Shields v. Ohio, 95 U. S. 319 
 
 Shirk v. Pulaski County, 4 Dill. 209 ._ . 
 
 Shoemaker v. Goshen Township, 14 Ohio St. 569 . 
 
 Shrewsbury & Birmingham Ry. Co. v. Northwestern Ry. Co 
 
 Silliman v. Fredericksburg, Orange & Charlottesville, R. R. Co. 2 7 Gratt. 
 
 (Va.) 119 
 
 Skinner v. Maxwell, US X. C. 400 
 
 Slack p. Maysville & Lexington R. R. Co. 13 B. Mon. (Ky.) 1 
 Smallhouse v. Kentucky & Mon. Gold & Silver Mining Co*. 2 Mon. T. 443 
 Smead p. Indianapolis, Pittsburg & Cleveland R. R. Co. 11 Ind. 104 
 
 SECTION 
 
 283 
 
 . 207, 317 
 
 . 3, 11, 14, 18, 401 
 
 . 230 
 
 415 
 
 . 283 
 
 2S0 
 
 1 
 
 6 ILL. 113 
 
 25 
 
 504 
 
 227, 231 
 
 580 
 
 308, 
 
 350, 353 
 
 Smith p. Chicago & Northwestern, R. R. Co. 18 Wis. 17 . . 654, 655 
 
 v. Cork & Bandon Ry. Co. Ir. R. 3 Eq. 356 ; Ir. R. 5 Eq. 65 . . 620 
 
 v. County of Clark, 54 Mo. 5S . . 272, 274, 277, 291, 292, 321 
 
 v. Eastern R. R Co. 124 Mass. 154 115,556 
 
 v. Eureka Flour Mills Co. 6 Cal. 1 306 
 
 v. Gower, 2 Duv. (Ky.) 17 ; 3 Mete. (Ky.) 171 . . .16, 632 
 
 v. Johnson, 3 H. & N. 222 353 
 
 v. Sac County, 11 Wall. 139 199 
 
 v. Tallapoosa County, 2 Woods, 574 292, 334 
 
 Societv for Savings v. City of New London, 29 Conn. 174 . . . 227, 292 
 
 Solomons v. Laing, 12 Beav. 339 350 
 
 Souter v. La Qrosse & Milwaukee R. R. Co. Woolworth, 49 521 
 
 South Carolina Railroad in re, 11 Chicago Legal News, 8 464 
 
 South Yorkshire Ry. &c. Co. v. Great Northern Ry. Co. 9 Exch. 55 . .1 
 Special Bank Commissioners v. Franklin Inst, for Savings, 11 R. I. 557 . 528 
 Spencer v. Pierce, 5 R. I. 63 . . . . . . . . .332 
 
 Spooner v. Holmes, 102 Mass. 503 ; 3 Am. R. 502 . 207, 216, 320, 337 
 
 Sprague v. Hartford, Prov. & Fhhkill R. R. Co. 50 R. I. 233 . . . 407 
 
 v. Smith, 29 Vt. 421 510, 511, 556 
 
 v. Steam Navigation Co. 52 Me. 592 118 
 
 Stanton v. Alabama & Chattanooga R. R. Co. 2 Woods, 506 ; S. C. lb. 523 
 
 214, 215, 514, 535, 539, 545 
 
 Starin v. Town of Genoa, 23 N. Y. 439 230. 291, 297 
 
 Stark Bank v. United States Pottery Co. 34 Vt. 144 350 
 
 State v. Bank of Md. 6 G. & J. (Md.) 205 653 
 
 v. Binder, 38 Mo. 450 269 
 
 v. Bissell, 4 Greene (Iowa), 328 240 
 
 v. City of Madison, 7 Wis. 688 223 
 
 v. Consolidation Coal Co. 46 Md. 1 2, 44 
 
 v. County Court of Daviess County, 64 Mo. 30 . . . . 268, 273 
 
 v. County Court of Sullivan County, 51 Mo. 522 .... 274 
 v. County of Wapello, 13 Iowa, 388 ....... 240 
 
 v. Curators State University, 57 Mo. 178 249 
 
 u. Del., Lackawanna & Western R. R. Co. 30 N. J. L. 473 . . 407 
 
 v. Greene County, 54 Mo. 540 272, 274 
 
 v. Linn County Court, 44 Mo. 504 276 
 
 v. Macon County Court, 41 Mo. 453 274 
 
 v. Mavor of St. Joseph, 37 Mo. 370 269 
 
 v. McKay, 43 Mo. 594 405 
 
 t\ Mexican Gulf Ry. Co. 3 Rob. (La.) 513 . . . 3, 122 
 
 v. New Orleans & Nashville R. R. Co. 4 Rob. (La.) 231 . .122 
 v. Osawkee Township, 14 Kans. 418 ..... 223 
 
 v. Rives, 5 Ired. (N. C.) L. 297 423, 653 
 
 v. Saline County, 51 Mo. 350 230, 274 
 
 xxxvi
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 . 291 
 
 171 
 . 305 
 
 272 
 . 247 
 
 257 
 . 280 
 
 303 
 . 239 
 
 308 
 . 233 
 
 398 
 
 . 242 
 
 149, 407 
 
 . 383 
 
 State v. Saline County Court, 48 Mo. 390 
 
 v. Severance, 55 Mo. 378 
 
 v. Shortridge, 56 Mo. 126 
 
 v. Sullivan County, 5 7 Mo. 522 
 
 v. Town of Clark, 23 Minn. 422 
 
 v. Trustees of Union Township, 8 Ohio St. 394 .... 
 i\ Van Home, 7 Ohio St. 327 . 
 
 v. Walker, 7 Cent. L. J. 390 
 
 v. Wheadon, 39 Ind. 520 
 
 State Bank v. U. S. Pottery Co. 34 Vt. 144 
 
 State of Arkansas v. Little Rock, Miss, Eiver & Tex. Ey. Co. 31 Ark. 701 
 
 State of Florida v. Anderson, 91 U. S. 667 
 
 State of Louisiana v. City of Shreveport, 27 La. Ann. 623 
 State of Maryland v. Northern Cent. By. Co. 18 Md. 193 
 
 State of Missouri v. Hays, 50 Mo. 34 
 
 State of Ohio v. Board of Education of Perrysburg Township. 27 Ohio St 
 
 96 • 
 
 State Treasurer v. Somerville & Easton E. E. Co. 28 N. J. L. 21 
 Steamboat Co. v. McCutcheon, 13 Pa. St. 13 . 
 Steele v. Harmer, 14 M. & W. 831 ; 4 Ex. 1 
 
 r. Sturgis, 5 Abb. (N. Y.) Pr. 442 
 Stein v. Mayor, &c. of Mobile, 24 Ala. 591 
 Steines v. Franklin County, 48 Mo. 167; 8 Am. E. 87 . 
 Stephens v. Benton, 1 Duv. (Ky.) 112 
 
 Stevens v. Buffalo & N. Y. City E. E. Co. 31 Barb. (N. Y.) 590 
 V. Davison, 18 Gratt. (Va.) 819 . 
 v. Mid-Hants Ey. Co. L. E. 8 Ch. App. 1064 . 
 v. N. Y. & Oswego Midland E. E. Co. 13 Blatchf. 104 
 
 412 
 
 v. South Devon Ev. Co. 13 Beav. 48 ; 9 Hare, 313 . 
 r. Watson, 4 Abb* (N. Y.) App. Dec. 302 . 
 
 Stewart's Appeal, 56 Pa. St. 413 
 
 72 Pa. St. 291 
 
 Stewart v. Board of Supervisors of Polk County, 30 Iowa, 9 . 
 
 V. Jones, 40 Mo. 140 
 
 St. Germans v. Crystal Palace Ev. Co. L. E. 11 Eq. 568 ; 19 "W 
 
 St. John o. Erie Ev. Co. 10 Blatchf. 271; 22 Wall. 136 . 
 
 St. Joseph & Denver City E. E. Co. v. Buchanan County Court, 39 Mo. 
 
 485 
 
 v. Smith, 19 Kans. 225; 6 Eeporter, 
 331 ; 6 Cent. L.J. 59 . 501, 507 
 
 St. Joseph Township v. Eogers, 16 Wall. 644 226, 227, 269, 278, 283, 291, 
 
 1 292, 293 
 
 St. Louis, Alton & Terre Haute E. E. Co. r. Miller, 43 111. 199 
 Stockton & Yi-alia R. R. Co. v. City of Stockton, 51 Cal. 328 
 Stoddard v. Kimball, 6 Cush. (Mass.) 469 . 
 
 Stoke- i7. County of Scott, 10 Iowa, 166 
 
 St. Paul & Pacific R. It. Co. v. Parcher, 11 Minn. 297 
 Strand Music Hall Co. in re 3 De G., J. & S. 147 . 
 Stratford & Huron Ely. Co. in re, 88 Q. 15. Upper Canada 112 
 Straus v. Eagle Ins. Co. of Cincinnati, 5 Ohio St. 59 
 Smart v. James River & Kanawha Co. •_' l Gratt. (Va.) 294 
 Sturgea <•• Knapp, SI Vt. 1 ; 33 Vt. 486 ; 36 Vt. 439 . 
 Sturtevanl '■■ City of Alton, :; McLean, 393 
 Sullivan r. Portland & Kennebec R. R. Co. 94 U. S. 806 
 Supervisors '•. Schenck, 5 Wall. 772 . 
 
 v. United State-, 18 Wall. 71 . . . 
 Supervisors of County of Portage v. Wisconsin Cent. R. R. Co. 121 Mass. 
 
 4, ;o 266, 278, 278 
 
 x \ \ v i i 
 
 288, 302 
 
 . 164 
 
 288 
 
 . 306 
 
 . 493 
 
 . 227 
 
 268, 280, 294 
 
 . 213 
 
 164, 165 
 
 . 457 
 
 385, 614 
 
 5. C. lb. 
 
 . 571, 638 
 
 620 
 
 . 122, 145 
 
 2 
 
 . 653 
 
 2-10 
 
 423 
 
 611 
 
 624 
 
 R. 
 
 3, 
 584 
 . 622, 
 
 227 
 
 
 
 657 
 
 
 
 273 
 
 
 
 208 
 
 
 
 240 
 
 
 6, 
 
 660 
 75 
 
 273 
 
 5 
 
 24 
 
 357, 
 
 864, 
 
 367 
 288 
 
 
 612, 
 
 655 
 
 . 280, 
 
 288, 
 
 294 
 
 
 803 
 
 805
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Susquehanna Canal Co. v. Bonham, 9 W. & S. (Pa.) 27 . .3, 159, 423 
 Sutherland v. Lake Superior Ship Canal, R. R. & Iron Co. 1 Cent. L. 
 
 J. 127 443, 690, G91 
 
 SutlifE v. Cleveland & Mahoning R. R. Co. 24 Ohio St. 147 . . 97 
 
 Sweatt v. Boston, Hartford & Erie R. R. Co. 3 Cliff. 339 . . 685 
 
 Sweet v. Hulbert, 51 Barb. (N. Y.) 312 230 
 
 Sykes v. Mayor, &c. of Columbus, 5 Reporter, 501 . . . 226, 230, 278 
 
 Taber v. Cincinnati, Logansport & Chicago Rv. Co. 15 Ind. 459 . 12, 334 
 
 Taft v. Hartford, Providence & Fishkill R. R. Co. 8 R. I. 310 . 620, 624 
 
 Tagart v. Northern Cent. Ry. Co. 29 Md. 557 418 
 
 Taylor v. Atlantic & Great Western Ry. Co. 55 How. (N. Y.) Pr. 275 . 387 
 v. Burlington, Cedar Rapids & Minn. Ry. Co. 11 W. Jur. 337; S. C. 
 
 4 Cent. L. J. 536; 4 Dill. 571 143,577,578 
 
 v. Columbian Ins. Co. 14 Allen (Mass.), 353 . . . . 483, 492 
 v. Commissioners of Ross County, 23 Ohio St. 22 257 
 
 v. Taylor, 10 Minn. 107 269 
 
 Ten Evck v. Mayor of Keokuk, 15 Iowa, 486 240 
 
 Terrell v. Allison, 21 Wall. 289 442 
 
 Thayer v. Montgomery County, 3 Dill. 389 .337 
 
 Third Nat. Bank v. Eastern R. R. Co. 122 Mass. 240 . . . . 618, 692 
 
 Thomas v. Armstrong, 7 Cal. 286 423 
 
 v. City of Port Huron, 27 Mich. 320 246 
 
 v. County of Scotland, 3 Dill. 7 272 
 
 Thompson v. City of Peru, 29 Ind. 305 231 
 
 v. Erie Ry. Co. 42 How. (N. Y.) Pr. 68; S. C. 11 Abb. Pr. 
 
 (N. Y.) 188 9, 619 
 
 v. Scott, 22 Int. Rev. Rec. 376 ; 4 Dill. 508 ... 508 
 
 v. Universal Salvage Co. 1 Ex. 694 306 
 
 v. Van Vechten, 27 N. Y. 568 164 
 
 Thomson v. Lee County, 3 Wall. 327 222, 226, 276, 278, 284, 317, 320, 337 
 
 Thurman v. Cherokee R. R. Co. 56 Ga. 376 512 
 
 Tippetts v. Walker, 4 Mass. 595 423 
 
 Titus v. Ginheimer, 27 111. 462 157 
 
 v. Mabee, 25 111. 257 111,157 
 
 Toledo, Wabash & Western Ry. Co. v. Beggs, 85 111. 80 . . . .517 
 
 Tomlinson v. Branch. 15 Wall. 460 272 
 
 Town of Bennington u. Park, 50 Vt. 178 280,282 
 
 Town of Cicero v. Clifford, 53 Ind. 191 320 
 
 Town of Coloma v. Eaves, 92 U. S. 484 .. . 226, 291, 292, 293, 294 
 Town of Concord v. Portsmouth Savings Bank, 92 U. S. 625 . 271, 274, 275, 
 
 291, 293, 295 
 Town of Duanesburgh v. Jenkins, 57 N. Y. 177 . . . . 270, 278 
 
 Town of Dundas v. Desjardins Canal Co. 17 Grant (Upper Can. Ch.), 27 . 78 
 
 Town of Eagle v. Kohn, 84 111. 292 267,288,296 
 
 Town of East Lincoln v. Davenport, 94 U. S. 801 . . 271, 272, 288 
 
 Town of Genoa v. Woodruff, 92 U. S. 502 332 
 
 Town of Hackettstown v. Swackhamer, 37 N. J. L. 191 . . . .283 
 
 Town of Keithsburg v. Frick, 34 111. 405 278 
 
 Town of Pana v. Lippincott, 10 Chicago Leg. News, 205 .... 226 
 Town of Platteville v. Galena & Southern Wis. R. R. Co. 43 Wis. 493 . 266, 
 
 273 
 Town of Queensbury v. Culver, 19 Wall. 83 ... . 230, 300, 338 
 
 Town of So. Ottawa v. Perkins, 94 U. S. 260 226 
 
 Town of Venice v. Murdock, 92 U. S. 494 291, 292 
 
 Township of Brock v. Toronto & Nipissing Ry. Co. 17 Grant (Upper Can- 
 ada Ch.). 425 193 
 
 Township of Burlington v. Beasley, 94 U. S. 310 225 
 
 Township of East Oakland v. Skinner, 94 U. S. 255 230 
 
 xxxviii
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Township of Elmwood v. Marcy, 92 U. S. 289 278 
 
 Township of Pine Grove d. Talcott, 19 Wall. 666 . . . 227, 229, 246 
 Township of Rock Creek v. Strong, 96 U. S. 271 . . 226, 267, 289, 292 
 
 Traskw. McGuire, 18 Wall. 391 660 
 
 Trebilcock v. Wilson, 12 Wall. 687 3S3 
 
 Troup's Case, 29 Beav. 353 5 
 
 Troy & Rutland R. R. Co. v. Kerr, 17 Barb. (N. Y.) 581 ... 2 
 
 Tucker v. City of Raleigh, 75 N. C. 267 283 
 
 v. Fergusson, 22 Wall. 572 12 
 
 Turgeau v. Brady, 24 La. Ann. 348 476 
 
 Twin-Lick Oil Co. v. Marbury, 91 U. S. 587 . . . . 22, 643, 644 
 
 Tyrone & Clearfield R. R. Co. v. Jones, 1 Weekly Notes of Cases, 571 .606 
 Tysen v. Wabash Rv. Co. Chicago Times, July 28, 1878 . . . 462 
 Tyson's Reef Co. hire, 3 W. H. & A. B. Cases at Law (Vict.), 162 . . 191 
 
 Underbill v. Trustees of Sonora, 17 Cal. 172 337 
 
 Union Bank of Louisiana v. Marin, 3 La. Ann. 34 .... 453 
 
 Union Pacific IS. R. Co. v. Colfax County, 4 Neb. 450 . . . . 225 
 
 v. Commissioners of Davis County, 6 Kans. 356 270, 
 
 302. 
 v. Lincoln County, 3 Dill. 300 . .267, 268, 299 
 v. Merrick County, 3 Dill. 359 . . 267, 268, 299 
 Union Trust Co. v. Rockford, Rock Island & St. Louis R. R. Co. 6 Biss. 
 
 197 484 
 
 v. St. Louis, Iron Mountain & Southern R. R. Co. 4 Dill. 
 
 114; 4 C. L. J. 585 459,461 
 
 Union Trust Co. of N. Y. v. Monticello & Port Jervis Ry. Co. 63 N. Y. 311 
 
 329 
 
 United States v. County Court of Vernon County, 3 Dill. 281 . . . 302 
 
 v. County of Clark, 5 Reporter, 131 .... 301 
 
 v. County of Clark, 95 U. S. 769 ; 96 U. S. 211 . . 303, 305 
 
 v. Jefferson Countv, 6 Reporter, 486 ; 7 Am. Law Rec. 154 
 
 300, 301 
 
 v. Kansas Pacific Ry. Co. 4 Dill. 367 92 
 
 v. Louisville & Portland Canal Co. 4 Dill. 601 . . . 557 
 v. Mavor, &c, of City of New Orleans, 2 Woods, 230 . 303 
 
 v. Miller County, 4 Dill. 233 301, 303 
 
 v. New Orleans R. R. Co. 12 Wall. 362 . . . 142, 151 
 
 v. Railroad Co. 17 Wall. 322 222 
 
 [v. Silverman, 4 Dill. 224 304 
 
 v. Supervisors of Lee County, 2 Biss. 77 ; 3 Wall. 327 .276 
 
 v. Union Pacific R. R. Co. 91 U. S. 72 . . . . 78, 92 
 
 v. Vernon County, 2 Cent. L. J. 7 71 . . . . . 303 
 
 United States Rolling Stock Co. in re, 55 How. (N. Y.) Pr. 286 . 388, 414 
 
 Upton v. Hubbard, 28 Conn. 274 492 
 
 Vance v. City of Little Rock, 30 Ark. 4 35 .... 300,303,304 
 
 Van Hostrup v. Madison City, 1 Wall. 291 293 
 
 Van Keuren v. Cent. IS. IS. Co. of N. J. 38 N. J. L. 165; S. C. 13 Am. 
 
 I!v. Rep. 43 109 
 
 Venlcr v. Town of Lima, 19 Wis. 280 . .... 297 
 
 Vermilye v. Adams Express Co. 21 Wall. 138 201,207 
 
 Vermont & Canada ES. It. Co. v. Vermont Central R. IS. Co. 50 Vt. 500 ; 
 
 1 l Am. Railw. R. 197 .... 453, 454, 459, 51-', 586, 539, 549 
 Vermonl & Canada IS. R. Co. v. Vermont Cent. IS. IS. Co. 46 Vt. 792 495, 
 
 500 
 
 v. Vermonl Cent. R. It. Co. ::i Vt. 1 . .569 
 
 Vicksbnrg & Meridian R. It. Co. u McCutchen, r>2 Miss. 645 . . 429 
 
 Vilas v. Milwaukee 6c Prairie du Cbien Ry. Co. 17 Wis. 497 . . 654, 655 
 
 8 \\'\
 
 TABLE OF CASES CITED. 
 
 SECTION 
 
 Virginia v. Chesapeake & Ohio Canal Co. 32 Md. 501; 35 Md. 1 198, 329, 
 
 332, 336, 344, 638 
 Virginia & Truckee R. R. Co. v. Lyons County, 6 Nev. 68 273 
 
 Von Hoffman v. City of Quincy, 4 Wall. 535 300 
 
 Vose v. Bronson, 6 Wall. 452 386 
 
 i). Cowdrey, 49 N. Y. 336 647 
 
 r. Reed, 1 Woods, 647 459, 471 
 
 233 
 
 74 
 
 . 453 
 
 227, 257 
 
 . 579 
 
 164 
 
 14 W. R. 
 Pt 
 
 l, l 
 
 611 
 611 
 
 302 
 217 
 132 
 
 272, 292 
 
 Waco Tap R. R. Co. v. Shirley, 45 Tex. 355; 13 Am. Ry. Rep, 
 Wadhams v. Gay, 73 111. 415 
 
 Walker v. Citv of Cincinnati, 21 Ohio St. 14 ... 
 
 v. Miss. Valley & Western R. R. Co. 2 Cent. L. J. 481 
 v. Sherman, 20 Wend. (N. Y.) 656 . 
 v. Ware, Hadham & Buntingford Ry. Co. 35 Beav. 52 
 
 158 
 
 v. Ware, Hadham & Buntingford Ry. Co. 11 Jur. N. S 
 Walkley v. City of Muscatine, 6 Wall. 481 ... 
 
 Wallace ». M'Connell, 13 Pet, 136 
 
 Walsh v. Barton, 24 Ohio St. 28 
 
 Washburn v. Cass County, 3 Dill. 251 
 
 Washington, Alexandria & Georgetown R. R. Co. v. Alexandria & Wash- 
 ington R. R. Co. 19 Gratt. 592 371 
 
 Waterloo v. Sharp, L. R. 8 Eq. 501 307 
 
 Watson v. Jones, 13 Wall. 679 485 
 
 Watt v. Hestonville, Mantua & Fairmount Passenger R. R. Co. 1 Brew. 
 
 (Pa.) 418; 6 Phila. 386 404 
 
 Weaver v. Barden, 49 N. Y. 286 ; 3 Lans. 338 202 
 
 Webb v. Com'rs of Heme Bay, L. R. 5 Q. B. 64 2 190 
 
 Weetjen v. St, Paul cSt Pacific R. R. Co. 4 Hun (N. Y), 529 . 139, 358, 362 
 Weismer v. Village of Douglas, 53 N. Y. 128; 64 lb. 91; 4 Hun, 201; 13 
 
 Am. R. 480 224, 228 
 
 Welch v. Pa^e, 47 N. Y. 143 198, 200, 284 
 
 Wellsborouoh & TiogaPlank Road Co. v. Griffin, 57 Pa. St. 417 520, 654, 656 
 
 West Branch Bank v. Chester, 11 Pa. St. 282 625 
 
 West Cornwall Ry. Co. v. Mowatt, 12 Jur. 407 19 
 
 Westermann v. Cape Girardeau County, 7 Cent. L. J. 353 . 249, 269, 293 
 Western Pennsylvania R. R. Co. v. Johnston, 59 Pa. St. 290 . . .633 
 Western Saving Fund Soc. of Phila. v. City of Phila. 31 Pa. St. 175; S. 
 
 C. lb. 185 224,271,300 
 
 Western Union R. R. Co. v. Smith, 75111. 496 . . . . . 419 
 
 Western Union Telegraph Co. v. Atlantic & Pacific Telegraph Co. 7 Biss. 
 
 367 - . 499,568 
 
 Weymouth i\ Washington, Georgetown & Alexandria R. R. Co. 1 McArthur 
 
 CD. C), 19 . ■ 408 
 
 Whitaker v. Hartford, Providence & Fishkill R. R. Co. 8 R. 1. 47 . . 332 
 White v. Carmarthen, &c. Ry. Co. 1 H. & M. 786 ; 1 Cox's Joint Stock 
 
 Cases, 112; 33 L.J. Ch. 93 21 
 
 v. Syracuse & Utica R. R. Co. 14 Barb. (N. J.) 559 ... 350 
 
 v. Vt. &Mass. R. R. Co. 21 How. 575 . . . 198,204,285 
 
 Whitehead v. Vineyard, 50 Mo. 30 81 
 
 White Mountains R. R. v. White Mountains R. R. 50 N. H. 50 632, 642, 652 
 Whiteside v. Bellchamber, 22 Upp. Can. (C. P.) 241 . . . . 1 
 
 White Water Valley Canal Co. v. Vallette, 21 How. 414 . ■ 11, 14, 75 
 
 Whitewell v. Warner, 20 Vt. 425 85 
 
 Whiting v. Sheboyo-an & Fond du Lac R. R. Co. 25 Wis. 167 224, 230, 266 
 
 Wickes v. Adirondack Co. 2 Hun (N. Y.), 112 . . 198, 207, 208 
 
 Wickham v. New Brunswick & Canada Ry. Co. L. R. 1 P. C. 64 ; 1 Cox's 
 
 Joint Stock Cas. 519 100, 187 
 
 Widener v. R. R. Co. 1 Weekly Notes of Cases, 472 . . . . 399 
 xl
 
 TABLE OF CASES CITED. 
 
 SECTIOX 
 
 Wilder v. Shea, 13 Bush (Ky.), 128 . . ... 428,430 
 Wildv o. Mid-Hants Ry. Co. 16 W. R. 409; 18 L. T. (N. S.) 73 . 613 
 Wiley v. Silliman, 62 111. 170 278 
 
 Wilkinson v. Fleming, 30 111. 353 370 
 
 Williams v. Avlesburv & Buckingham Ry. Co. 21 W. R. 819 . . .611 
 v. Missouri," Kansas & Texas Rv. Co. 3 Dill. 26 7 . . . 409 
 
 v. Smith, 2 Hill (N. Y.), 301 208 
 
 v. Town of Duanesburgh, 66 N. Y. 129 . . . . 229, 278 
 
 Williamson v. City of Keokuk, 44 Iowa, 88 226, 230 
 
 v. New Albany, &c. R. R. Co. 1 Biss. 198 . 117,458,459,463, 
 
 466, 480 
 v. N. J. Southern R. R. Co. 26 N. J. Eq. 398; 28 lb. 277; 29 
 
 lb. 311; 15 Am. Railw. R. 572 . . Ill, 122, 138, 142, 144, 
 
 163, 164, 557 
 Willink v. Morris Canal & Banking Co. 3 Green (N. J.), Ch. 377 . 126, 142 
 
 Willittsr. Waits, 25 N. Y. 577 483,492 
 
 Wilmer v. Atlanta & Richmond Air Line Ry. Co. 2 Woods, 409 ; S. C. 
 
 lb. 447 413.415,434,452,467,485,487,488,625 
 
 Wilmington & Baltimore R. R. Co. v. Woelpper, 64 Pa. St. 366 . .122 
 
 Wilmington Ry. Co. v. Reed, 13 Wall. 268 18 
 
 Wilson v. Boyce, 92 U. S. 320 ; S. C. 2 Dill. 539 . . . . 78, SO 
 
 v. Garroutte, 7 Cent. L. J. 29 271, 272, 274 
 
 Winch t\ Birkenhead, &c. Ry. Co. 5 De G. & S. 562; 7 Railw. Cas. 384 . 1 
 
 Winchester v. Mid-Hants Ry. Co. L. R. 5 Eq. 17 611 
 
 Winchester & Strasburg R. R. Co. v. Colfelt, 2 7 Gratt. (Va.) 777 . .429 
 
 Winn v. City of Macon, 21 Ga. 275 227 
 
 Winslow v. Merchants' Ins. Co. 4 Met. (Mass.) 306 121 
 
 Winston v. Tenn. & Pacific R. R. Co. 57 Tenn. 60; 15 Am. Railw. R. 237 268 
 Winter v. Iowa, Minn. & N. Pacific Ry. Co. 2 Dill. 487 . . . 685, 689 
 
 Wiswall v. Sampson, 14 How. 52 4S5, 500 
 
 Witherspoon v. Texas Pacific R. R. Co. 48 Tex. 309 .... 680 
 
 Wood o. Bedford & Bridgeport R. R. Co. 8 Phila. (Pa.) 94 . . . 3 
 
 v. Goodwin, 49 Me. 260 365, 413 
 
 v. Lawrence County, 1 Black, 386 317 
 
 v. Truckee Turnpike Co. 24 Cal. 474 423 
 
 Woodman v. York & Cumberland R. R. Co. 45 Me. 207 . . 115,118 
 
 Woodruff v. Trapnall, 10 How. 190 355 
 
 Woods v. Lawrence County. 1 Black, 386 291 
 
 Woodson v. Murdock, 22 Wall. 351 78, 82 
 
 Worcester Cm Exchange Co. in re, 3 De G., M. & G. 180 . . . 191 
 
 Wright v. Bundy, 11 Ind. 398 84 
 
 v. -Milwaukee cSc St. Paul R. R. Co. 25 Wis. 46 . . . . 655 
 v. Ohio & Miss. K. R. Co. 1 Dis. (Ohio) 465 .... 338 
 
 Yeager v. Wallace, 44 Pa. St. 294 495 
 
 York & Cumberland R. R. Co. in re, 50 Me. 552 71 
 
 Yomvr v. Montgomery & Eufaula R. R. Co. 2 Woods, 606 . 349, 383, 392 
 
 439, 443, 487, 490 
 Youngman v. Elmira & Williamsport R. R. Co. 65 Pa. St. 278 . 106, 159, 399 
 
 Zabriskie v. Cleveland, Columbus & Cincinnati R. R. Co. 23 How. 381 . 191, 
 
 193, 198, 350, 352 
 
 Zimmer v. State, 30 Ark. 677 4 15 
 
 xli
 
 LAW OF RAILROAD SECURITIES.
 
 \ 
 
 . > > 
 
 
 ERRATUM. 
 
 Page 456, third line from top, substitute " and" for "or. 1
 
 c^^tt^Q^ 
 
 
 THE LAW OF RAILROAD 
 
 AND OTHER CORPORATE SECURITIES. 
 
 CHAPTER I. 
 
 POWER OF CORPORATIONS TO MORTGAGE THEIR PROPERTY 
 AND FRANCHISES. 
 
 I. When legislative authority is essential 
 to a mortgage of corporate property 
 and franchises, 1-25. 
 
 II. Statutes authorizing railroad compa- 
 nies to mortgage their property and 
 franchises, 26-67. 
 
 I. WJien Legislative Authority is essential to a Mortgage of Cor- 
 porate Property and Franchises^ 
 
 1. It is a settled doctrine of the English law that a corpora- 
 tion like a railway company, created for the performance of im- 
 portant public functions, and for that purpose endowed with special 
 rights and privileges, cannot, without legislative authority, trans- 
 fer these rights and privileges, and thus divest itself of its means 
 of discharging its public duties. 1 " I agree," said Lord Cranworth 
 in the House of Lords, delivering the judgment in the case first 
 cited below, " to the proposition urged by the appellants, that 
 primd facie corporate bodies are bound by all contracts under their 
 common seal. When the legislature constitutes a corporation, it 
 gives to that body, primd facie, an absolute right of contracting. 
 But this primd facie right does not exist in any case where the 
 contract is one which, from the nature and object of incorporation, 
 
 1 Shrewsbury & Birmingham Ity. Co. Railw. Cas. 643; East Anglian Ry. v. 
 v. Northwestern Ry. Co. 6 H. L. 113; Eastern Counties Ry. Co. 11 C. B. 775; 
 Winch v. Birkenhead, &c. Ry. Co. 5 De 7 Railw. Cas. 150; Richc v. Ashbury Ry. 
 G. & S. 562; S. V. 7 Railw. Cas. 384; Carriage Co. L. R. II Kx. 224, 264 ; Bag- 
 South Yorkshire By. &c. Co. v. Great shaw v. Eastern Union Ry. Co. 7 Hare, 
 Northern Ry. Co. 'J Kx. 55, 84; Great 114; 2 Mac. & G. 389 ; Whiteside v. Bell- 
 Northern Ry. Co. v. Eastern Counties Ry. chamber, 22 Upp. Can. (C. 1'.) 241. 
 Co. 21 L. J. Ch. 8, 37; <J Hare, 306; 7 
 
 1 1
 
 § 2.] POWER OF CORPORATIONS. 
 
 the corporate body is expressly or impliedly prohibited from mak- 
 ing ; such a contract is said to be ultra vires; and the question 
 here, as in similar cases, is, whether there is anything on the face 
 of the act of incorporation which expressly or impliedly forbids 
 the making of the contract sought to be enforced." 
 
 To like effect Lord Justice Cairns, in a recent important case 
 upon this subject, said: " When parliament, acting for the pub- 
 lic interest, authorizes the construction and maintenance of a rail- 
 way, both as a highway for the public and as a road on which the 
 comj^any may themselves become carriers of passengers and goods, 
 it confers powers and enforces duties and responsibilities of the 
 largest and most important kind, and confers and enforces them 
 upon the company, which parliament has before it, and upon no 
 other body of persons." 1 
 
 It is also the settled rule that the permanent way and fixed 
 plant of railway companies cannot, without legislative authority, 
 be mortgaged in the ordinary way so as to give the mortgagees 
 the right to enter upon the property or to interfere with the use 
 and possession of it by the companies chartered to use it ; and 
 other corporations having public duties are under the same inabil- 
 ity respecting the mortgaging of their permanent property. 2 
 
 2. Such also may be considered the settled law of the Amer- 
 ican courts. — The grant of the franchise to be a corporation, with 
 the grant to build and work a railroad and take tolls from the 
 public, is attended with an obligatio'n on the part of the company 
 to exercise the franchise for the public benefit. The franchise 
 and the attendant privileges are confided to a particular political 
 person, and are not a subject of sale and transfer to any other 
 person or body corporate, except by the authority of some posi- 
 tive provision of law. 3 The function, however, which is not as- 
 
 i Gardner v. London, Chatham & Do- Barb. (N. Y.) 581 ; Black v. Del. & Rari- 
 
 ver Ry. Co. L. R. 2 Ch. App. 201, 212. tan Canal Co. 22 N. J. Eq. 130, 399 ; S. 
 
 2 Gardner v. London, Chatham & C. 24 lb. 455 ; Stewart's Appeal, 56 Pa. 
 
 Dover Rj. Co. L. R. 2 Ch. App. 201 ; St. 413 ; State v. Consolidation Coal Co. 
 
 Panama, New Zealand & Australian 46 Md. 1, 10 ; Hays v. Ottawa, Oswego. 
 
 Royal Mail Co. in re, L. R. 5 Ch. 321, per & Fox River Valley R, R. Co. 61 111. 422 ; 
 
 Gifford L. J.; Myatt v. St. Helen's, &c. Arthur v. Commercial and Railroad Bank 
 
 Ry. Co. 2 Q. B. 364; Hart v. Eastern of Vieksburg, 9 Sm. & M. (Miss.) 394, 
 
 Union Ry. Co. 7 Ex. 246. 431. See McAllister v. Plant, 54 Miss. 
 
 8 Troy & Rutland R. R. Co. v. Kerr, 17 106, 119. 
 
 2
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 3. 
 
 signable, is the corporate existence the right of being a body 
 politic with rights of succession, of acquiring and conveying prop- 
 erty, and of suing and being sued in its corporate name. The 
 right to build, own, and manage a railroad, and to take tolls thereon, 
 if given to a natural person, might be assigned by him ; for there 
 is nothing in the nature of such a privilege inconsistent with a 
 sale and transfer to another. But a corporation created for a 
 public object can neither transfer its franchise, nor, it would seem, 
 disable itself from performing its public duties, by conveying its 
 track and right of way, or other property which is essential to its 
 fulfilling the duties imposed upon it by its charter. 1 
 
 3. Whether a railroad corporation can without legislative 
 authority transfer its franchises, by way of mortgage, is an 
 inquiry to which the same answer must be made, for the same 
 reason that these privileges are personal to the grantee. Inas- 
 much as every mortgage may in the end result in an absolute 
 transfer of the mortgaged property, it follows that such a corpo- 
 ration cannot without special authority mortgage its property and 
 give to the mortgagee, upon default, the right to exercise its pub- 
 lic duties and functions, or the power to sell and convey these 
 privileges to another. 2 
 
 In a case before the Supreme Court of Massachusetts, 3 Mr. Jus- 
 tice Hoar forcibly states the law : " In the case of a railroad com- 
 pany, created for the express and sole purpose of constructing, 
 owning, and managing a railroad ; authorized to take land for this 
 public purpose under the right of eminent domain ; whose powers 
 are to be exercised by officers expressly designated by statute ; 
 
 1 Richards v. Merrimack & Conn. Iliver R. Co. 21 Law Reporter, 138 ; Daniels v. 
 R. It. Co. 44 X. H. 127, per Bell, C. J. Hart, 1 1 8 Mass. 543 ; Wood v. Bedford & 
 
 2 Carpenter v. Black Hawk Gold Min- Bridgeport R. R. Co. 8 Phila. (Pa.) 94; 
 ing Co. 65 N. Y. 43, 50 ; Pullan v. Cin- State v. Mexican Gulf Ry. Co. 3 Rob. 
 cinnati & Chicago Air Line R. R. Co. 4 (La.) 513. 
 
 Bis-. :;:>; Susquehanna Canal Co. v. Bon- This doctrine is substantially denied in 
 
 ham, '.» W. & S. (Pa.) 27; Pierce v. Maine. Shepley v. Atlantic & St. Law- 
 
 Emery, -vj. X. II. 484; Arthur ». Commcr- rence R. R. Co. 55 Mc. 395; Kennebec & 
 
 cial & Railroad Bank of Vieksbur<;, 9 S. Portland R. R. Co. v. Portland & Kenne- 
 
 & M. (Miss.) 394; Atkinson v. Marietta & bee R. R. Co. 59 Me. 9, 23. See § 18. 
 
 Cincinnati R. R. Co. 15 Ohio St. 21 ; Stew- 3 Commonwealth v. Smith, 10 Allen 
 
 art v. Jones, 40 Mo. 140; New Orleans, (Mass.), 448; and Bee Bast Boston Freight 
 
 Jackson & Great Northern It. It. Co. v. R. K. Co. v. Eastern R. It. Co. 13 lb. vi-z ■ 
 
 Harris, 27 Miss. 517; Hall v. Sullivan It. Richardson v. Sibley, 11 lb. 05. 
 
 3
 
 § 4.] POWER OF CORPORATIONS. 
 
 having public duties, the discharge of which is the leading object 
 of its creation ; required to make returns to the legislature ; there 
 are certainly great, and in our opinion insuperable objections to 
 the doctrine that its franchise can be alienated, and its powers and 
 privileges conferred by its own act upon another person or body, 
 without authority other than that derived from the fact of its own 
 incorporation. The franchise to be a corporation clearly cannot 
 be transferred by any corporate body, of its own will. Such a 
 franchise is not, in its own nature, transmissible. The power to 
 mort^ao-e can only be coextensive with the power to alienate ab- 
 solutely, because every mortgage may become an absolute convey- 
 ance by foreclosure. And although the franchise to exist as a 
 corporation is distinguishable from the franchises to be enjoyed 
 and used by the corporation after its creation, yet the transfer of 
 the latter differs essentially from the mere alienation of ordinary 
 corporate property. The right of a railroad company to continue 
 in being depends upon the performance of its public duties. Hav- 
 ing once established its road, if that and its franchise of managing, 
 usino - , and taking tolls or fares upon the same are alienated, its 
 whole power to perform its most important functions is at an end. 
 A manufacturing company may sell its mill and buy another ; 
 but a railroad company cannot make a new railroad at its pleas- 
 ure." 
 
 Other like corporations are subject to the same inability to 
 make any alienation, absolute or conditional, either of the gen- 
 eral franchise to be a corporation, or of the subordinate franchise 
 to manage and carry on the corporate business. 1 Thus, this in- 
 ability attaches to a corporation created for the purpose of con- 
 structing and maintaining a street railway. The main object in 
 establishing such a corporation is not the profit of the share- 
 holders, but the accommodation of the public. A mortgage made 
 by such a corporation of all its property, without distinct legisla- 
 tive authority, is wholly void and inoperative, because it is in 
 violation of the public policy of the state. 2 
 
 4. Even when organized under a statute providing that the 
 
 corporation may " acquire and convey, at pleasure, all such 
 
 real estate as may be necessary and convenient to carry into effect 
 
 the object of the incorporation," a railroad company has no power 
 
 1 See § 1, last paragraph. 2 Richardson v. Sibley, 11 Allen (Mass.), 65. 
 
 4
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 5. 
 
 to alienate its franchise to be a corporation, or the franchise to 
 construct and maintain a railroad, and receive compensation for 
 the transportation of persons and property, nor any interest in 
 real estate acquired and held solely and exclusively for the pur- 
 pose of the exercise of such franchise. 1 The general words of the 
 statute do not extend to an alienation of the franchise, and they 
 must be limited to the purposes for which the statute authorized 
 the formation of corporations. When power is given to acquire 
 an interest in real estate for the single and exclusive purpose of 
 the exercise of a franchise, and particularly when, to acquire such 
 interest, there is a delegation of the power of eminent domain, 
 the interest cannot be separated from the use to which alone it 
 can be applied ; and if the franchise cannot be conveyed, neither 
 can the interest in real estate with which it is connected be con- 
 veyed. 2 
 
 5. Ordinary private corporations for gain having no public 
 functions, not only have an implied power to incur debts and 
 borrow money for the purposes of the corporation, but also an 
 implied power to pledge either real or personal property as secu- 
 rity. 3 Whatever qualifications of this rule, or exceptions to it, may 
 have been recognized by the English courts, 4 in the United States 
 the rule is established without conflict of authority. 5 The power 
 of such corporations to mortgage, unless expressly prohibited, 
 goes 'pari passu with the power to incur debts. In a recent lead- 
 ing case in England, 6 which involved the question whether a file 
 manufacturing company had power to secure an overdraft at its 
 bankers, by a deposit of title deeds, Mellish, L. J., affirming the 
 
 1 Coe v. Columbus, Piqua & Ind. R. R. * See German Mining Co. in re, 4 De 
 Co. 10 Ohio St. 372. G., M. & G. 19 ; Lowndes v. Garnett, &c. 
 
 2 Per Gholson, J., in Coe v. Columbus, Gold Mining Co. 33 L. J. (Ch.) 418 ; Nor- 
 &e. snjmi. wicb Yarn Co. in re, 22 Beav. 143 ; Troup's 
 
 3 Bank of Australasia v. Breillat, 6 Case, 21) Beav. 353. 
 
 Moo. 1'. C. 152; Royal British Bank v. 6 Curtis v. Leavitt, 15 N. Y. 9 ; Beers 
 
 Turqnand, 6 E. & B. .327 ; International v. Phoenix Glass Co. 14 Barb. (N. Y.) 358 ; 
 
 Life Ass. Co. in re, L. R. 10 Eq. 312; Bir- Mead v. Keeler, 24 lb. 20; Partridge v. 
 
 mingham Banking Co. ex parte, L. R. 6 Badger, 25 lb. 146 ; Clark v. Titcomb, 42 
 
 Ch. App. 83 ; General Provident Ass. Co. lb. 122; Barnes v. Ontario Bank, 19 X. Y. 
 
 m re, L. R. 14 Eq. 507; General South 152; Nelson v. Eaton, 26 N. Y. 410; 
 
 Am. Co. m re, -i Ch. Div. 340; Interna- Bradley v. Ballard, 55 III. 413 ; Rockwell 
 
 tional Life Ass. Soc. in re, L. R. 10 Eq. V. Elkhorn Bank, 13 Wis. 653. 
 
 312. o Patent File Co. in re, L. 11. G Ch. 83.
 
 § 6.] POWER OF CORPORATIONS. 
 
 decision of the Vice Chancellor, that the company had such power, 
 said : "It is urged that no company can mortgage, unless ex- 
 pressly authorized to do so. Now the company has property 
 which it is authorized to deal with, and I should say that the true 
 rule is just the contrary, namely, that the company can mortgage, 
 unless expressly prohibited from doing so." And further : " There 
 being nothing in the articles to prohibit the giving of such a se- 
 curity, I am of opinion that the company can give it as well for a 
 past debt as for a future one. In fact, the case is stronger in favor 
 of a security for a past debt, as it would be absurd to say that a 
 company has not power to pay past debts ; and if so, why should 
 it be debarred from giving security, which is one way of applying 
 its property in payment of its debts ? " 
 
 In another case, 1 it was held that a steamship company, being 
 in want of money for the purposes of the company's business, 
 might mortgage its ships as security for the loan, the Vice Chan- 
 cellor, Page Wood, saying, " I cannot see why it should not be 
 within their ordinary province to raise money by mortgage of 
 their ships, either for the purpose of buying new ships or paying 
 creditors." 
 
 Corporations not expressly or impliedly restrained by the nature 
 of their undertaking may borrow money to carry out the legiti- 
 mate objects of their incorporation, and secure the payment of it 
 by a mortgage of their property. 2 Thus, for instance, a corpora- 
 tion organized for the purposes of manufacturing and supplying 
 gas to the inhabitants of a city or village is under no restriction 
 in this respect arising by implication from the nature of the busi- 
 ness it was created to engage in. 3 This restriction upon the right 
 of a corporation to alienate its property arises not from the fact 
 that it subserves a public use, and is useful, or, it may be, neces- 
 sary to the general public ; but it applies only when the state, in 
 view of the public purpose of a corporation, has conferred upon it 
 special privileges, of which the right of eminent domain is gen- 
 erally the most important. 
 
 6. But the power to transfer corporate privileges and prop- 
 
 1 See Australian Auxiliary Steamship St. 59 ; Monument National Bank v. 
 Go. v. Mounsey, 4 K. & J. 733 ; 27 L. J. Globe Works, 101 Mass. 57. 
 
 (Ch.) 729. s Hays v. Galion Gas Light & Coal Co. 
 
 2 Curtis v. Leavitt, 15 N. Y. 9 ; Straus 29 Ohio St. 330. 
 v. Eagle Ins. Co. of Cincinnati, 5 Ohio 
 
 6
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 7. 
 
 erty by way of mortgage is readily conferred by the legisla- 
 ture upon corporations having special privileges entrusted to them 
 for public uses ; or a mortgage made without such authority is 
 usually confirmed by the legislature whenever such confirmation is 
 asked for. 1 
 
 An express power to mortgage would seem to negative any im- 
 plied power for the same purpose, so that where there is express 
 authority to give securities up to a certain amount, there can be 
 no implied authority beyond this amount. 2 But an express au- 
 thority to mortgage for certain purposes does not necessarily nega- 
 tive or qualify a general authority to borrow for other purposes 
 for which the implied powers of a corporation are usually sum 
 cient. 3 In general, it may be said that every private corporation 
 has an implied power to borrow money and give its negotiable 
 securities therefor, unless it be expressly or impliedly restrained 
 by legislation ; and it is only when the corporation attempts to 
 pledge its privileges and property essential to its continued exist- 
 ence and fulfilment of its duties to the public, that it meets an 
 implied restriction upon its action. 4 
 
 A corporation authorized by its charter or by statute to execute 
 a mortgage is the proper judge whether the exigency of its affairs 
 and interest demand the exercise of this right ; and a creditor of 
 the company cannot interfere with the making of such mortgage 
 unless he can show that his rights will be prejudiced by it. 5 
 
 7. The authority to mortgage the franchise need not be 
 given in express terms. — It is sufficient if it appears by a reas- 
 onable implication from a special statute that the legislature in- 
 tended to authorize such a conveyance. But whether a statute 
 referring only to property will authorize a mortgage of franchises 
 may well be questioned. 7 
 
 In a case before the District Court of the United States for In- 
 
 i Richards v. Merrimack & Conn. River Ala. 437; Mobile & Cedar Point R. R. 
 
 I! K.Co. 44 N. 11. 127; Kennebec & Port- Co. v. Talman, 15 Ala. 4 7i> ; Phillips v. 
 
 IandR. R. Co. v. Portland & Kennebec Winslow, 18 B. Mon. (Ky.) 431. 
 
 B. B. Co. 59 Me. 9; Pierce v. Milwaukee * See Ch. viii. 
 
 &St. Paul It. B. Co. 24 Wis. 551; St. 6 Reed v. Bradley, 17 111.321. 
 
 Paul & Pacific B. B. Co. v. Parcher, 14 8 Last Boston Freight R. R. Co. v. 
 
 Minn. 297. Eastern R. R. Co. 13 Allen (Mass.), 422. 
 
 - Briceon Ultra Vires, 2d Eng. ed. 273. 7 Dunham v. Isett, 15 Iowa 284. See 
 
 3 Allen v. Montgomery R. B. Co. n Pollard w.Maddox, 28 Ala. 821. 
 
 7
 
 § 8.] POWER OF CORPORATIONS. 
 
 diana, it was questioned whether a railway company whose charter 
 merely authorized it to mortgage its " road, income, and other 
 property," could mortgage its franchises. But whether the com- 
 pany had power to mortgage its franchises or not, it could make a 
 valid mortgage of the road itself, its tolls, income, and real estate. 1 
 
 A railway company authorized by its charter to borrow money, 
 and to execute " such securities, in amount and kind," as it might 
 deem expedient to secure such loans, has been held to be author- 
 ized to mortgage its entire road, with its franchises, and all its 
 property, as well all future acquisitions for the use of the road, as 
 the property it then had in possession. 2 
 
 A statute of the State of Mississippi authorizing the Southern 
 Railroad Company to buy out and absorb the Vicksburg and Jack- 
 son Railroad Company expressly empowered it to issue its bonds 
 secured by mortgage of the real and personal property of the road, 
 its " appurtenances and franchise ; " and to use such bonds in pay- 
 ing the indebtedness growing out of the purchase of the latter 
 road, or in the construction of the unfinished portion of that road, 
 or in such other way as the company might desire. This was 
 considered as giving ample authority for making a mortgage of its 
 franchise and property. 3 
 
 ' A railroad company which has the power to sell its property 
 may mortgage it. Thus, a charter conferring the right " to ac- 
 quire, aliene, transfer, and dispose of property of every kind," 
 confers the power to mortgage it. But this is affirmed of the 
 property of the company as distinguished from its franchises. 4 
 
 8. Legislative authority to mortgage may apply to the 
 property of a corporation and not to its franchises. — If a cor- 
 poration, having power by its charter to pledge lk its property and 
 profits," executes a mortgage covering not only these, but also its 
 franchise to be a corporation, such mortgage is not for that rea- 
 son entirely void, but it operates to convey the property of the 
 company. A mortgage, however, of " all the present and future 
 to be acquired property of the company, and all its estate and 
 franchises," followed by an enumeration of the property and 
 
 1 Pullan v. Cincinnati & Chicago Air 8 McAllister v. Plant, 54 Miss. 106. 
 Line R. R. Co. 4 Biss. 35. * McAllister v. Plant, 54 Miss. 106. 
 
 2 Pierce v. Milwaukee & St. Paul R. R. 
 Co. 24 Wis. 551. 
 
 8
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 9. 
 
 rights intended to be conveyed, may be so limited and explained 
 by such enumeration as to be brought within the limits of such 
 legislative authority. 1 
 
 A mortgage may be valid in part and in part void. Thus, if 
 a corporation mortgages its property and franchises when it has 
 no power to transfer its franchises, but is not restrained by law 
 in respect to transfers of its property, the mortgage may effectu- 
 ally pass the property, while it is ineffectual to transfer its fran- 
 chises. 2 Under a statute providing that corporations for man- 
 ufacturing, mining, mechanical, or chemical purposes shall not 
 mortgage any property except real estate, and shall not do this 
 except to secure the payment of debts, a mortgage by such corpo- 
 ration to secure bonds is valid so far as the bonds are used for the 
 payment of its debts, even though invalid so far as the bonds are 
 used to raise money to carry on its operations. 3 It is doubtless 
 true that the bonds not used for this purpose would be valid in 
 the hands of bond fide holders ; and that as against such holders, 
 the company would be estopped from claiming the invalidity of 
 the mortgage. 
 
 9. The scope and purpose of the power conferred must be 
 substantially met in its exercise. — Under a statute authorizing 
 any railroad corporation to borrow money " for completing, fur- 
 nishing, and operating its road," and to issue bonds therefor, se- 
 cured by a mortgage of its property and franchise, 4 a mortgage 
 which appeared upon its face to be " made to consolidate its funded 
 debt, obtain the money and material necessary for perfecting its 
 line of railway, enlarging its capacities, and extending the facilities 
 thereof," is within the scope of the powers conferred. Without 
 other proof of the object of the mortgage, no suit to restrain the 
 making of it, or the issuing of bonds under it, can be maintained 
 by a common stockholder, or by a preferred stockholder of the cor- 
 poration. For aught that appears in the case, the funded debt 
 and other debts may have been incurred in constructing and op- 
 erating the road, and the excess of money sought to be obtained 
 by such bonds may be necessary further to complete and operate 
 
 > Butler v. Bahm,46Md. 541. 8 Carpenter v. Black Hawk Gold Min- 
 
 2 Carpenter v. Black lluwk Gold Min- ing Co. supra. 
 ing Co. 65 N. Y. 43 ; Central Gold Min- * 2 K. 8. N. Y. 1875, p. 532 ; Pt. I. ch. 
 ing Co. v. Piatt, 3 Daly (N. Y.), 263. 18, tit. 15, § 39 ; Laws 1850, ch. 140, § 28. 
 
 9
 
 § 10.] POWER OF CORPORATIONS. 
 
 the same. 1 If the power to make such mortgage exists, a com- 
 mon stockholder cannot restrain the making of it; and a preferred 
 stockholder stands in no better condition, because if Lis right to 
 receive interest is subject to the payment of the interest on all 
 the mortgages of the company, whether made before or after the 
 issuing of the stock, he could not object to the making of a new 
 mortgage for a new indebtedness ; and certainly he could not ob- 
 ject to a mortgage which consolidated the funded debts of the 
 company, or which embraced subsequent indebtedness with such 
 debts. If, on the other hand, the preferred stockholder be enti- 
 tled to interest on his preferred stock, subject only to the pay- 
 ment of interest on the mortgages then existing, his rights would 
 remain unaffected by the issuing of subsequent mortgages. 
 
 It has been suggested that a mortgage of a railway and its 
 franchise, made without legislative authority is not wholly void 
 and inoperative, but that a Court of Equity may give effect to 
 such an instrument, at least to the extent of treating it as a good 
 equitable charge upon the net earnings of the railroad. 2 
 
 10. Authority to mortgage for the purpose of constructing 
 a railroad confers no right to secure by mortgage the debt of 
 another. — A railroad company having authority to borrow such 
 sums of money as might be expedient for completing, maintain- 
 ing, and working the railway, and to make bonds, debentures, 
 or other securities, and sell the same, and to hypothecate, mort- 
 gage, or pledge the lands, tolls, revenues, and other property of 
 the company, for the due payment of such sums and the inter- 
 est thereon, 3 cannot make a mortgage for any purpose not em- 
 braced in the terms of the act, and therefore cannot make a mort- 
 gage to secure a debt which is not a debt of the company. When 
 the express purpose for which a mortgage is authorized to be 
 given is the repayment of a loan of money for the completion or 
 maintenance of the road, a mortgage to secure the debt of another, 
 though it may be for the benefit of the company to make it, is 
 ultra vires and void. 4 
 
 1 Thompson v. Erie Ry. Co. 42 How. 3 Railway Act of Ontario, sec. 9, sub-sec. 
 (N. Y.) Pr. 68. 11. 
 
 2 Bickford v. Grand Junction Ry. Co. 4 Grand Junction Ry. Co. v. Bickford, 
 1 Supreme Ct. of Canada, 696, 737, per 23 Grant's Ch. (Ont.) 302. 
 
 Strong, J. 
 
 10
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 10. 
 
 Although there may be no substantial divergence of opinion in 
 relation to the correctness of these general principles, a wide dif- 
 ference will be noticed in the application of them by different 
 courts rendering judgments in the case about to be noticed at 
 length. 
 
 The Grand Junction Railway Company, having such authority 
 to mortgage its property, entered into an agreement with a con- 
 tractor for building its road, by which the contractor was to re- 
 ceive in payment certain municipal and other securities, and the 
 balance in the first mortgage bonds of the company, upon the 
 completion of the work. After building a portion of the road, 
 the contractor was unable to procure iron for it, and the railway 
 company, to enable him to obtain it, made a mortgage of a por- 
 tion of its road to secure the notes of the contractor given for the 
 price of the iron, with the provision that in case of his failure to 
 pay the notes, the mortgagee's sole recourse should be against the 
 property, and not against the company. The vendors of the 
 iron retained a lien upon it until it should be laid on the track. 
 The contractor, after laying a small part of the iron, became in- 
 solvent, and a large quantity of iron which had been delivered 
 to him, but which had not been laid upon the road, was sold by 
 the vendors at a large loss from the price at which the iron was 
 purchased. The holders of the mortgage of the railway then 
 sought to enforce it for the value of the iron actually laid upon 
 the track, as well as for the loss resulting from the resale of the 
 iron. The railway company, while not objecting to paying the 
 price of the iron actually placed upon the road, objected to pay- 
 ing the loss arising from the resale ; and contended that the mort- 
 gage was ultra vires. 
 
 The Court of Appeals of Ontario started with the principle, that 
 without express legislative authority a mortgage of the corporate 
 property of a railway company could not be made ; and from this 
 deduced the conclusion, that a mortgage, to be effectual, must be 
 within the terms of the authority given to create it. The only 
 authority this company had to mortgage its property was given to 
 secure the repayment of money borrowed for the purpose of com- 
 pleting or maintaining the road; whereas, the debt secured by 
 the mortgage in this case was that of the contractor. The mort- 
 gage was a pledge, by way of collateral security, that the con- 
 tractor should pay his own debt; and tin; court regarded such a 
 
 11
 
 § 10.] POWER OF CORPORATIONS. 
 
 mortgage as beyond the power of the company, and invalid, even 
 if assented to, or ratified by, every stockholder. The conrt also 
 declared that, inasmuch as the authority given to the company was 
 to mortgage its property, tolls, and revenues, the company could 
 mortgage only the whole undertaking, and that a mortgage of a 
 portion of the line which the company was constituted to build 
 was void. 
 
 On appeal from the judgment of the Court of Appeal of On- 
 tario, the Supreme Court of Canada 1 reversed this judgment, and 
 held the mortgage valid. The court start with the proposition 
 that every corporation has the power to mortgage its property, 
 unless this power be limited by its charter or by statute ; although 
 such limitation may be deduced either from the object of the 
 corporation being limited to certain specific things, or from its 
 property being subject to charges or trusts in favor of the pub- 
 lic, with which a mortgage would be inconsistent. The statutes, 
 however, confer express power to mortgage the company's prop- 
 erty for the payment of loans and debentures. This statutory 
 power to mortgage does not restrict the general power of the com- 
 pany incidental to its existence to deal with its property by way 
 of mortgage. 
 
 The mortgage, moreover, was within the scope of the powers 
 conferred upon the company to construct and work a railway. 
 The iron rails, for the price of which the mortgage was given, 
 were indispensable to enable the company to carry out its under- 
 taking. The company might have purchased them directly from 
 the vendors. It was found more convenient, however, to make a 
 contract for the construction of the railway, by which the con- 
 tractor undertook to furnish the iron. Having the power to give 
 a mortgage to secure the price of rails, it can make no difference 
 that they have given the mortgage as sureties for the contractor, 
 and not as direct purchasers. Indirectly, it is given to secure the 
 price of rails. "Had the mortgage been given for any object 
 foreign to, or inconsistent with, the purposes of the incorporation, 
 then, no doubt, it would have been ultra vires of the company. 
 A familiar instance of a railway company exceeding the limits of 
 its undertaking is afforded by a well known case, in which such 
 a corporation added to its legitimate business that of a line of 
 steamships. Had this mortgage been given in aid or furtherance 
 1 Bickford v. Grand Junction liy. Co. 1 Supreme Ct. of Canada, 696, 730. 
 
 12
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 11. 
 
 of any similarly unauthorized enterprise, it would, of course, have 
 been ultra vires ; but it is manifest that such was not the case 
 here, and that the sole object of the corporation was to attain 
 the end for which it had been created." 1 
 
 Furthermore the mortgage cannot be considered wholly void 
 when it creates a good charge upon any part of the company's 
 property, although it includes franchises and property which are 
 so impressed with a trust in favor of the public that it is beyond 
 the power of the company to deal with them. Conceding, say 
 the court, that the mortgage, if confined to the franchise, and to 
 the railway and its adjuncts, would have been void as being a 
 charge on subjects extra commercium, it does not follow that it 
 may not be a good charge on other lands over which the company 
 had power of free disposition, and for that reason alone the order 
 of the court below should be reversed. 
 
 Of this judgment of the Supreme Court of Canada, it may be 
 remarked, that conceding its correctness as applied to the case in 
 hand, it contains some general propositions and reasoning not in 
 accordance with the best English and American authorities. 
 
 11. A mortgage without legislative authority of corporate 
 property essential to the exercise of the corporate franchise, 
 would seem on principle to be subject to the same objection that 
 is made to a mortgage of the corporate franchise itself without 
 such authority. 2 The adjudications upon this point are conflict- 
 ing, though their weight is in favor of the proposition stated. 
 
 A mortgage made in pursuance of authority to borrow money 
 on the credit of the undertaking, and to " assign and charge the 
 property of the undertaking, and the rates and tolls, as a security 
 for the money borrowed," was held not to include the land of the 
 company. The mortgage followed the words of the power given 
 to the company to raise money, assigning " the said undertaking, 
 and ;tll and singular the rates, tolls," &c. ; Lord Denman, C. J., 
 in his decision said : 3 "In my opinion there is nothing in those 
 words to justify the construction that they contain a demise of 
 the land, or of any portion of the real estate of the defendants. 
 
 1 Bickford v. Grand Junction By. Co. 3 Myatt >•. St. Helen's, &c. Ry. Co. 2 
 supra, per Strong, J. Q. n. 364 
 
 2 Grand Junction By. Co. v. Bickford, 
 
 23 Grant's Cli. (Ont.) 302. 
 
 13
 
 § 12.] POWER OF CORPORATIONS. 
 
 Such a demise would not only be exceedingly improbable, but 
 very inconvenient to the public, as it would perchance prevent the 
 carrying on of the very " undertaking " by means of which the 
 defendants were to be enabled to satisfy the demands of their 
 creditors and to promote the convenience of the public." 
 
 Some cases on the other hand have held that a corporation may, 
 without special authority, mortgage its lands and other property, 
 in the course of its legitimate business, as it may deem expedi- 
 ent 5 1 but these decisions are exceptional and are not followed. 
 
 12. But land of a railway company not acquired under the 
 delegated right of eminent domain, or so connected with the 
 franchise to operate and manage a railroad that the alienation 
 would tend to disable the corporation from performing the public 
 duties imposed upon it, and in consideration of which its char- 
 tered privileges have been conferred, may be conveyed or mort- 
 gaged by the company without special authority, under the gen- 
 eral right of corporations at common law to dispose of whatever 
 property they have power to acquire. 2 If the company should in- 
 clude in one deed or mortgage both real estate not connected with 
 its franchises and real estate essential to the exercise and enjoy- 
 ment of its franchises, as for instance a portion of its roadway, 
 the conveyance might be upheld as to the former, and treated as 
 inoperative and void as to the latter. The ordinary rule is ap- 
 plied, that if the part of the subject of the conveyance which is 
 valid can be separated from that which is void, the conveyance will 
 be carried into effect so far as it can be. As to property not ac- 
 quired for the purposes of the road, the corporation stands in the 
 relation of an ordinary trading corporation which has no public 
 obligations. 
 
 The power of mortgaging land grants or surplus lands not 
 needed for the permanent way, station-houses, or grounds required 
 for the uses or purposes of the railroad, is one of the ordinary 
 powers of a railroad company. This right of alienation extends 
 to lands acquired in the exercise of compulsory powers as well as 
 
 1 White Water Valley Canal Co. v. 2 Hende'e ». Pinkerton, 14 Allen (Mass.), 
 Vallette, 21 How. 414, per Campbell, J. ; 381 ; Farnsworth v. Minn. & Pacific Ry. 
 and see Shepley v. Atlantic & St. Law- Co. 92 U. S. 49 ; Tucker v. Furgusson, 
 rence R. R. Co. 55 Me. 395 ; Kennebec & 22 Wall. 572. 
 Portland R, R. Co. v. Portland & Kennebec 
 R. R. Co. 59 Me. 9, 23. 
 14
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 13. 
 
 those obtained by purchase and government grant. It is a mat- 
 ter of common experience that upon the completion of a railroad 
 the company finds itself in possession of land not required for the 
 purpose of its working, which it may have been compelled to pur- 
 chase as part of other property, or which purchased or taken as 
 necessary for the use of the railroad has in the event been found 
 to be superfluous. There is no ground for contending that such 
 land is impressed with a public trust, so that the company cannot 
 freely alienate it. 1 The retention of such lands can serve no pos- 
 sible purpose of public utility or public policy. 
 
 A power to mortgage conferred by statute upon a railroad com- 
 pany has reference only to such lands and property as the com- 
 pany could lawfully acquire, and cannot therefore include such as 
 is not necessary to the purposes of the road. But a railroad cor- 
 poration having authority to receive land in payment of subscrip- 
 tions for stock, provided that so much of the land as may not be 
 necessary for the use of the road shall be sold within a reasonable 
 time, may mortgage such land, if the property be not thereby 
 placed in such condition as to put it out of the power of the com- 
 pany to comply with the terms of the statute. 2 
 
 13. Authority to a railway company to mortgage its road 
 is authority for its making a mortgage of a part of it. 3 — But 
 if the authority to execute a mortgage of a railroad indicates that 
 the mortgage is to embrace the road as a whole, then it cannot be 
 mortgaged in parts. Thus, a statute of the province of Ontario, 
 authorizing railway companies to hypothecate, mortgage, or pledge 
 the lands, tolls, revenues, and other property, for the purpose of 
 completing, maintaining, and working their roads, was thought to 
 prohibit by implication the creation of a mortgage upon a part 
 of the line only. 4 A mortgage of an undertaking, or of the prop- 
 erty of a railway company as a going concern, is a very different 
 thing from a mortgage of a part of the specific propert}' of a com- 
 pany, and confers very different rights. Notwithstanding the 
 giving of such a mortgage, the interest of the public in the work- 
 ing ami maintenance of the road is provided for, because the prop- 
 
 ■ Bickford v. Grand. Junction Ey. Co. 1 8 Pullan v. Cincinnati & Chicago Air 
 
 Su; ceme Ct. of Canada, 696, 735. Line R. R. Co. i Bias. 35, -15. 
 
 3 Taber v. Cincinnati, Logansport & * Grand Junction lty. Co. v, Bickford, 
 
 Chicago Rv. Co. 15 Ind. 459. 2.3 Giant's Ch. (Out.) 302, 354. 
 
 16
 
 §§ 14, 15.] POWER OF CORPORATIONS. 
 
 erty cannot be sold under foreclosure, and it is only by keeping 
 the road in a condition to earn surplus revenue that the mort- 
 gagee can obtain any benefit from the security. 1 
 
 14. A mortgage of its property and franchise, executed by 
 a railroad corporation without previous legislative author- 
 ity, is capable of being ratified and affirmed by the legislature, 
 and rendered as valid and effectual as it would have been if exe- 
 cuted under such previous authority. 2 Such a mortgage is not 
 absolutely void, but voidable only. An act authorizing the trus- 
 tees under such a mortgage to sell the road is such a ratification. 3 
 
 Prior to the enactment of general laws authorizing mortgages 
 by railroad companies, they were frequently made without legis- 
 lative sanction in reliance that the legislature would afterwards 
 confirm them ; and there seems to have been no difficulty in ob- 
 taining such confirmation. 
 
 15. The franchise which a railroad company transfers by 
 its mortgage is not its franchise to exist as a corporation, but 
 only such of its franchises or privileges as will enable the grantee 
 to have the same use and beneficial enjoyment of the property 
 which the company itself had ; and especially is this the case 
 when the charter merely authorizes the company to mortgage 
 " its means, property, and effects," without express mention of 
 franchises. Mr. Justice Manning, in a recent case before the Su- 
 preme Court of Alabama, 4 upon this point said : " Strictly, ' the 
 franchise to exist as a corporation' is not a corporate franchise, 
 ' or franchise of the corporation,' at all. It is a franchise of the 
 individual corporators, of the natural persons who are sharehold- 
 ers of the capital stock, and pertains to them as such corporators ; 
 whereby they are endowed with the privilege and capacity of 
 being constituted into, and cooperating together, as a body politic, 
 with power of succession, and without individual liability. And 
 the corporation as such in its collective capacity, or by its board 
 of directors, has no more power to sell this franchise thus pertain- 
 
 1 See §§99-101. Co. 55 Me. 395; White Water Valley 
 
 2 Shaw v. Norfolk County R. R. Co. 5 Canal Co. v. Vallette, 21 How. 414. 
 Gray (Mass.), 162 Richards v. Merrimack 3 Richards v. Merrimack & Conn. River 
 & Conn. River R. R. Co. 44 N. H. 127 ; R. R. Co. supra. 
 
 Shepley v. Atlantic & St. Lawrence R. R. * Meyer v. Johnston, 53 Ala. 237, 325. 
 
 See, however, Pierce v. Emery, 32 N. H. 
 16 484.
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 16. 
 
 ing to the corporators individually, than it has to sell their paid- 
 up shares of the capital stock. The interest of each of these in 
 this franchise is transferred with his shares of stock, and passes 
 with them from one individual to another ; and this is the proper 
 mode of parting with and acquiring this particular privilege. A 
 railroad company may continue to exist as a corporation after its 
 railroad, with all its appurtenances, has been sold away from it. 
 There may be other property to dispose of, or credits to get in, or 
 obligations to be discharged, or interests to be protected, which 
 require its continued existence, and which may not belong to, or 
 be chargeable upon, the persons who were purchasers of its rail- 
 road and the franchises necessary for the maintenance and opera- 
 tion of it. And on the other hand, those purchasers might not 
 desire to be constituted into a corporation at all. Or, if they did, 
 it might be very inconvenient to find themselves composing the 
 same body politic, whose property had just been sold to them for 
 the payment of some of its debts. For it would seem that if 
 with the railroad they acquired also the company's ' franchise to 
 be a corporation,' with the same faculties and name, by virtue of 
 and with which the former body existed, they acquired it to be 
 assumed and used, and so must themselves become that corpora- 
 tion, and be bound to perform its obligations." 
 
 The mortgage of a railroad, or a sale under the mortgage, does 
 not necessarily work the dissolution of the corporation. It may 
 be ground of forfeiture if insisted upon by the state, but this is a 
 matter between the state and the corporation with which third 
 persons have nothing to do. 1 
 
 A corporation having authority to borrow money, and secure the 
 payment of it by mortgage of " the entire road, fixtures, and equip- 
 ments, with all the appurtenances, income, and resources thereof," 
 cannot mortgage the franchise to be a corporation appertaining to 
 tilt; individual members of the corporation, but can mortgage the 
 franchise to maintain the railroad and secure compensation for the 
 transportation of persons and property, and can mortgage property 
 connected with the railroad, whether real or personal, then owned 
 by it, or subsequently to be acquired, and the use of its franchise. 2 
 
 16. The franchise to be a corporation is not necessarily 
 
 1 Artlmr i). Commercial & Railroad 2 Coe v. Columbus, Piqua & Ind. 1{. It 
 Bonk of Vicksburj,', 'J 8.& .M. (Miss.) 394. Co. 10 Ohio St. 372. 
 
 2 17
 
 § 16.] POWER OF CORPORATIONS. 
 
 included, if it ever be included, in a mortgage by a railroad 
 company of its road and franchises. The right to build, own, 
 manage, and run a railroad, or take the tolls thereon, is not of 
 necessity of a corporate character, or dependent upon corporate 
 rights. 1 It may belong to, and be enjoyed by natural persons, 
 and there is nothing in its nature inconsistent with its being as- 
 signable. " To the suggestion that the assignees can obtain and 
 enjoy the fruits of this mortgage only in virtue of the continued 
 existence and organization of the corporation, and the corporation, 
 having parted with rights that are indispensable to its fulfilling 
 the ends for which it was created, would no longer be entitled to 
 continue, and so the end for which it was created would be de- 
 feated, it seems sufficient to say, that whether its potential ex- 
 istence and its organization would continue or not would depend 
 on whether it should have subjected itself to a forfeiture of exist- 
 ence, by the failure to answer the purposes for which it was cre- 
 ated, in the matter of its duties to the public. So long as these 
 duties should be performed, would not the claim of the public, as 
 well as of individuals, be fully answered ? And is it to be pre- 
 sumed in anticipation, that the assignees will fail to perform those 
 duties as fully as the corporation would have done, when the same 
 motives exist and would be operative upon the assignees as upon 
 the corporation, and when the same remedies may be made avail- 
 able, both in favor of the public and of individuals, for a failure 
 to operate the road, — namely, as to the public, a forfeiture of the 
 rights granted by the charter, and in favor of individuals, a re- 
 verter of the land constituting the roadway ? " 2 
 
 The Vermont Central Railroad Company conveyed in trust 
 and mortgage to trustees, to secure the payment of its bonds, its 
 railroad and franchise, " with all the lands thereto belonging and 
 intended for the use and accommodation of said road." Subse- 
 quently a creditor recovered judgment against the company, and 
 levied his execution upon certain lands which were not then used 
 for the accommodation of the road ; but the trustees claiming the 
 land under the mortgage, a bill in equity was brought to remove 
 such claim, and relieve the title from this cloud. It was held 3 that 
 only such land passed by this conveyance as was so connected 
 
 1 Bank of Middlebury v. Edgerton, 30 2 Per Barrett, J., in Miller v. Rutland 
 
 Vt. 182, 190 ; Miller v. Rutland & Wash- & Washington R. R. Co. supra. 
 
 ington R. R. Co. 3G Vt. 452, 498. 3 Eldridge v. Smith, 34 Vt. 484, 489. 
 18
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 17. 
 
 with the railroad, and used for it by the company, that it would 
 have been authorized to take the land compulsorily under its 
 charter; although if so connected and used, it was immaterial 
 whether it was actually so taken or purchased by the company. 
 To the argument of counsel, that the mortgage being of the 
 franchise of the corporation, and therefore that all property owned 
 by it, whether connected with the road or not, and whether cov- 
 ered by the language of the description or not, passed by the 
 deed, Chief Justice Poland, delivering the opinion of the court, 
 replied : " It is said that one of the franchises of all corporations is 
 the power of being a body politic, of corporate existence, with 
 rights of succession of members. Another is, its rights of repre- 
 sentation in court by its corporate name, either as plaintiff or de- 
 fendant. It has a general power, also, of acquiring, holding, and 
 conveying property. In addition to these general corporate powers, 
 this company was invested by the legislature with a power to build 
 a railroad between certain points and to operate and manage the 
 same, and take tolls and fares on the same for their own benefit 
 and profit ; and, to the extent of the proper necessities of the road, 
 was authorized to exercise the sovereign power of the state, to 
 sequester private property without the consent of the owners, by 
 making compensation therefor. When a railroad company mort- 
 gages its road and appurtenances as a security for debt, and also 
 its franchise, it is not to be understood as conveying its corporate 
 existence, or its general corporate powers, but only the franchise 
 necessary to make the conveyance productive and beneficial to the 
 grantees, to maintain and support, manage and operate, the rail 
 road, and receive the tolls and profits thereof for their own benefit." 
 In like manner a foreclosure sale of the property and franchises 
 of a railroad company does not pass to the purchaser debts due the 
 company. The corporate existence of the company is continued 
 for the purpose of collecting such debts, as well as for other pur- 
 poses. 1 
 
 17. A less stringent doctrine as to the power of a corpo- 
 ration without legislative authority to mortgage its franchise 
 and property prevails in some states. Thus, in Kentucky it has 
 been beld that a railroad company, authorized by its charter to 
 borrow on its credit, but not expressly authorized to make a mort- 
 
 1 Smith v. Gowcr, 2 Duv. (Ivy.) 17. 
 
 19
 
 § 18.] POWER OF CORPORATIONS. 
 
 gage of its property or franchises to secure the loan, yet had an 
 implied power to do so ; and that although it could not in such 
 case mortgage its corporate existence, or any prerogative franchise 
 conferred upon it, it might mortgage its right to build and use its 
 road, for this is not a prerogative franchise. 1 Upon the foreclosure 
 of such mortgage, a purchaser would take the road subject to the 
 terms of the charter ; but he would have power to hold and manage 
 the road as an individual. Whether the road should be operated 
 by an individual or a corporation was not regarded as a matter of 
 any interest to the public ; and it was urged that under the char- 
 ter of a corporation a single person, by purchasing all its stock, 
 could control the road as completely as if he owned it individually. 
 
 18. In a few instances the doctrine has been practically 
 discarded that a railroad company can make a valid mortgage 
 only by legislative consent given either before or after the mort- 
 gage. The argument that it is dangerous to the public interests 
 to have the privileges conferred by a railroad franchise trans- 
 ferred to a new body by the action of the corporation itself, is 
 declared to be of little weight, inasmuch as the active manage- 
 ment of the corporation is liable to be changed at any time by the 
 action of the stockholders ; and that in all cases the influence of 
 the original corporators is but a temporary matter. 2 The transfer 
 of the franchise to new hands through a foreclosure of a mortgage 
 is in fact a change no greater than may take place within the 
 original corporation ; and the public interests are as safe in such 
 new hands as they were in the hands of the original corporators. 
 
 It is claimed that a railroad company cannot mortgage its prop- 
 erty and franchise without legislative authority, because the fran- 
 chise is conferred upon a particular body of men constituting the 
 corporation, implying a special confidence in them to answer the 
 trusts in behalf of the public. The Supreme Court of Vermont 
 regarded this idea as altogether fanciful and theoretical, saying, 
 in fact, that there is no such confidence ; that from the nature of 
 the case there could not be ; for the reason, that who shall com- 
 pose the corporation at any given time depends on the share- 
 holders of the capital stock, — one set of men to-day ; another to- 
 
 i Bardstown & Louisville R. R. Co. v. R. R. Co. 55 Me. 395, 407, per Walton, J. ; 
 
 Metcalfe, 4 Met. (Ky.) 199. Kennebec & Portland R. R. Co. v. Portland 
 
 2 Shepley v. Atlantic & St. Lawrence & Kennebec R. R. Co. 59 Me. 9, 23. 
 20
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 19. 
 
 morrow ; some citizens of the state ; some foreigners ; that the 
 true idea is, that the public relies, for its assurance that its rights 
 will be duly protected, upon the fact that they must be, in order 
 that the conferred privileges may be held and enjoyed by the cor- 
 poration, of whomsoever composed, — not upon any personal con- 
 fidence which the legislature has in an indiscriminate body of per- 
 sons, — men, women, and children, citizens and foreigners, daily 
 changing, who may become or cease to be stockholders at their 
 own pleasure and without restraint. 1 
 
 Mr. Justice Strong, of the Supreme Court of Canada, considered 
 it an open question whether all the rights and privileges of a rail- 
 road corporation, save only its right to be a corporation, are not 
 susceptible of alienation by mortgage or otherwise ; whether it 
 may not, for instance, mortgage or otherwise alienate its rights of 
 taking lands, operating the road, taking tolls, and exercising the 
 other rights and powers usually conferred on railroad companies, 
 the transferees being subject to all the trusts and burdens in favor 
 of the public which the original company was liable to. 2 
 
 19. Aside from mortgaging their franchises or property, 
 corporations, like individuals, unless restrained by law, have 
 the power to borrow money and to acknowledge the indebted- 
 ness by giving therefor ordinary commercial obligations. 3 If the 
 manner of borrowing be prescribed by statute, or the amount of 
 loans be limited, or the obligations to be given for the money be 
 specified, the implied power is to this extent controlled. 
 
 A railroad corporation having power to build a road and issue 
 bonds and negotiate them to raise money, has authority to issue 
 to contractors, in payment for work clone, negotiable certificates 
 of indebtedness payable in money or bonds. The payment of the 
 expense of construction in bonds is a sale of them. Having con- 
 tracted a legitimate liability, the corporation has undoubted au- 
 thority to acknowledge it and to promise to pay it by a written 
 obligation. 
 
 1 Miller v. Rutland & Washington R. R. 3 Soe §§ 99-101; West Cornwall Ry. 
 
 Co. 36 Vt. 452, 492, per Barrett, J. Co. v. Mowatt, 12 Jur. 407; Australian 
 
 - Bickford v. Grand Junction Ry. Co. Auxiliary Clipper Co. v. Mounsey, 4 K. 
 
 1 Supreme Court of Canada, 696, 738; & J. 733; Byron v, Metropolitan Saloon 
 
 citing Ball p. Sullivan, 21 Law Reporter, Omnibus Co. 8 De G. & J. 123 ; [mperial 
 
 138, per Curtis, J. ; Wilmington Ry. Co. Land Co. of Marseilles in re,L. R. 1 1 Eq. 
 
 v. Reed, 13 Wall. 268. 47b. 
 
 21
 
 § 20.] POWER OF CORPORATIONS. 
 
 On such a certificate, promising to pay a specified sum with 
 interest, in bonds on demand, if the corporation does not on de- 
 mand exercise its election to make payment in bonds, the creditor 
 may recover the amount in money ; payment in bonds being a 
 privilege for the benefit of the corporation ; but if this privilege 
 be not taken advantage of at the proper time, the rule of damages 
 is the principal sum and interest. 1 
 
 20. Where corporations constituted for specific purposes 
 are by statute limited in the amount of money they are per- 
 mitted to borrow, or conditions are imposed upon them as to the 
 manner in which they shall exercise their borrowing powers, if 
 they borrow in amounts or in a manner unauthorized by law, the 
 securities have no legal validity. Thus where a dock company 
 was authorized by the special act to raise money on the security 
 of the tolls and other property, and the mortgages were directed 
 to be registered, and the company mortgaged to a contractor a 
 quantity of tools, machinery, and materials used on the works, 
 but the securities were not made in the form required by the act, 
 or registered, it was held that the mortgage was void. 2 A re- 
 striction as to the amount a corporation may borrow, when it has 
 no power to borrow other than that expressly conferred, as is the 
 case with municipal corporations, would seem to be a condition a 
 breach of which would render the securities void ; 3 but if the 
 corporation has a general power to borrow, even if there is no 
 right of action upon securities in excess of the limit, the money 
 lent may be recovered in assumpsit. 4 It may happen also that 
 while a mortgage given by a corporation may be outside its power, 
 the indebtedness incurred may be a valid obligation. 5 On the 
 other hand the mortgage may be valid, being expressly authorized, 
 while the acknowledgments of indebtedness secured, as for in- 
 stance bills of exchange, may be prohibited, in which case the 
 mortgage would be regarded as securing the debt for which the 
 bills of exchange were given, and therefore not on that account 
 invalid. 6 When corporations are restricted in their borrowing to 
 
 1 Pusey v. N. J. West Line R. R. Co. 4 Brice on Ultra Vires, 2d ed. 267 ; In 
 14 Abb. (N. Y.) Pr. N. S. 434. re Pooley Hall Colliery Co. 21 L. J. N. S. 
 
 2 McCormick v. Parry, 7 Exch. 355 ; 21 690. 
 
 L.J. (Ex.) 43. 5 Holdsworth v. Mayor of Dartmouth, 
 
 3 Gordon v. Sea Fire & Life Ass. Co. 11 A. & E. 490. 
 
 1 H. & N. 599. 6 Scott v. Colburn, 26 Beav. 276. 
 
 29
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§ 21. 
 
 certain amounts, there is no doubt that when this is the ease the 
 power may be exercised again and again so long as the limit is 
 not exceeded at any one time. 1 
 
 The rights of bond fide holders of negotiable securities of cor- 
 porations will be considered elsewhere, as also the circumstances 
 under which corporations may be estopped from taking advantage 
 of an irregular exercise of their borrowing powers ; and reference 
 is here made to these subjects merely to say that the rights of 
 holders of securities issued in violation of restrictions imposed by 
 statute may be secure, although the securities themselves were 
 upon their first issue void. 
 
 21. "What are known in England as Lloyd's bonds are obli- 
 gations which purport to be issued by corporations for work done, 
 or materials supplied for the purposes of the undertaking. They 
 are generally issued in this way in order to avoid the limitation 
 imposed by parliament as to the amount of money which a rail- 
 way company is permitted to borrow. As such bonds are noth- 
 ing more than an acknowledgment under seal of a debt due for 
 a bond fide consideration, there is no reason to doubt their va- 
 lidity when given bond fide to contractors or others for work act- 
 ually done. 2 The power to issue such bonds is liable to gross 
 abuse ; 3 and when not in fact issued for the purposes specified, 
 they are void. 4 But the substance of the contract, rather than 
 the form of it is, regarded. Thus, where a railway company, 
 whose borrowing powers were not to arise until it had completed 
 and opened a certain portion of its line for traffic, borrowed from 
 another railway company money sufficient to enable it to complete 
 the requisite portion of the line, under an agreement that the bor- 
 rowing company would, when its borrowing powers arose, issue 
 its debentures in repayment, it was held that there was nothing 
 illegal in the contract, and that the debentures were valid to the 
 extent of the sum actually advanced in payment of the contrac- 
 tor's accounts. 5 
 
 In one respect Lloyd's bonds have an advantage over ordinary 
 
 1 Brice on Ultra Vires, 2d cd. 266. Co. 5 B. & S. 588; 3.3 L. J. (Q. B.) 268 i 
 
 - White v. Carmarthen, &c. I£y. Co. 1 Fountuine v. Carmarthen Ry. Co. L. R. 
 
 II. & M. 780 ; 33 L. J. Ch. 93 ; 1 Cox's 5 Eq. 316; 37 L. J. Ch. 429. 
 
 Joint Stock (,'iis. 112. 6 See Bagnalstown v. Wexford Ry. Co. 
 
 '■'■ Hodges Law of Railw. 6th cd. ISO. L. K.4 Eq. 505. 
 
 4 Chambers v. Manchester & Milford Ky. 
 
 23
 
 §§ 22, 23.] POWER OF CORPORATIONS. 
 
 mortgages and bonds, for they are not hampered by the provisions 
 of law applicable to securities regularly issued, which place all 
 such obligations upon an equality whenever issued. The holders 
 of these irregular bonds can sue upon them and recover judg- 
 ment, and issue execution against the corporation in the same 
 manner as creditors may do upon ordinary debts. 1 
 
 22. A corporation may borrow from a director and mort- 
 gage its property to him to secure the payment of the loan, and 
 the transaction, when open, and otherwise free from blame, can- 
 not be impeached. 2 There are three parties whose interests are 
 affected by the transaction ; namely, the lender, the corporation, 
 and its stockholders. The directors represent the interests of 
 the corporation and of the stockholders. Therefore when a di- 
 rector deals with his company, his obligation to candor and fair 
 dealing is increased in the precise degree that his representative 
 character has given him power and control, through the confi- 
 dence reposed in him by the stockholders, who appointed him 
 their agent. This obligation would be still stronger with a sole 
 director, or with one of a very small number vested with the 
 management of the company, and his acts would be subject to 
 more severe scrutiny, and their validity determined by more rigid 
 principles of morality, and by their freedom from ingredients of 
 selfishness. But at the same time, a director is more than any 
 one else interested in aiding the corporation judiciously, and is 
 best qualified to judge of the necessity of that aid, and of the 
 extent to which it may be safely given. A loan, therefore, hon- 
 estly made by a director for the benefit of the corporation, both 
 in the rate of interest and in the security taken, is valid origin- 
 ally, whether liable to be avoided afterwards or not. 
 
 23. A corporation may be estopped from setting up the de- 
 fence of ultra vires to its obligation in the hands of a holder in 
 good faith for value, who cannot be presumed to have had any 
 knowledge of the want of authority to make the contract. Of 
 course, if the contract be absolutely prohibited by the charter of 
 incorporation, or by a general statute, or if the law implies such a 
 prohibition from the purposes for which the corporation was cre- 
 
 i Cork & Youghal Ry. Co. L. E. 4 Ch. 2 Twin-Lick Oil Co. v. Marbury, 91 U. 
 App. 748. S. 587. 
 
 24
 
 LEGISLATIVE AUTHORITY TO MORTGAGE ESSENTIAL. [§§ 24, 25. 
 
 ated, all persons dealing with it are bound to take notice of the 
 extent of the company's powers. But when there is no apparent 
 want of power in the corporation to incur the obligation, whether 
 note, bond, or mortgage, and there is nothing on the face of the 
 paper, by which the debt is evidenced, showing that the company 
 has overstepped the limits of its power, the corporation is estopped 
 from denying that which, by assuming to make the contract, it 
 had virtually affirmed. 1 
 
 24. When the authority to mortgage is coupled with a 
 condition for the benefit of the state, the state alone can enforce 
 it. An act authorizing a company to borrow money and mort- 
 gage its property to secure the payment of it, upon condition of 
 paying or securing certain bonds issued to the company by the 
 state, when accepted by the company, is a contract between the 
 company and the state, but is not a contract between the com- 
 pany and the holders of the state bonds referred to, and they 
 cannot maintain an action thereon against the company. There 
 was originally no relation of debtor and creditor between the com- 
 pany and the bondholder, and the act did not create any such re- 
 lation. Upon the failure of the company to fulfil the condition 
 on which the privilege accorded by the act was granted, it be- 
 came amenable to the state and not to strangers to the contract. 2 
 
 25. Forfeiture of the charter of a corporation. — When the 
 charter of a railroad company provides that unless the road be com- 
 pleted by a certain day the company shall forfeit to the state its 
 corporate franchises and rights, together with its road and all its 
 property, and the company having authority by its charter to issue 
 bonds secured by mortgage exercises this power, but failing to 
 complete the road, the state proceeds to declare the charter for- 
 feited, and to take possession of the road and turn it over to per- 
 sons who originally subscribed money for it, the state takes the 
 property and franchises free from the incumbrance of the mort- 
 gage The authority to make the mortgage and the condition of 
 forfeiture, being parts of the same statute, must be construed to- 
 
 1 Hays v. Galion Gas Light & Coal Co. Monument Nat. Bank v. Globe Works, 10* 
 29 Ohio St. 330; Bissell v, Mich. Smith. & Mass. 57. See Chapters vi., vii. 
 North. Iinl. Ii. ];. Co.'s 22 N. Y. 289; 2 Stuart v. James River & Kanawha Co. 
 
 24 Gratt. (Va.) 294. 
 
 25
 
 § 26.] POWER OF CORPORATIONS. 
 
 getlier. If the act should be construed as investing the company 
 with the right to aliene or mortgage all its franchises, rights, and 
 property, free from the right of the state to declare a forfeiture of 
 the same, the act would be in part nullified ; for in that case the 
 very property which is to be forfeited to the state becomes vested 
 in others by the mortgage, and nothing is left upon which the 
 forfeiture could operate. The idea that only the equity of re- 
 demption is subject to forfeiture is also repugnant to the provision 
 that the road and all its property shall be forfeited. 1 
 
 Of course such a provision for the forfeiture of the charter of a 
 company would, if known, prevent the sale of the company's funds 
 in the market. The loan could be disposed of only to persons 
 having a personal interest in the company, or personal confidence 
 in its officers. Whether purchasers of such bonds had actual no- 
 tice of the restriction of the company's power of executing a mort- 
 gage or not, they would in law be chai^geable with such notice. 
 They must be presumed to know the conditions annexed to the 
 grant of power made by the charter or statute under which the 
 corporation was organized. The purchasers of such bonds cannot 
 claim the position of bond fide holders without notice of the rights 
 and equities of the state. 
 
 II. Statutes authorizing Railroad Companies to mortgage their 
 Property and Franchises. 
 
 26. General statement. — In recognition of the doctrine that 
 legislative authority is essential to the making of a valid mort- 
 gage by a corporation chartered for public purposes, and to this 
 end, having important privileges granted them, general laws have 
 been enacted in almost all the American States conferring upon 
 railroad corporations the power to mortgage their property and 
 franchises. These corporations are so numerous and their func- 
 tions so important, not only has the public convenience demanded 
 that there should be general laws upon the subject doing away 
 with the necessity of special legislation, so often as such corpora- 
 tions may have occasion to exercise this power, but also has the 
 public welfare demanded that the authority conferred should be 
 uniform, and that it should be regulated and restricted in a uni- 
 form manner. • 
 
 i Silliman v. Fredericksburg, Orange & Charlottesville E. R. Co. 27 Gratt. (Va.) 
 119. 
 
 26
 
 STATUTES AUTHORIZING MORTGAGES. [§ 27. 
 
 A statement of the statutes upon this subject in the several 
 states is given because they are the foundation of most of the rail- 
 road mortgages now existing in this country, and will be the foun- 
 dation of many others yet to be made. That similar statutes do 
 not exist in relation to mortgages by other corporations arises 
 from the fact that there are veiw few other corporations that stand 
 in the same relation to the public that railroad companies do, hav- 
 ing cor*porate privileges which they cannot transfer. In the few 
 instances of corporations having similar public duties and privi- 
 leges, such for instance as canal companies, special legislation is 
 adequate. In a few states, authority to mortgage is still given to 
 railroad companies by charter or by special act. 
 
 Not less important than legislative authority to railroad com- 
 panies to give mortgages of their property and privileges is legis- 
 lative authority to those who may become purchasers under such 
 mortgages to organize themselves as corporations, so that they 
 can adequately use and enjoy what they have purchased ; and, 
 accordingly, statutes for this purpose have been enacted in nearly 
 all the states. These will be given in a subsequent chapter. 1 
 
 27. Alabama. 2 — Any railroad corporation may borrow money 
 to an amount not exceeding its authorized capital stock, at a rate 
 of interest not greater than seven per cent., and may execute 
 bonds or promissory notes therefor in sums of not less than one 
 hundred dollars, and, to secure the payment thereof, may pledge 
 or mortgage the personal and real property and income of such 
 company, together with its franchise; and any such mortgage, 
 deed of trust, or other security, vests in the mortgagee or trustee 
 full power to sell and convey the road-bed, franchise, income, or 
 other property conveyed in accordance with the provisions of such 
 mortgage, deed of trust, or other security. 3 
 
 Any railroad company in the state may sell, negotiate, mort- 
 gage, or pledge its bonds or notes, as well as any bonds, notes, 
 scrip, or certificates, for the payment of money or property, 
 which it may have received as donations, or in payment of sub- 
 scriptions to its capital stock, or for other dues, at such time and 
 such places, either within or without the state, and at such rates 
 
 1 Ch. xxiii. them made before the 21st day of Fcbru- 
 
 - Code I87C, §§ 2048, 2049, 2051, 2052. ary, 1860, are legalized and declared valid, 
 
 3 Mortgages and deeds of trust executed upon certain conditions, § 1058. 
 
 before January 1, 18G0, and sales under 
 
 27
 
 §§ 28, 29.] POWER OF CORPORATIONS. 
 
 or prices as it may deem conducive to its interests ; and if such 
 notes or bonds are sold at a discount, they and the securities for 
 their payment are as valid as if the sale had been at par. 
 
 But the Constitution of the state prohibits the issuing of stock 
 or bonds by any corporation except for money, labor done, or 
 money or property actually received ; and all fictitious increase of 
 stock or indebtedness is void. The stock and bonded indebted- 
 ness shall not be increased, except in pursuance of general laws, 
 nor without the consent of the persons holding the larger amount 
 in value of stock, first obtained at a meeting to be held after 
 thirty days' notice given in pursuance of law. 1 
 
 28. Arkansas. 2 — A railroad company has power to borrow 
 money on the credit of the corporation, not exceeding its author- 
 ized capital stock, at a rate of interest not exceeding seven per 
 cent, per annum, and to execute its bonds therefor, in sums of 
 five hundred or one thousand dollars, and to secure the payment 
 thereof may pledge the property, both real and personal, and in- 
 come of such company, and may execute a deed of mortgage or 
 other instrument of writing ; and such company is authorized to 
 sell, negotiate, pledge, or mortgage such bonds for the benefit of 
 such company, and at such times and in such places, either within 
 or without this state, and at such rates and for such prices as, in 
 the opinion of the directors of the corporation, will best advance 
 the interests of such company. The Constitution of the state pro- 
 hibits the issuing of bonds except for money or property actually 
 received or labor done, and all fictitious indebtedness is declared 
 void. The bonded indebtedness cannot be increased except in 
 pursuance of general laws, nor until the consent of the persons 
 holding the larger amount in value of stock shall be obtained, at 
 a meeting held after notice given, for a period not less than sixty 
 days, in pursuance of law. 3 
 
 29. California. 4 — Any railroad corporation may borrow, on 
 the credit of the corporation, and under such regulations and re- 
 
 1 Constitution of 1875, art. xiii. § 6; 3 Const, of 1874, art. xii. sec. 8. 
 
 Code 1876, p. 148. For manner of giving 4 Civil Code, §§456,457, Codes & Stat. 
 notice, &c, see §§ 2031-2035 of Code. 1876, §§ 5456, 5457. 
 
 2 Dig. 1874 sec. 4970; Act of Jan. 22, 
 1855, § 7. 
 
 28
 
 STATUTES AUTHORIZING MORTGAGES. [§§ 30, 31. 
 
 strictions as the directors thereof, by unanimous concurrence, may 
 impose, such sums of money as may be necessary for constructing 
 and completing its railroad, and may issue and dispose of bonds 
 or promissory notes therefor, in denominations of not less than 
 five hundred dollars, and at a rate of interest not exceeding ten 
 per cent, per annum ; and may also issue bonds or promissory 
 notes, of the same denomination and rate of interest, in payment 
 of any debts or contracts for constructing and completing the 
 road, with its equipments and all else relative thereto. The 
 amount of bonds or promissory notes issued for such purposes 
 must not exceed, in all, the amount of the capital stock ; and to 
 secure the payment of such bonds or notes, it may mortgage its 
 corporate property and franchise. The directors must provide a 
 sinking fund to be specially applied to the redemption of such 
 bonds on or before their maturity, and may also confer on any 
 holder of any bond or note so issued, for money borrowed, or 
 in payment of any debt or contract for the construction and 
 equipment of such road, the right to convert the principal due or 
 owing thereon into stock of such corporation, at any time within 
 eight years from the date of such bonds, under such regulations 
 as the directors may adopt. 
 
 30. Colorado. 1 — Any railway corporation has the power from 
 time to time to borrow such sums of money as may be necessary 
 for completing, furnishing, improving, or operating its railway, 
 and to issue and dispose of its bonds, for any amount so borrowed, 
 and to mortgage its corporate property and franchise to secure 
 the payment of any debt contracted by such corporation, for the 
 purposes aforesaid, in such manner as the shareholders represent- 
 ing a majority of the stock of any such corporation may direct. 
 
 The Constitution of the state provides that no corporation shall 
 issue stock or bonds except for labor done, services performed, or 
 money or property actually received, and that all fictitious increase 
 of stock or indebtedness shall be void. 2 
 
 31. Connecticut. 3 — Every railroad company may borrow money, 
 and may secure the repayment of the same by its bonds, signed 
 
 i Gen. Laws 1877, §§ 801,306. ° Gen. Stat. Is7r>, pp. 3:12, 333. 
 
 2 Const. 1876, art. xv. sue. 9. 
 
 29
 
 § 32.] POWER OF CORPORATIONS. 
 
 by its president and countersigned by its treasurer ; but before 
 being issued, the bonds shall be registered in the office of the con- 
 troller, and a certificate thereof shall appear on the face of each 
 bond ; and the controller shall cancel any bonds so registered, 
 which may be brought to him for that purpose, and enter said act 
 of cancelling in his register; but no railroad company shall issue 
 any bond of a less denomination than one hundred dollars, nor 
 have bonds outstanding at any one time to a greater amount than 
 one third of the sum which its president and chief engineer shall 
 certify, under oath to the controller, has been actually expended 
 upon its road ; and any false swearing in this matter shall be per- 
 jury ; and the controller shall not permit the bonds of any rail- 
 road company, registered in his office and uncancelled, to exceed 
 the amount limited in this section. The company may dispose 
 of its bonds as its stockholders may authorize. The company 
 may secure such bonds by a mortgage of its property, or any 
 part thereof, by deed duly executed by its president, under the 
 corporate seal, to the treasurer of the state and his successors 
 in office, in trust for the holders of said bonds, and recorded in 
 the office of the secretary of this state. It may include in such 
 mortgage all or any part of its rolling stock, locomotives, and cars, 
 whether then owned by it or thereafter acquired ; and such mort- 
 gage is valid and effectual as to all property so included, and may 
 be foreclosed in the same manner as ordinary mortgages of real 
 estate. 1 
 
 32. Dakota Territory. 2 — Every railroad corporation has power 
 to mortgage or execute deeds of trust of the whole or any part of 
 its property and franchises, including any lands or other property 
 granted to such corporation by the United States, to secure money 
 borrowed by it for the construction and equipment of its road, 
 and may issue its corporate bonds in sums not less than five hun- 
 dred dollars, — secured by such mortgages or deeds of trust, — 
 payable to bearer or otherwise ; and if payable to bearer, negoti- 
 able by delivery, bearing interest at a rate not to exceed ten per 
 cent, per annum, convertible into stocks, and may sell them at 
 such rates or prices as it may deem proper ; and if such bonds 
 be sold below their nominal or par value, they are valid and bind- 
 
 i Acts 1877, c. 38. 2 Rev. Codes 1877, pp. 303 and 304; 
 
 Civil Code, §§ 464, 465. 
 
 30
 
 STATUTES AUTHORIZING MORTGAGES. [§§ 83-35. 
 
 ing upon the corporation, and no plea of usury can be put in 
 or allowed in behalf of such corporation in any action or pro- 
 ceedings upon the same ; the principal and interest upon such 
 bonds, or either of them, may be made payable within or without 
 the territory. Such corporation has power to borrow money on 
 the credit of the corporation, and may execute bonds or prom- 
 issory notes therefor, and, to secure the payment thereof, may 
 pledge its property and income. 
 
 33. Delaware. — There is no general statute in this state for 
 the organization of railroad companies ; but these are created by 
 special acts which provide for their borrowing money and mort- 
 gaging the corporate property and franchises as security. 
 
 34. District of Columbia. 1 — Any railroad company may, from 
 time to time, borrow such sums of money as it may deem neces- 
 sary for completing or operating its railroad, and issue and dispose 
 of its bonds for any amounts so borrowed, for such sums and at 
 such rates of interest as may be agreed upon, and mortgage its 
 corporate property and franchises to secure the payment of any 
 debt contracted by the company ; and the directors of the company 
 may confer on any holder of any bond issued for money so bor- 
 rowed, the right to convert the principal due or owing thereon 
 into stock of the company, at any time not exceeding fifteen years 
 from the date of such bond, under such regulations as the com- 
 pany may adopt ; and the company may sell its bonds whenever 
 it may deem proper, and such sales will be as valid as if such 
 bonds should be sold at par value. But such corporation shall 
 not have power to issue any bonds or to execute any mortgages 
 upon its property or franchises, until at least one half of the cap- 
 ital stock shall have been fully paid. 
 
 35. Florida. 2 — Among the general powers of all corporations 
 is included the right to hold, buy, mortgage, or otherwise convey 
 such real and personal estate as the purposes of the corporation 
 shall require, not exceeding the amount limited in its articles of 
 incorporation. 
 
 The general railroad law 3 provides that every corporation 
 
 i Kcv. St;ir. 1874, § (in. 8 Laws 1874, ch. 1987, sec. 9, par. 10. 
 
 2 Bush'a Dig. 1872, p. 1G5. 
 
 31
 
 §§ 36, 87.] POWER OF CORPORATIONS. 
 
 formed under that act shall be empowered to borrow such sum or 
 sums of money at such rates of interest and upon such terms as 
 such company or its board of directors shall authorize or agree 
 upon, and may deem necessary or expedient, and may execute 
 one or more trust deeds or mortgages, or both, if occasion may 
 require, and any railroads, canal or canals, constructed or in proc- 
 ess of construction by said company for the amount or amounts 
 borrowed or owing by*such company, as its board of directors 
 shall deem expedient ; and such company may make such provi- 
 sions in such trust deed or mortgage as it may think proper 
 for transferring its railroad track or canal, right of way, depots, 
 grounds, rights, privileges, franchises, immunities, machine houses, 
 rolling stock, furniture, tools, implements, appendages and appur- 
 tenances used in connection with such railroad or railroads, canal 
 or canals, in any manner whatsoever then belonging to said com- 
 pany, or which shall thereafter belong to it, as security for any 
 bonds, debts, or sums of money that may be secured by such trust 
 deed or mortgage. 
 
 36. Georgia. — Railroad companies are organized under special 
 charters, which provide for their borrowing money and mortgag- 
 ing the corporate property and franchises as security. 
 
 37. Illinois. 1 — Any railroad company has power from time to 
 time to borrow such sums of money as may be necessary for com- 
 pleting, finishing, improving, or operating its railway, and to issue 
 and dispose of its bonds for any amount so borrowed, and to 
 mortgage its corporate property and franchises to secure the pay- 
 ment of any debt contracted by such corporation for the pur- 
 poses named ; but the concurrence of the holders of two thirds in 
 amount of the stock of such corporation is necessary to the va- 
 lidity of any such mortgage ; and the order or resolution for such 
 mortgage must be recorded in the office of the recorder of deeds 
 in each county, through or into which such railway is proposed 
 to be run, and in the office of the secretary of state ; and the 
 directors of such corporation are empowered, in pursuance of any 
 such order or resolution, to confer on any holder of any bond 
 for money so borrowed as aforesaid the right to convert the 
 
 1 Rev. Stat. 1877, eh. 114; § 20, and see prior to March 1, 1872, which may be 
 §§ 30-33 as to loans by companies formed made in similar manner. 
 
 32
 
 STATUTES AUTHORIZING MORTGAGES. [§§ 38, 39. 
 
 principal due, or owing thereon, into stock of such corporation, at 
 any time not exceeding ten years after the date of such bond, 
 under such regulations as may be provided in the by-laws of such 
 corporation. The Constitution, however, prohibits the issuing of 
 stock or bonds by any railroad corporation, except for money, 
 labor, or property actually secured, and applied to the purposes 
 for which such corporation was created ; and all fictitious stock 
 or indebtedness is void. 1 
 
 38. Indiana. 2 — Any railroad company may, from time to time, 
 borrow such sums of money as it may deem necessary for complet- 
 ing or operating its railroad, and issue and dispose of- its bonds 
 for any amounts so borrowed, for such sums and at s^'h'W$|"fjf^j5 £ i*, 
 interest as is allowed by the laws of the state where' s ^iy£&Wjq>ct t , 
 is made, and mortgage its corporate property and ?franc$i&e to ^ TGJ>£^ 
 secure the payment of any debt contracted by such company ; UBfiAfiY 
 the directors of the company may confer on any ^holder ®f -aft}, 
 bond issued for money borrowed as aforesaid, the right to convert 
 the principal due or owing thereon into stock of said company, at 
 any time not exceeding fifteen years from the date of said bond, 
 under such regulations as the company may adopt ; and such 
 company may sell its bonds, either within or without the state, at 
 such rates and prices as are permitted by law, and such sales are 
 as valid as if such bonds had been sold at par value. 
 
 39. Iowa. 3 — Any railway corporation has power to issue its 
 bonds for the construction and equipment of its railway, in sums 
 not less than fifty dollars, payable to bearer or otherwise, and 
 ' bearing interest at a rate not exceeding ten per cent, per annum, 
 and to make the same convertible into stock, and to sell the same 
 at such rates or prices as is deemed proper ; if such bonds are sold 
 below the par value thereof, they nevertheless are valid and bind- 
 ing, and no plea of usury is allowed such corporation in any action 
 or proceeding brought to enforce the collection of said bonds ; 
 such corporation may also secure the payment of said bonds by 
 executing mortgages or deeds of trust of the whole or any part of 
 its property and franchises. 
 
 1 Constitution of 1870, art. 11, § 14. 3 Code of Iowa, 187.'!, §§ 1283, 1284, 
 
 a Revision 1876, vol. 1, p. 706; Act of 1286,1287,1301. 
 
 May 11, IS'>2. 
 
 3 33
 
 §§ 40-42.] POWER OF CORPORATIONS. 
 
 Such mortgages or deeds of trust may, by their terms, include 
 and cover, not only the property of the corporation making them 
 at the time of their date, but property both real and personal 
 which may thereafter be acquired, and are as valid and effectual 
 for that purpose as if the property were in possession at the time 
 of the execution thereof. 
 
 Any such corporation, with the assent of two thirds of all the 
 stockholders in interest, may issue, in payment of debts, preferred 
 stock, not exceeding ten thousand dollars for each mile of railway 
 constructed, which stock shall be entitled to such dividends as the 
 directors of the corporation may determine, not exceeding eight 
 per cent, per annum, if the same is earned in any one year, after 
 pkymen'i; : f .all interest on the bonds of the corporation, before 
 any dividend is made to the common stock. 
 
 Such' ptef err eel stock, and any income or mortgage bond of the 
 corporation, -shall, at the option of the holder, be convertible into 
 1 Common sftfock in such manner and on such terms as the board of 
 'directors thereof may prescribe ; but the aggregate amount of the 
 common and preferred stock shall not exceed the total amount of 
 stock which the corporation may be by law, or the articles of in- 
 corporation thereof, authorized to issue. Any contract, lease, or 
 benefit derived therefrom may be mortgaged for the purpose of 
 securing construction bonds, in the same manner as other property 
 of the corporation. 
 
 40. Kansas. 1 — Every railway corporation has power from 
 time to time to borrow such sums of money as may be necessary 
 for completing and finishing or operating its railway, and to issue 
 and dispose of its bonds for any amount so borrowed, and to mort- 
 gage its corporate property and franchises to secure the payment 
 of any debt contracted by the corporation for the purpose afore- 
 said. 
 
 41. Kentucky. — There is no general law for the organization 
 of railroad companies. The power to borrow money and to mort- 
 gage the corporate property and franchises is conferred by the 
 private charters. 
 
 42. Louisiana. 2 — In addition to the powers conferred by 
 
 * Dassler's Stat. 1876, voJ. 1, p. 167.. * R. S. 1870, §§ 692, 693, 2396, 2397. 
 
 U
 
 STATUTES AUTHORIZING MORTGAGES. [§ 43. 
 
 law upon railroad companies, any railroad company established 
 under the laws of this state may borrow from time to time such 
 sum of money as may be required for the construction or repair 
 of any railroad, and for this purpose may issue its bonds or ob- 
 ligations, secured by mortgage upon the franchises and all the 
 property of said companies, and payable at such times and places 
 as the president and directors may designate, with power to sell, 
 pledge, or otherwise dispose of said bonds, on such terms as the 
 president and directors may deem expedient. 
 
 A mortgage so made by any company is binding in the several 
 parishes through which a railroad may pass, by the record of the 
 mortgage in such parishes, and such mortgage need not be rein- 
 scribed to continue it in force. The president and directors of 
 any company may confer on the holder of any bond or bonds 
 issued for money for the use of said company the right to convert 
 the principal due thereon into the stock of said company at any 
 time, not exceeding ten years from the date of said bond or bonds, 
 under such regulations as the president and directors may adopt ; 
 but no increase in the capital stock of any railroad company shall 
 be authorized or implied from this provision. 
 
 Any railroad company established under the laws of this state 
 may, to secure the payment of any obligation contracted by such 
 company for the construction of the road, mortgage its road, in 
 whole and in part ; 1 and such mortgage, if made of the entire 
 road, shall bear upon the entire road, though the same be not 
 completed at the time the mortgage was made ; and such mort- 
 gage may also be made to bind the appurtenances of said road, 
 its warehouses, depots, water stations, locomotives, and the like. 
 
 A mortgage made by any of the companies binds the road, its 
 warehouses, depots, water stations, locomotives, and other ap- 
 purtenances that may be mortgaged in the several parishes where 
 the same may be, only by the record of the mortgage in each 
 parish, but such mortgage need not be reinscribed to continue it 
 in force. 
 
 43. Maine. 2 — A railroad corporation, to obtain money to build 
 or furnish its road, or to pay debts contracted for that purpose, 
 may issue its bonds in sums not less than one hundred dollars, 
 
 1 Ibid. §§ 720, 727, 2427, 2428. 2 R. S. 1871, j>. 454; Acta 1871, vh. 
 
 198. 
 
 35
 
 §§ 44, 45.] POWER OF CORPORATIONS. 
 
 bearing interest secured in such manner as it deems expedient, 
 and binding upon it though sold at less than par value, and no de- 
 fence of usury can for that cause be admitted. 
 
 44. Maryland. 1 — A railroad company has power to borrow 
 money on the credit of the corporation, not exceeding its author- 
 ized capital stock, at a rate of interest to be agreed upon by the 
 respective parties, and may execute bonds or promissory notes 
 therefor, in sums of not less than one hundred dollars, and, to 
 secure the payment thereof, may pledge the property and income 
 of such company. The power of a railroad company to mortgage 
 its property without legislative authority has never been recognized 
 by the courts. It has been repeatedly held, however, that without 
 such authority a railroad company cannot lease or aliene its road 
 or other property. 2 
 
 45. Massachusetts. 3 — Any railroad corporation, by a vote at 
 a meeting called for the purpose, may issue bonds to provide 
 means for funding its floating debt, or for the payment of money 
 borrowed for any lawful purpose, and may mortgage or pledge as 
 security for the payment of such bonds any part or all of its road, 
 equipment, or franchise, or any part or all of its property, real or 
 personal. Such bonds may be either " coupon bonds," or " reg- 
 istered bonds," as may be determined by such vote, in sums of 
 not less than one hundred dollars each, payable at periods not ex- 
 ceeding twenty years from the date thereof, and bearing interest 
 not exceeding the rate of seven per centum a year, payable an- 
 nually or semi-annually, to an amount which, including that of 
 bonds previously issued, shall not exceed for the aggregate of all 
 bonds, whether registered or coupon, the capital stock of the cor- 
 poration actually paid in at the time the bonds are issued. They 
 must be recorded by the treasurer in books to be kept at his of- 
 fice. No bond shall be issued unless approved by some person 
 appointed for that purpose, who shall certify that it is properly 
 issued and recorded as aforesaid. 
 
 1 Laws 1870, p. 903. utes see Acts 1854, ch. 286; G. S. 1860, 
 
 2 State v. Consolidation Coal Co. 46 ch. 63, §§ 120-123. Bonds i>sued in viola- 
 Mil. 1, 10. tion of these statutes are void. East Bos- 
 
 a Acts 1874, ch. 372, §§ 49,50,51,52; ton Freight 11. R. Co. v. Hubbard, 10 
 Acts 1875, ch. 58. For previous stat- Allen (Mass.), 459 ; Commonwealth v. 
 
 Smith, lb. 448. 
 
 36
 
 STATUTES AUTHORIZING MORTGAGES. [§ 45. 
 
 At the request of the owner or holder of any coupon bonds 
 lawfully issued, other than bonds, the payment of which has been 
 or shall be guaranteed by the Commonwealth, the railroad corpo- 
 ration which issued such coupon bonds may issue registered bonds 
 in exchange for and in lieu of them, upon such terms and under 
 such regulations as may be prescribed by the directors of the cor- 
 poration, with the consent and approval of the trustees, to whom 
 any mortgage or pledge shall have been executed ; and such reg- 
 istered bonds shall, with the exception of the coupons, correspond 
 in all respects with the coupon bonds for which the same are ex- 
 changed, and shall be in conformity with all laws authorizing the 
 issue of the coupon bonds. Such exchange shall not affect any 
 mortgage or pledge given as security for the payment of such 
 coupon bonds, and such mortgage or pledge shall remain in full 
 force as security for such registered bonds ; and the coupon bonds 
 shall be cancelled and destroyed at the same time that the regis- 
 tered bonds are issued in lieu thereof. 
 
 No railroad corporation which has previously issued bonds shall 
 subsequently make or execute any mortgage upon its road, equip- 
 ment, and franchise, or any of its property, real or personal, with- 
 out including in and securing by such mortgage all bonds previ- 
 ously issued, and all preexisting debts and liabilities of the corpo- 
 ration. 
 
 All bonds or notes issued by a railroad corporation shall be 
 binding and collectible in law, notwithstanding such bonds or 
 notes were negotiated and sold by the corporation or its agents 
 at Less than par. 
 
 No railroad corporation shall hereafter issue any bonds, coupon 
 notes, or other evidences of indebtedness, payable at periods of 
 more than twelve months from the date thereof, except as above 
 provided. 1 
 
 A railroad corporation can take or guarantee the bonds of an- 
 other corporation, only by special authority of the legislature, ex- 
 cept that a railroad corporation may guarantee, to an amount not 
 exceeding five per centum of its capital, the bonds of any corpo- 
 ration of this slate, formed for the purpose of carrying freight, 
 passengers, and mails between any part of the Commonwealth 
 and Europe ; or it may, upon adequate security, issue its own 
 bonds to the same amount; except, also, that each of two com- 
 
 1 Acts 1H70, ch. 170, § 1. 
 
 37
 
 §§ 46, 47.] POWER OF CORPORATIONS. 
 
 parries having connecting roads may guarantee the bonds of the 
 other upon such terms and to such an extent as may be author- 
 ized at a meeting called for the purpose, provided the bonds so 
 guaranteed do not exceed the amount of the capital stock of 
 such other corporation actually paid up in cash ; or a railroad 
 company may aid a branch or connecting road by taking its notes 
 or bonds, secured by mortgage or otherwise, but not in excess of 
 two per centum of its paid up capital stock, except by vote of 
 the stockholders at a meeting called for the purpose. 1 
 
 46. Michigan. 2 — Any company organized under the general 
 railroad act has power from time to time to borrow such sums of 
 money as may be necessary for completing, finishing, equipping, 
 or operating its road, or any part thereof, or for paying any in- 
 debtedness necessarily incurred for completing, finishing, or oper- 
 ating its road, or any part thereof ; and to issue and dispose of 
 its bonds or obligations for any amount necessarily borrowed for 
 such purpose, for such sums and for such rate of interest, not ex- 
 ceeding ten per cent., as it may deem advisable, and to mortgage 
 its corporate property and franchises, and the income thereof, or 
 any part thereof, to secure the payment of any debt contracted, 
 or to defray any expenditure by the company for the purpose 
 aforesaid. And the directors of any such company may confer on 
 any holder of any such bond or obligation the right to convert 
 the same into the stock of said company, at any time, not exceed- 
 ing ten years from the date of said bonds, on such terms and un- 
 der such regulations as the company may see fit to adopt ; and 
 said company may sell its bonds or obligations, either within or 
 without this state, and at such rates and prices as they may deem 
 proper. 
 
 47. Minnesota. 3 — The several railroad companies of this state 
 have power to mortgage or execute deeds of trust of the whole 
 or any part of their property and franchises, to secure money bor- 
 rowed by them for the construction and equipment of their roads, 
 and they may issue their corporate bonds in sums of not less 
 than five hundred dollars, secured by such mortgages or deeds of 
 trust, payable to bearer or otherwise ; and if payable to bearer, 
 
 1 Acts 1874, §§ 53-57. 3 Stat, at Large 1S73, vol. 1, p. 430; 
 
 3 Laws 1873, p. 527. Act of March 5, 1868. 
 
 38
 
 STATUTES AUTHORIZING MORTGAGES. [§§ 48, 49. 
 
 negotiable by delivery, bearing interest at a rate not to exceed 
 ten per cent, per annum, and convertible into stock or not, as 
 may be deemed expedient ; and may sell them at such rates or 
 prices as they deem proper ; and if such bonds are sold below 
 their nominal or par value, they are valid and binding on the 
 company, and no plea of usury can be put in or allowed by said 
 companies in any suit or proceeding upon the same. 
 
 Such mortgages or deeds of trust may, by their terms, include 
 and cover, not only the property of the companies making them 
 at the time of their date, but property, both real and personal, 
 which may thereafter be acquired by them, and they are as valid 
 and effectual for that purpose as if the property were in posses- 
 sion at the time of the execution thereof. 1 
 
 Any such corporation has the power to borrow money on credit 
 of the corporation, and may execute bonds or promissory notes 
 therefor, and to secure the payment thereof may pledge the prop- 
 erty and income of the company ; but the amount of the indebt- 
 edness or liability of such company, exclusive of its indebtedness 
 secured by mortgage of its property, shall not, at any one time, 
 exceed two thirds of the amount of its capital stock. Such cor- 
 poration is authorized to issue bonds in lieu and in payment of 
 any bonds of such company, or bonds issued and disposed of for 
 the construction of its line of road, outstanding, bearing such rate 
 of interest as may be agreed upon. In case the articles of asso- 
 ciation so provide, the corporation may admit into the board of 
 directors as members thereof one or more persons, to be chosen by 
 the bondholders, under such regulations as may be agreed upon 
 between the trustees of the bondholders and such corporation. 2 
 
 48. Mississippi. — There is no general railroad law in this 
 state. Power to borrow and mortgage is conferred by the special 
 charters or by special acts. 
 
 49. Missouri. 3 — Every railroad company has power from time 
 to time to borrow such sums of money as may be necessary for 
 completing and finishing or operating its railroad, and to issue and 
 dispose of its bonds for any amount so borrowed, and to mortgage 
 the corporate property and franchises to secure the payment of 
 
 i Stat, at Large 1873, p. 431. » 1 Wagner's Stat. 1872, p. 298. 
 
 2 Laws 1875, ch. 14, § 40. 
 
 39
 
 §§ 50, 51.] POWER OF CORPORATIONS. 
 
 any debt contracted by the company for the purposes aforesaid ; 
 and the directors of the company may confer on any holder of any 
 bond issued for money borrowed as aforesaid the right to convert 
 the principal due or owing thereon into stock of said company, at 
 any time not exceeding ten years from the date of the bond, 
 under such regulations as the directors may see fit to adopt. 
 
 50. Montana Territory. 1 — Any railroad corporation has power 
 to borrow money on the credit of the corporation, to an amount 
 not exceeding its authorized capital stock, at a rate of interest to 
 be agreed upon by the respective parties, and may execute bonds 
 therefor in sums of not less than one hundred dollars, and secure 
 the payment thereof by mortgage or pledge of the property and 
 income of such corporation. And if the said mortgage shall so 
 provide, it shall be and remain a valid lien upon all of the prop- 
 erty of said company, of whatever kind then existing, or that may 
 thereafter be by it acquired, irrespective of the law now in force 
 relating to chattel mortgages, and the same shall be taken, held, 
 and enforced in the same manner as mortgages upon real estate 
 now are held and enforced. 
 
 51. Nebraska. 2 — A railroad corporation has power to borrow 
 money on the credit of the corporation, and may execute bonds 
 or promissory notes therefor, and to secure the payment thereof 
 may pledge the property and income of said company. 
 
 Every railroad company has power to mortgage or execute 
 deeds of trust of the whole or any part of its property and 
 franchises, including its lands or other property granted to said 
 company by the United States, to secure money borrowed by it 
 for the construction and equipment of its roads, and may issue 
 its corporate bonds in sums not less than five hundred dollars, 
 — secured by said mortgages or deeds of trust, — payable to bearer 
 or otherwise, and, if payable to bearer, negotiable by delivery, 
 bearing interest at a rate not to exceed ten per cent, per annum, 
 and convertible into stock, or not, as shall be plainly expressed on 
 the face of each and every bond so issued by said company, and 
 may sell them at such rates or prices as they may deem proper ; 
 and if said bonds should be sold below their nominal or par value, 
 
 1 Laws 1873, p. 102, § 14. 2 Qen. Stat. 1873, ch. 11, §§ 84, 117, 
 
 118, 119. 
 
 40
 
 STATUTES AUTHORIZING MORTGAGES. [§ 52. 
 
 they shall be valid and binding upon the company, and no plea 
 of usury shall be put in or allowed in behalf of the company 
 upon any suit or proceedings upon the same ; the principal and 
 interest upon such bonds, or either of them, may be made payable 
 within or without this state. 
 
 Any mortgage or deed of trust made upon the lands, roads, or 
 other property of any railroad company, shall bind and be a valid 
 lien upon all the property mentioned in such deed or mortgage, 
 including rolling stock; and the purchaser, under foreclosure of 
 mortgage or trust deed, shall have and enjoy all the rights of a 
 purchaser on execution sale. 
 
 The Constitution of the state provides that no railroad corpora- 
 tion shall issue any stock or bonds, except for money, labor, or 
 property actually received and applied to the purposes for which 
 such corporation was created, and all stock, dividends, and other 
 fictitious increases of the capital stock or indebtedness of any such 
 corporation shall be void. The capital stock of railroad corpora- 
 tions shall not be increased for any purpose, except after public 
 notice for sixty days, in such manner as may be provided by law. 1 
 
 52. Nevada. 2 — A railroad corporation has power to borrow 
 from time to time on the credit of the corporation, and under 
 such restrictions as two thirds in interest of the stockholders may 
 impose, such sum or sums of money, not exceeding in all the 
 amount of its capital stock, as may be necessary for the construc- 
 tion and equipment of its road, at a rate of interest not to ex- 
 ceed fifteen per centum per annum, and to execute bonds or prom- 
 issory notes therefor, in sums not less than one thousand dollars 
 in any one note or bond ; and to secure such notes or bonds may 
 mortgage its corporate property and franchise, and pledge the 
 income of the company ; and the directors of such company shall 
 also provide, in such manner as may seem to them best, a sinking 
 fund, to be especially applied to the redemption of such bonds 
 on or before their maturity, and may also confer on any holder of 
 any bond so issued for money borrowed, or in payment of any 
 (|,l,i mi- contract for the construction or equipment of such road 
 as aforesaid, the right to convert the principal due or owing 
 
 i Const. 1875, art. 11, § 5 ; art. 12, » Compiled LaWB 1 873, p. 292, § 3440. 
 
 §§ 2, 3. 
 
 41
 
 §§ 53, 54.] POWER OF CORPORATIONS. 
 
 thereon into stock of such company, at any time within six 
 years from the date of such bond, under such regulations as the 
 company may adopt. 
 
 53. New Hampshire. — There are no special provisions confer- 
 ring upon railroad companies the power to make bonds and mort- 
 gages other than that they have the general powers given by law 
 to other corporations. It is provided that all corporations may 
 purchase, hold, and convey real and personal estate necessary and 
 proper for the due transaction of their legitimate business to the 
 amount authorized by their charters. 1 A railroad corporation 
 may purchase, hold, and convey real estate, lying near to or ad- 
 joining its road, not exceeding in value five per cent, of its cap- 
 ital stock. 2 Bonds sold at a discount by a railroad company are 
 not affected bv the usury laws. 3 No sale or mortgage of a rail- 
 road is valid unless it be in writing, filed in the office of the secre- 
 tary of state, and authorized by the legislature. 4 
 
 54. New Jersey. 5 — Any company incorporated under the gen- 
 eral railroad act has power to borrow such sum or sums of money, 
 from time to time, not to exceed in the whole its paid-up capital 
 stock, as shall be necessary to build, construct, or repair their 
 road, and furnish all necessary engines and other equipments for 
 the uses and objects of said company, and to secure the repay- 
 ment thereof by execution, negotiation, and sale of any bond or 
 bonds, secured by mortgage on the lands, privileges, franchises, 
 and appurtenances of and belonging to the said company ; but the 
 company is not allowed to plead any statute or statutes against 
 usury in any court of law or equity in any suit instituted to en- 
 force the payment of any bond or mortgage executed under these 
 provisions ; and it is provided further, that said bonds shall con- 
 stitute a first lien on the railroad, its cars, real estate, and fran- 
 chises, and that the proceeds of said bonds shall be used for the 
 purpose of aiding in the construction of such railroad. 
 
 A canal company has like power to borrow and to execute 
 bonds secured by mortgage on lands, privileges, franchises, and ap- 
 purtenances of the company. The bonds constitute a lien on the 
 
 1 Gen. Stat. 1867, ch. 133, § 6. * Gen. Stat. ch. 145, § 2. 
 
 2 Ibid. ch. 144, § 3. 6 Laws 1873, ch. 413, § 20 ; 2 Rev. 
 
 3 Ibid. ch. 144, § 4. 1877, p. 931, § 108. 
 
 42
 
 STATUTES AUTHORIZING MORTGAGES. [§§ 55, 56. 
 
 canal, its real estate, and franchises, and the proceeds of such 
 bonds must be used for the purposes of building or repairing the 
 canal and its works. 1 
 
 55. New Mexico Territory. 2 — Any railroad corporation has 
 the power to borrow, on the credit of the corporation, and under 
 such regulations and restrictions as its directors by unanimous 
 concurrence may impose, such sums of money as may be necessary 
 for constructing and equipping its railroad and telegraph lines, 
 and to issue and dispose of its bonds or promissory notes therefor, 
 in denominations of not less than five hundred dollars, and at a 
 rate of interest not exceeding ten per cent, per annum ; and also 
 to issue its bonds or promissory notes of the same denomination 
 and rate of interest, in pa} 7 men t of any debts or contracts for con- 
 structing, equipping, and completing its railroad and telegraph 
 lines, and all else relating thereto. The amount of bonds or 
 promissory notes issued for such purposes shall not exceed in all 
 the amount of its capital stock ; and to secure the payment of 
 such bonds and notes, it may mortgage its corporate property and 
 franchises. 
 
 56. New York. 3 — A railroad corporation may from time to 
 time borrow such sums of money as may be necessary for com- 
 pleting and finishing or operating its railroad, and may issue and 
 dispose of its bonds for any amount so borrowed, and mortgage 
 its corporate property and franchises to secure the payment of 
 any debt contracted by the company for the purposes aforesaid ; 
 and the directors of the company may confer on any holder of any 
 bond issued, for money borrowed as aforesaid, the right to convert 
 the principal due or owing thereon into stock of said company, 
 at any time not exceeding ten years from the date of the bond, 
 under such regulations as the directors may see fit to adopt. 
 
 A corporation for manufacturing, mining, mechanical, or chem- 
 ical purposes, is empowered to secure the payment of any debt 
 contracted in the business for which it was incorporated, by mort- 
 gaging all or any part of its goods and chattels, and also its fran- 
 chises, privileges, and rights, provided the written assent of a 
 
 1 Laws is?/, eh. 8. r ), § 14; 2 Rev. 1877, 8 Rev. Stat. 1875, p. 533, § 39, pi. 10; 
 p. 940, g 11-'. Same in General R. R. Act 1850; Laws 
 
 * Acts 1878, p. 35, § 14. 1850, ch. 140, § 28, pi. 10. 
 
 43
 
 §§ 57, 58.] POWER OF CORPORATIONS. 
 
 majority of the stockholders, owning at least two thirds of the 
 capital stock of such corporation, shall first be filed in the office 
 of the clerk of the county where it has its principal place of busi- 
 ness, and also in the office of the clerk of the county where such 
 goods and chattels are situated. 1 
 
 Any railroad company is authorized to borrow money on the 
 security of its railroad, appurtenances, and franchises, subject, 
 however, to all previous incumbrances and debts in favor of the 
 state and of individuals, to such an amount as may be sufficient 
 for the purpose of putting so much of its railroad as such di- 
 rectors shall deem expedient in a proper condition to receive a 
 second track ; of procuring iron for such track, and of laying the 
 same with an iron rail weighing not less than fifty-six pounds 
 to the lineal yard ; but such money shall not be used for, or ap- 
 plied to, any other purpose, nor shall the money borrowed by 
 virtue of this provision exceed in the aggregate the sum of ten 
 thousand dollars for each mile of the railroad of such company. 2 
 
 57. North Carolina. 3 — A railroad corporation has power from 
 time to time to borrow such sums of money as may be necessary 
 for completing and finishing or operating its railroad, and to issue 
 and dispose of its bonds for any amount so borrowed, and to 
 mortgage its corporate property and franchises to secure the pay- 
 ment of any debt contracted by the company for the purposes 
 aforesaid ; and the directors of the company may confer on any 
 holder of any bond issued for money borrowed as aforesaid the 
 right to convert the principal due or owing thereon into stock of 
 said company at any time not exceeding ten years from the date 
 of the bond, under such regulations as the directors may see fit 
 to adopt. 
 
 58. Ohio. 4 — A railroad company has power to borrow money 
 on the credit of the corporation, not exceeding its authorized cap- 
 ital stock, at a rate of interest not exceeding seven per cent, per 
 annum, and to execute bonds or promissory notes therefor, in sums 
 of not less than one hundred dollars ; and, to secure the payment 
 
 1 Laws 1878, ch. 163. 4 1 R. S. I860, ch. 29, § 31. As to 
 
 2 R. S. 1875, p. 550, § 90. For orig- bonds and mortgages of narrrow gauge 
 inal statute see Laws 1847, ch. 405. railroad companies, see Laws 1877, p. 
 
 3 Rjvisal 1873, p. 740, ch. 99, § 29, 146. 
 pi. 10. 
 
 44
 
 STATUTES AUTHORIZING MORTGAGES. [§§ 59, 60. 
 
 thereof, such company may pledge its property and income. The 
 bonds issued may be either registered or coupon bonds, or both ; 
 and either kind may be exchanged by the company for the other. 1 
 
 59. Oregon. — No general provisions in relation to railroad 
 mortgages are found. 
 
 60. Pennsylvania. 2 — The president and directors of a railroad 
 company may borrow money, not exceeding the amount of capital 
 stock subscribed, and issue the bonds of the company therefor, 
 in such amounts as shall not exceed double the amount actually 
 paid up of the capital stock subscribed, the proceeds whereof 
 shall be actually expended in the construction and equipment of 
 the road ; these bonds may be made payable at such time, not 
 exceeding fifty years after the date thereof, and at such place, and 
 at such rate of interest, not exceeding seven per centum, as the 
 directors may deem best ; and they may secure the payment of such 
 bonds and interest by a mortgage on the road and franchises. 3 
 
 A mortgage to secure the bonds and obligations of a railroad 
 company may be made upon the whole or any part of its prop- 
 erty, rights, and franchises, subject to any prior incumbrances 
 thereon. Special power is given to mortgage any branch, lateral, 
 or diverging line. 4 
 
 A narrow gauge railroad company, 5 whose line does not exceed 
 fifty miles in length, and having a capital stock not exceeding 
 $500,000, is authorized to borrow money not exceeding the cap- 
 ital stock in amount, and to issue bonds not exceeding double the 
 amount of capital stock actually paid up, payable at a time not 
 exceeding fifty years from date thereof, with interest not exceed- 
 ing seven per cent, per annum, the proceeds to be expended in 
 the construction and equipment of the road, and to secure the 
 payment of such bonds and interest by a mortgage on the road 
 and franchises, subject to any prior incumbrance thereon. 
 
 The Constitution of the state provides that no corporation shall 
 issue stocks or bonds except for money, labor done, or money or 
 property actually received ; and that all fictitious increase of stock 
 or indebtedness shall be void. The stock and indebtedness of cor- 
 
 1 Laws 1*70, p. 123. B Laws 1*7."{, p. 45, § 21. 
 
 •; Brightley'fl Purdon'a Dig. pp. l^, L3, * Dig. supra, p. 1232, § 102. 
 § 8; Act of April 4, 1808, § 8. ° Laws L876, p. 135. 
 
 45
 
 §§ 61, 62.] POWER OF CORPORATIONS. 
 
 porations shall not be increased except in pursuance of general law, 
 nor without the consent of the persons holding the larger amount 
 in value of the stock be first obtained, at a meeting to be held 
 after sixty days' notice given in pursuance of law. 1 
 
 Any railroad company 2 of this state may from time to time pur- 
 chase and hold or guarantee the bonds of any other railroad com- 
 pany chartered under the laws of this state, or existing under the 
 laws of any other state. Any railroad or canal company may aid 
 corporations authorized by law to develop the coal, iron, lumber, 
 and other material interests of this commonwealth, not possessing 
 mining or manufacturing privileges in the county of Schuylkill, 
 by the purchase of their bonds or by guaranteeing them. 
 
 Railroad companies may indorse or guarantee the bonds or other 
 obligations of any other railroad company. 
 
 61. South Carolina. — There is no general act for the incorpo- 
 ration of railroad companies. Their powers are conferred and de- 
 fined by special charters. 
 
 62. Tennessee. 3 — Any railroad company may issue bonds, for 
 the purposes of its incorporation, to an amount not exceeding 
 double the cost of that part of the road already completed, in 
 such form, and for such sums not less than one hundred dollars, 
 bearing interest at the rate of six per cent., and payable at such 
 times and places as it may designate ; and may pledge or mort- 
 gage the property, effects, and franchises of the company for the 
 payment of the interest and final redemption of such bonds. 
 
 Any railroad company in this state owing outstanding floating 
 debts, and being desirous of making provision for the payment of 
 the same, is authorized to issue income bonds for an amount 
 sufficient to pay off the indebtedness, bearing interest at a rate 
 not exceeding ten per cent, per annum, payable either annually 
 or semi-annually ; and to secure such bonds by mortgage or 
 deed of trust of either the whole or any part of the rents and 
 profits, and other property and franchises of the company ; such 
 bonds, together with any consolidated bonds the company may 
 
 1 Const. 1873, art. xvi. § 7. piled Stat. 1871, § 1443. For act au- 
 
 2 Brightle/s Purdon's Dig. p. 1233, §§ tliorizing, in certain cases, consolidated 
 105 > 106. mortgage bonds, see Acts 1873, eh. 8, § 1. 
 
 3 Code 1858, p. 315, § 1443; Com- 
 
 46
 
 STATUTES AUTHORIZING MORTGAGES. [§§ 63, 64. 
 
 have issued, not to exceed twenty thousand dollars per mile of 
 road, and not to affect existing liens. 1 
 
 63. Texas. 2 — Any railroad corporation may from time to time 
 borrow such sums of money as may be necessary for completing, 
 finishing, improving, or operating its railway, and may issue and 
 dispose of its bonds for any amount so borrowed, and mortgage 
 its corporate property and franchise to secure the payment of any 
 debt contracted by such corporation for the purposes aforesaid ; 
 but the concurrence of the holders of two thirds in amount of the 
 stock of such corporation, to be expressed in the manner and under 
 all the conditions provided for by another section of the statute, 
 shall be necessary to the validity of any such mortgage ; and the 
 order or resolution for such mortgage must be recorded in a man- 
 ner particularly provided ; and the directors are empowered, in 
 pursuance of any such order or resolution, to confer on any holder 
 of any bond, for money so borrowed as aforesaid, the right to con- 
 vert the principal due or owing thereon into the stock of such cor- 
 poration at any time not exceeding ten years after the date of 
 such bond, under such regulations as may be provided in the by- 
 laws of such corporation. 
 
 The Constitution of the state provides that no corporation shall 
 issue stock or bonds except for money paid, labor done, or prop- 
 erty actually received, and that all fictitious increase of stock or 
 indebtedness shall be void. 3 
 
 64. Vermont. 4 — Every railroad corporation within this state, 
 if it shall vote so to do at a meeting of the stockholders called for 
 such purpose, has power to issue its notes or bonds for the purpose 
 of building or furnishing its roads, or paying any debts contracted 
 for building or furnishing the same, bearing such a rate of in- 
 terest, not exceeding seven per cent., and secured in such a man- 
 ner as it may deem expedient. All bonds or notes which have 
 been or which hereafter may be issued by any such corporation, 
 for the purposes aforesaid, shall be binding and collectible in law, 
 notwithstanding such notes or bonds were negotiated and sold by 
 such corporation at less than par. 
 
 1 Act 1873, cl). 8, §§ 3, 4. 
 
 2 Laws 1876, ch. 97, § 23. 
 
 3 Const. 187G, art. xii. § C. 
 
 4 Gen. Stat. 1870, ch. 26, 
 09. 
 
 47 
 
 97, 98,
 
 §§ 65, G6.~\ POWER OF CORPORATIONS. 
 
 All notes or bonds which may be issued under and by virtue of 
 these provisions must be issued for a sum not less than one hun- 
 dred dollars each, and must be made payable in not less than three 
 years, nor more than twenty years, from the time of issuing the 
 same. 
 
 65. Virginia. 1 — No railroad company, which by its charter has 
 no express power so to do, shall borrow money until there shall be 
 paid up and expended or appropriated the whole amount of capi- 
 tal stock subscribed, with the exception only of losses by delin- 
 quent or insolvent stockholders. But the president and directors 
 may borrow an amount not exceeding that part of the capital 
 stock which is unsubscribed, and may issue certificates for the 
 money so borrowed, and may make such certificates convertible, 
 within a prescribed time, into stock of the company, at the pleas- 
 ure of the holder. 
 
 66. West Virginia. 2 — Any railroad company is empowered, 
 from time to time, to borrow such sums of money as may be nec- 
 essary for completing, finishing, improving, or operating any such 
 railroad, and to issue bonds, bills of credit or indebtedness, and 
 preferred stock, and dispose of the same, for any amount so bor- 
 rowed, and to mortgage its corporate property and franchises to 
 secure the payment of any debt contracted by such corporation 
 for such purposes ; but the concurrence of the holders of two 
 thirds in amount of the stock of such corporation, to be expressed 
 in the manner and under all the conditions provided for by stat- 
 ute, is made necessary to the validity of any such mortgage ; and 
 the order or resolution for such mortgage must be recorded as pro- 
 vided for ; and the directors of such corporation are empowered, 
 in pursuance of any such order or resolution, to confer on any 
 holder of any bond, for money so borrowed as aforesaid, the right 
 to convert the principal due or owing thereon into stock of such 
 corporation, at any time not exceeding ten years after the date of 
 such bond, under such regulations as may be provided in the by- 
 laws of such corporation. 
 
 No corporation shall issue any stock or bonds, except for money, 
 
 1 Code 1873, c. 61, § 43; Act 1836-37, porations in which the state is a stock- 
 p. Ill, § 29. As to restrictions on cor- holder, see Code, supra, c. 57, §§ 41-43. 
 
 2 Acts 1872-73, ch. 88, §§ 20, 22. 
 48
 
 STATUTES AUTHORIZING MORTGAGES. [§ 67. 
 
 labor, property, and materials actually purchased, received, and 
 applied to the purposes for which such corporation was organized. 
 All stock dividends, and other fictitious increase of the capital 
 stock or indebtedness of any such corporation, shall be void. 
 
 A railroad or other corporation authorized to issue its bonds 
 may' issue either registered or coupon bonds, and may exchange 
 the one for the other ; and the bonds given in exchange are enti- 
 tled to the security or lien arising from any mortgage given for 
 the security of the original bonds. 1 
 
 67. "Wisconsin. 2 — A railroad corporation has power to borrow 
 such sum or sums of money at such rates of interest and upon 
 such terms as said company or its board of directors shall author- 
 ize and agree upon, and may deem necessary or expedient, and to 
 execute one or more trust deeds or mortgages, or both, as occasion 
 may require, on any railroad or railroads constructed or in process 
 of construction by said company, for the amount or amounts bor- 
 rowed or owing by such company, upon such terms and in such 
 manner as such company or its board of directors shall deem ex- 
 pedient ; and such company may make such provisions in such 
 deed or mortgage for pledging or transferring their railroad track, 
 rio-ht of way, depot grounds, rights, privileges, franchises, immu- 
 nities, machine houses, rolling stock, furniture, tools, implements, 
 appendages and appurtenances used in connection with such rail- 
 road or railroads, in any manner whatever, then belonging to said 
 company, or which shall thereafter belong to it, as security for 
 any bonds, debts, or sums of money that may be secured by such 
 trust deed or mortgage, as they shall think proper. 
 
 i Acts 1877, ch. 3. " Laws 1877, ch. 144, § 1. 
 
 4 49
 
 CHAPTER II. 
 
 FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 I. Common kinds of corporate mortgages, 
 68-72. 
 
 II. Equitable mortgages, 73-77. 
 
 III. Statutory liens and mortgages, 78- 
 83. 
 
 IV. Who may execute a corporate mort- 
 gage, 84-88. 
 
 V. Construction of various provisions of 
 corporate mortgages, 89-98. 
 
 I. Common Kinds of Corporate Mortgages. 
 
 68. Mortgages of railroad companies and other corpora- 
 tions are almost invariably in the form of trust deeds, with a 
 power of sale. The intervention of trustees to take and hold the 
 mortgage title for the benefit of the creditors secured, and to rep- 
 resent them in all important matters connected with the security, 
 and especially in the enforcement of it, is almost, if not altogether, 
 a necessity of corporate mortgages of the magnitude common with 
 these securities. The holders of the bonds secured by such mort- 
 gages are often very numerous, and scattered all over the world. 
 The bonds are made negotiable, so that they may be conveniently 
 disposed of in the market, and consequently the bondholders do 
 not remain the same from year to year, but are constantly shift- 
 ing. 1 
 
 Through the intervention of trustees the mortgage is in effect a 
 contract between the corporation making it and all persons who 
 may become holders of the bonds secured by it, and they are en- 
 titled to the same benefit they would have if made parties to the 
 deed. 2 
 
 It is usual in corporate mortgages to convey the property in 
 trust to two or more trustees jointly, so that upon the death of a 
 trustee his interest does not descend to his heirs, but vests in the 
 survivor. This right of survivorship is not affected by statutes 
 abolishing joint-tenancies and converting them into tenancies in 
 
 1 See 2 Jones on Mortgages, §§ 1764- "- Butler v. Rahm, 46 Md. 541. 
 1771. 
 
 50
 
 COMMON KINDS OF CORPORATE MORTGAGES. [§§ 69, 70. 
 
 common, unless the language of the statutes expressly embrace 
 trust estates ; for the evil to be remedied by such statutes is the 
 improper accretion to the survivor of that which belonged in part 
 to the deceased ; and inasmuch as trust property, whether held by 
 one or more persons, would only be held for the benefit of the 
 cestuis que trust, whose estate would be in no manner affected by 
 the death of one of the trustees, the reason of the law ceases, and 
 the law itself does not apply. 1 
 
 69. Although railroad mortgages generally contain a power 
 of sale which the trustees may exercise upon default, it is not 
 often that this power is resorted to for the enforcement of these 
 securities. The property of such corporations is generally widely 
 scattered, and in the hands of a great number of persons ; and 
 generally, too, there are conflicting interests arising from mort- 
 gages and other liens in favor of other persons. These considera- 
 tions are generally sufficient to render it desirable and proper for 
 mortgagees to resort to proceedings in equity to foreclose such 
 mortgages rather than to exercise the summary rights conferred 
 by powers of sale. 
 
 70. Indefiniteness in a power of sale will render it void. 
 Thus the York and Cumberland Railroad Company 2 executed a 
 mortgage, in the condition of which it was provided that upon 
 failure of payment for the term of sixty days the holder of the 
 bonds secured, or of any one or more thereof, was authorized to 
 take possession for the common benefit and use of the holders of 
 all the bonds, " and such holders shall share and share alike in 
 the disposition and sale of the same for that purpose by public 
 vendue, on reasonable notice given thereof to the grantors afore- 
 said, first deducting from such proceeds all costs and expenses in- 
 cident to such possession and sale." A power of sale is not given in 
 terms by the mortgage, nor is it necessarily implied from it. More- 
 over, if a power were assumed to exist, it would be void from the 
 indefiniteness of the persons upon whom it is conferred, and from 
 the impossibility of its execution. It is given to no one specific- 
 ally. It one may sell so may another. If one wished to sell, and 
 the others objected to a sale, the exercise of the power could not 
 
 1 McAllister v. Plant, 54 Miso. 106. - Mason v. York & Cumberland U. R. 
 
 Co. 52 Mc. 82. 
 
 51
 
 §§ 71, 72.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 be prevented. The bondholders, moreover, might severally pro- 
 ceed to sell ; but if the sales should be made at the same time, at 
 different places, and upon different terms and conditions, who, of 
 the bondholders thus selling, will confer a valid title upon the 
 purchaser? No estate is conferred upon the bondholders as such. 
 This is conferred upon the mortgagee ; but the power of sale, if 
 conferred upon any one, is not conferred upon him. The mort- 
 gagee having attempted to exercise the power of sale, and having 
 transferred to the purchaser all his right, title, and interest in the 
 mortgage, it was held that the purchaser took an assignment of 
 the mortgage and held the mortgage title in the same manner that 
 the mortgagee had held it. 
 
 71. When bonds are secured by a conveyance strictly in 
 the form of a mortgage rather than a trust deed, the mortgagee, 
 after a transfer of any of the bonds, holds the legal title as mort- 
 gagee for his remaining interest and in trust for the holders of the 
 bonds transferred. 1 
 
 72. Debentures, which are the commonest form of security 
 issued by English corporations, are denned to be instruments 
 under seal, creating a charge, according to their wording, upon the 
 property of the corporation, and to that extent conferring a pri- 
 ority over subsequent creditors, and over existing creditors not 
 possessed of such a charge. 2 This is the true and proper use of 
 the term ; although it is frequently applied on the one hand to in- 
 struments which do not confer a charge, and which are nothing 
 more nor less than ordinary unsecured bonds, and on the other, 
 to instruments which are more than a mere charge, being in ef- 
 fect mortgages, and are properly termed mortgage debentures. 
 Debentures, strictly so called, differ from mortgages in not con- 
 ferring upon the grantees the legal title, or any of the ordinary 
 rights of ownership of the property upon which a charge is cre- 
 ated. 3 They are at most only equitable mortgages. The charge 
 they create upon the property of the company confers only equi- 
 table rights, either as against other creditors, or as against the cor- 
 poration ; and in fact the true test whether an instrument is a 
 
 1 1 Jones on Mortgages, § 817 ; Mason 2 Brice on Ultra Vires, 2d ed. 279. 
 
 v. York & Cumberland 11. R. Co. 52 Me. 3 To assist in understanding the Eng- 
 
 82 ; York & Cumberland R. R. Co. in re, lisli decisions, the forms of these instru- 
 
 50 Me. 552. ments are given at the end of this section. 
 
 52
 
 COMMON KINDS OF CORPORATE MORTGAGES. 
 
 [§ 72. 
 
 debenture or mortgage is found in the inquiry whether the holder 
 has any legal right to interfere with the company's use or control 
 of the property in whatever way it pleases. If the instrument 
 confers a charge which can be protected and enforced only in 
 equity, it is strictly a debenture. 1 Of course the effect and extent 
 of the charge depends entirely upon the language used. 2 
 
 Such debentures are in effect statutory mortgages. It will be 
 noticed that the English railway mortgages differ widely from 
 those in use in America, in that each creditor is there secured by 
 a separate mortgage, while here one mortgage is made to secure 
 all the mortgage creditors. 
 
 Under the Companies Clauses Act, 3 holders of mortgage de- 
 bentures of a corporation have no priority as respects each other, 
 but are all upon an equality. One mortgage debenture holder is 
 not entitled to acquire an advantage over the other mortgage de- 
 benture holders. After a bill in equity against the company has 
 been filed by all the debenture holders, and a receiver appointed, 
 a single mortgagee, who has recovered judgment on his debent- 
 ure, is not entitled to sue out an execution otherwise than as trus- 
 tee for himself and the other mortgage debenture holders. 4 
 
 1 See Holroyd v. Marshall, 10 H. L. C. 
 191. 
 
 2 General South American Co. in re, 
 L. 1!. 2 Ch. D. 337. 
 
 5 8 Vict. 16, § 42. 
 
 4 Bowen v. Brecon Ry. Co. L. R. 3 Eq. 
 541. 
 
 The form of a mortgage deed in England 
 is prescribed by statute to be as follows, or to 
 like effect (Companies Clauses Act 1845, 
 8 Vict. ch. 10, § 14.): — 
 
 " Tin; Com; any." 
 
 Mortgage, number . £ 
 
 By virtue of [here name the special act], 
 v. '•, " The 
 
 Company," in consideration of the 
 sum of pounds paid to us by A. 
 
 13., of , do assign unto the 
 
 said A. B., bis executors, administrators, 
 and assigns, tin- said undertaking, and all 
 the tolls and sums of money arising by 
 virtue of tin- said act, and all the estate, 
 
 ri^'lit, title, and interest of the company in 
 tie- Bame, to hold unto the said A. I!., his 
 executors, administrators, and a signs, 
 
 until the said sum of pounds, to- 
 
 gether with interest for the same, at the 
 rate of for every one hundred 
 
 pounds by the year, be satisfied [" the 
 principal sum to be repaid at the end of 
 years from the date hereof," 
 in case any period be agreed upon for that 
 purpose "at ," or anyplace 
 
 of payment other than the principal office 
 of the company]. Given under our com- 
 mon seal, this day of 
 , in the year of our 
 Lord 
 
 Tht same act prescribes the following form 
 qf bond : — 
 
 "The Company." 
 
 Bond, number . ■£ 
 
 By virtue of [in re, name the special act], 
 we, " The 
 
 Company," in consideration of 
 the BUm of pounds to us in hand 
 
 paid by A. B., of do bind our- 
 
 Bclves and our SUCCeSSOrS unto the said A. 
 
 I'., his executors, administrators, and as- 
 signs, in the penal sum of pounds. 
 
 53
 
 § 73.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 II. Equitable Mortgages. 
 
 73. An instrument which was intended to be the mort- 
 gage deed of a corporation, but which, not being executed 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 in- 
 tended to be given. The Rutland and Washington Railroad 
 Company authorized its president to issue bonds secured by a 
 mortgage of its road and franchise. The president executed an 
 instrument which recited his authority, proceeded in his name as 
 president to convey the property in mortgage, and to make the 
 covenants, and the deed was signed in his own name. The com- 
 pany issued bonds under this mortgage, and did various acts in 
 ratification of the security, and afterwards issued two other sets of 
 bonds, and secured them by second and third mortgages executed 
 in due form. The first bonds not being paid when due, the trus- 
 tees filed a bill to foreclose the mortgage, whereupon the subse- 
 quent mortgagees claimed that the first mortgage, by reason of its 
 defective execution, did not constitute a lien upon the property. 
 The court, however, sustained it as an equitable mortgage. As 
 against the corporation itself, the bonds and mortgage were binding 
 
 The condition of the ahove obligation is 
 such, that if the said company shall pay 
 to the said A. B., his executors, adminis- 
 trators, or assigns [" at ," in 
 case any other jilace of payment than the 
 principal office of the company be intended], 
 on the day of , which 
 will be in the year one thousand eight 
 hundred and , the principal 
 sum of pounds, together with 
 interest for the same, at the rate of 
 
 pounds per centum per annum, pay- 
 able half-yearly, on the day of 
 , and day of 
 , then the above written 
 obligation is to become void, otherwise to 
 remain in full force. Given under our 
 common seal, this day of 
 , one thousand eight hun- 
 dred and 
 
 Form of transfer of mortgage or bond : — 
 I, A. B., of , in con- 
 
 54 
 
 sideration of the sum of » 
 
 paid to me by G. H., of , 
 
 do hereby transfer to the said G. H , his 
 executors, administrators, and assigns, a 
 certain bond [or "mortgage"], number 
 , made by " The 
 Company " to , 
 
 bearing date the day of 
 
 , for securing the sum of 
 and interest 
 
 [or, if such transfer be by indorsement, " the 
 within security"], and all my right, es- 
 tate, and interest in and to the money 
 thereby secured [and if the transfer be of 
 a mortgage, "and in and to the tolls, 
 money, and property thereby secured"]. 
 In witness whereof, I have hereunto set 
 my hand and seal, this 
 day of , one thousand 
 
 eight hundred and 
 
 i Miller v. Rutland & Washington R- 
 R. Co. 36 Vt. 452.
 
 EQUITABLE MORTGAGES. [§ 73. 
 
 contracts. Objection was made that the mortgage was not a 
 memorandum in writing sufficient to satisfy the statute of frauds. 
 The vote of the directors in connection with the deed was regarded 
 as sufficient in this respect, and as furnishing an equitable right in 
 the security contracted to be given. It was also objected that a 
 court of equity would not give relief for mistake in matter of 
 law ; but there was no occasion to discuss this question, because 
 there was no mistake on the part of the corporation as to matter 
 of law ; for the intention was that the president should make a 
 valid technical mortgage, and it was altogether a mistake on his 
 part that it was not technically the deed of the corporation. He 
 by mistake made one that technically could operate only as his 
 own deed. 
 
 But after determining that the instrument constituted an equi- 
 table mortgage between the parties, it remained to establish it as 
 such against the subsequent mortgagees. The court was con- 
 vinced by the evidence, that all the trustees under the second and 
 third mortgages, prior to and at the time such mortgages were 
 executed, had notice and knowledge, in point of fact that the 
 first bonds had been issued, and that they were secured by mort- 
 gage. They stood chargeable, therefore, with the legitimate ef- 
 fect of the right, whether legal or equitable, which existed in 
 virtue of the issuing of the bonds with such security by way of 
 mortgage as appertained to them. The trustees under these 
 mortgages were the agents of the holders of the bonds, and no- 
 tice to the agent was notice to the bondholders, who therefore 
 took their bonds subject to all the legal consequences of the ex- 
 istence of the equitable first mortgage. Notice to the trustees 
 should be held to affect the title in their hands, with reference to 
 all rights existing in respect thereto under the trust. " Though 
 it be obvious and readily conceded," said Mr. Justice Barrett, 
 "that bondholders acquire their rights, in reference to the secu- 
 rity provided by the mortgage in trust, by the purchase of the 
 bonds, and with such purchase the trustees have no connection, 
 nor any agency in reference to the transfer thereof, yet, it is at 
 the same time true, that, in reference to the security for holding, 
 enforcing, and administering it according to the provisions of the 
 trust, the trustees are the agents of the parties interested and en- 
 titled by reason of being bondholders. We are unable to assent 
 to the proposition, that the trustees are only agents of the cestuis
 
 §§ 74, 75.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 que trust for holding the legal title. They are agents for holding 
 just such title ;is is created by the transaction, and for adminis- 
 tering it according to the terms of the trust, and whatever title 
 the cestuis que trust have, whether legal or equitable, is through, 
 and in virtue of, the title conveyed to and held by the trustees. 
 Even if it should be granted that the trustees were agents merely 
 for holding the legal title, still, as the rights of the cestuis que trust 
 depend upon and are to be asserted through that legal title, what- 
 ever affects such legal title in its creation in the trustees must af- 
 fect the rights and interests that are dependent upon it. If the 
 legal title is charged with an incumbrance in its creation in the 
 hands of the trustees, it is difficult to see how the cestuis que trust 
 can have an equity suspended upon that legal title that shall over- 
 ride such incumbrance. However that might be as a proposition 
 applicable to a dry trust, still, as to a trust which, in addition to 
 the holding of the title, is administrative of the property for the 
 purposes of effectuating the security, the trustees must be regarded 
 as the agents of the cestuis que trust with reference to their rights 
 and interests, both in the title held and in the administration and 
 fruits of the trusts, according to its terms and legal operation." 
 
 74. A contract to give a mortgage for specified sums has in 
 equity the effect of a mortgage to the extent indicated. But 
 such a contract implies that no other or different mortgage or lien 
 is to be given ; and a stipulation for a mortgage "for the advance- 
 ments made or money expended " under a contract cannot be 
 made to include damages for a breach of the contract. 1 If the 
 property to be charged consists of land, it is of course ineffectual 
 by reason of the statute of frauds, unless it be in writing ; but 
 an agreement by word of mouth to charge other property may be 
 enforced in equity by a decree for specific performance. 2 
 
 Statutory liens, as affecting personal property, have, without 
 possession, the same operation and efficacy that existed in com- 
 mon law liens, when the possession was delivered. 3 
 
 75. Without a formal mortgage the bonds of a corpora- 
 
 1 Waco Tap K. B. Co. v. Shirley, 45 Peto v. Brighton, &c. By. Co. 1 H. & M. 
 Tex. 355 ; 13 Am. Bailw. Bep. 233 ; and 468. 
 
 see 1 Jones on Mortgages, § 163 3 B ea n v _ White, 94 U. S. 382. 
 
 2 Asliton v. Conigan, L. B. 13 Eq. 76; 
 
 56
 
 EQUITABLE MORTGAGES. [§ 76. 
 
 tion providing that they shall be a lien upon the property of 
 the company prior to all others, are in substance a mortgage, and 
 may be enforced in equity as against the corporation and its prop- 
 erty. Of course as against subsequent purchasers and incum- 
 brancers without notice of such lien, whose deeds are first recorded, 
 such bonds would have no priority. Such for instance were the 
 bonds of the White Water Valley Company, a corporation organ- 
 ized under the laws of the State of Indiana to build a canal, and 
 whose bonds, pledging " the effects, real and personal," of the 
 company, contained recitals that they should have preference over 
 all debts to be thereafter contracted, and that in default of the 
 payment of interest, the holder of the bonds might enter into 
 possession of the tolls, water-rates, and other incomes of the com- 
 pany, and might apply for the appointment of a receiver. Upon 
 a default occurring, the Supreme Court of the United States held 
 that the bondholders were entitled to this relief, the bonds in 
 effect constituting a mortgage. 1 
 
 Similar illustrations, that informal agreements or instruments 
 are sufficient in equity to create a charge, are furnished by the 
 English courts. Thus, the directors of the Strand Music Hall 
 Company borrowed money under a written agreement that they 
 would deposit with the lender, as collateral security, certain in- 
 complete mortgage bonds, constituting a first charge upon the 
 property. In the winding up of the company, a question arose 
 whether these mortgage bonds, by reason of their incomplete- 
 ness, constituted a valid charge upon the property for this loan. 
 Turner, L. J., delivering the opinion of the court that a valid 
 charge was created, said: 2 "I apprehend that where this court 
 is satisfied that it was intended to create a charge, and that the 
 parties who intended to create it had the power to do so, it will 
 give effect to the intention, notwithstanding any mistake which 
 may have occurred in the attempt to effect it." 
 
 A mortgage not executed and recorded according to law, never- 
 theless lias priority of a subsequent mortgage which is expressly 
 made subject to the former. 3 
 
 76. An agreement of a company to set apart specific 
 
 i White Water Valley Canal Co. v. » Coe v. Columbus, Piqua & Ind. R. R. 
 
 Vallette, 21 How. 414. See § 72. Co. 10 Ohio St. 372. 
 
 - Strand Music Hall Co. in re, 3 De <;., 
 
 J. & H. 147, 158. 57
 
 §J; 77, 78,] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 earnings or property in the hands of a third person to meet the 
 interest or principal of its bonds, creates an equitable lien or 
 charge. The legal proposition, which is an accepted doctrine of 
 courts of equity, is tersely stated by Judge Dillon : 1 " If a debtor, 
 by a concluded agreement with a creditor, sets apart a specified 
 amount of a specific fund in the hands, or to come into the hands 
 of another from a designated source, and directs such person to 
 pay it to the creditor, which he assents to do, this is a specific 
 appropriation, binding upon the parties and upon all persons with 
 notice, who subsequently claim an interest in the fund under the 
 debtor." 
 
 77. An equitable mortgage must have some foundation in 
 contract, or must arise by necessary implication from the 
 terms or scope of a contract. A provision in a railroad mortgage 
 to trustees made for the purpose of retiring an existing mortgage 
 and prior liens, and of completing and equipping a railroad, that 
 the expenditure of all sums realized from the sale of the bonds 
 secured shall be made with the approval of at least one of the 
 trustees, whose assent in writing shall be necessary to all contracts 
 made by the corporation, before the same shall be a charge upon 
 any of the sums received from said sales, does not create a charge 
 in favor of one who has afterwards built a portion of the road 
 under a written contract with the corporation, if the contract did 
 not itself impose such charge. To create a charge upon money 
 which has no ear-mark would require evidence of the most unmis- 
 takable language. It is not enough to create such a charge that 
 the party claiming the lien may, through his efforts or outlays, 
 have added to the security of the bondholders. 2 
 
 III. Statutory Liens and Mortgages. 
 
 78. A mortgage may be constituted by statute without the 
 execution of any deed of conveyance. 3 In this way the Union Pa- 
 cific Railroad was mortgaged to the United States to secure the 
 repayment of the amount of bonds of the United States issued 
 and delivered to the company to aid in the construction of the 
 road ; the act of Congress authorizing such aid 4 providing that 
 
 1 Ketclmm v. Pacific ^Railroad, 4 Dill. 3 Wilson v. Boyce, 92 U. S. 320; S. C. 
 78, 86. See § 122. 2 Dill. 539 ; Murdock v. Woodson, 2 Dill. 
 
 2 Dillon v. Barnard, 1 Holmes, 386. 188 Woodson v. Murdock, 22 Wall. 351. 
 
 58 4 Act of July 1, 1862, 12 Stat, at Large,
 
 STATUTORY LIENS AND MORTGAGES. [§ 70. 
 
 " the issue of such bonds and delivery of them to the company 
 shall ipso facto constitute a first mortgage on the whole line of the 
 railroad and telegraph, together with the rolling stock, fixtures, 
 and property of every kind and description ; and in consideration 
 of which said bonds may be issued ; and on the refusal or fail- 
 ure of said company to redeem said bonds, or any part of them, 
 when required to do so by the secretary of the treasury, in 
 accordance with the provisions of this act, the said road, with all 
 the rights, functions, immunities, and appurtenances thereto be- 
 longing, and also all lands granted to the said compairy by the 
 United States which at the time of said default shall remain in 
 the ownership of said company, may be taken possession of by 
 the secretary of the treasury for the use and benefit of the 
 United States." 
 
 When a statute clearly provides for a lien, it is not essential 
 that the bonds issued by the corporation should themselves recite 
 the words of the act creating the charge, if they show by refer- 
 ence to the act that they were intended to carry the benefit of 
 the lien. An act authorizing a canal company to boraow money 
 on its bonds provided that these should " take precedence and 
 have priority of lien on the said canal and the tolls thereon 
 and other property of the said company over all claims." The 
 bonds issued for the money borrowed by the company stated that 
 the holder was " entitled to such security therefor as is mentioned 
 in the said recited act." The court held that the holders were 
 entitled to a charge upon the canal and tolls as provided by the 
 act, and to the appointment of a receiver. 1 
 
 79. A statutory lien can exist only when the statute in 
 terms not doubtful expresses the intention to give a lien. 
 Thus under a statute giving a city authority to aid a railroad com- 
 pany, and to receive security from the company by mortgage or 
 pledge of stock, the city having accepted security of the latter 
 kind, it can have no statutory lien by reason of a clause of the 
 statute which declares that the above liens, mortgages, or other 
 securities, shall have priority of all claims or obligations subse- 
 quently contracted by the company. 2 
 
 489; and see United States v. Union J';icilic ' Town of I )undas v. I tesjardins Cunal 
 It. It. Co- 'j 1 U. S. 72. Co. 17 Gram (Upper Can. Ch.), 27. 
 
 2 Cincinnati City v. Morgan, 3 Wall. 275. 
 
 59
 
 § 79.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 To constitute a statutory lien, it must clearly appear that it was 
 intended that the statute should have this effect. The Brunswick 
 and Florida Railroad, in 1856, issued its bonds without securing 
 them by mortgage, and subsequently issued other bonds with such 
 security. The holder of the first bonds claimed that under the 
 charter of the company these bonds, ipso facto, became a lien upon 
 the property of the company, which was unaffected by the subse- 
 quent mortgage. The charter upon which this claim was based 
 provided, that "it should be lawful for the board of directors to 
 direct the president and secretary to issue bonds of said company, 
 which shall be binding on the property of said company, and on 
 such other property belonging to the stockholders as they may 
 pledge to said company, by mortgage, to meet their own engage- 
 ments or the engagements of the company." The court, however, 
 held that these words did not give a statutory lien upon the com- 
 pany's property, which was superior or equal to the lien of the sub- 
 sequent mortgage. 1 The case of Collins v. Central Bank of Geor- 
 gia 2 was discussed and considered at length in this connection. 
 The Monroe Railroad and Banking Company was authorized to 
 do a banking business and to issue bills for circulation, and the act 
 provided that the " railroad to be built by said company, together 
 with all the revenues arising therefrom, and all the property, 
 equipments, and effects therewith connected, should be pledged 
 and bound for the redemption of the same." The company hav- 
 ing suspended payment, and being unable to complete its road, ar- 
 ranged with contractors to do this under a written agreement that 
 they should have a lien upon the entire road. Upon a subsequent 
 sale of the road under a creditor's bill, the court held, with refer- 
 ence to the distribution of the proceeds, that under the charter the 
 bill holders had a lien in preference to the contractors as to all 
 that portion of the road built by the company prior to the agree- 
 ment with the contractors, and that the latter had a prior lien only 
 upon the part they built. This case is distinguished from the case 
 above noticed chiefly by the different nature and character of the 
 debts in the two cases ; the one being an ordinary debt for a loan 
 of money and the other a debt to bill holders issued under author- 
 ity of the state for circulation among the people, and having, upon 
 grounds of public policy, a claim to protection. Besides, the lan- 
 
 1 Brunswick & Albany R. R. Co. v. 2 1 Kel y (Ga.), 435. 
 Hughes, 52 Ga. 557. 
 
 60
 
 STATUTORY LIENS AND MORTGAGES. [§§ 80, 81. 
 
 guage regarding the lien was considered stronger in the case of the 
 banking company than in the case of the railroad ; and in the lat- 
 ter case it was regarded as only a fair construction of the whole 
 provision, that, while certain property of the stockholders mort- 
 gaged to the company was to be capable of being charged with 
 this debt, it was not intended to discharge the company itself and 
 its property. In other words, the intent to create a lien upon the 
 company's property was not manifested with certainty enough to 
 establish it. 
 
 80. A statutory mortgage is construed in the same man- 
 ner as one executed by deed, as regards the property it em- 
 braces. Thus, the State of Missouri having issued bonds in aid 
 of the Cairo and Fulton Railroad Company, under an act which 
 declared that they should " constitute a first lien and mortgage 
 upon the road and property" of the company, ib was held by the 
 Supreme Court 6f the United States that a valid lien was created 
 by the act upon all the lands of the company, including such as 
 did not constitute the road, or any part of it, and were not used 
 in connection with it. 1 The generality of the language is no ob- 
 jection to the validity of the mortgage. It is, moreover, as com- 
 petent for a railroad company to mortgage the lands it has re- 
 ceived from the state in aid of its construction as it is to mort- 
 gage the lands used for its track or appurtenant to it. The word 
 " property " is broad enough to cover the outside lands of the 
 company, and the legislature must be regarded as having intended, 
 in using this word, to cover all the corporate property of the com- 
 pany of every nature and wherever situated ; and such was the 
 construction given to this language by the Supreme Court of Mis- 
 souri. 2 
 
 81. A statutory mortgage by a railroad company, like a 
 mortgage created by deed, may embrace after-acquired land 
 and other property acquired after the creation of the lien, if the 
 intention to embrace such land be manifest in the act creating 
 the lien. 8 A statutory mortgage in favor of the State of Missouri, 
 making all bonds issued by tin', state in aid of certain railroad 
 companies a first lien upon the road and property of the several 
 
 i Wilson '■. Boyce, *.»^ U. S. 320, affirm- a Whitehead v. Vineyard, ."><> Mo. 30. 
 ing & C. '■!■ Hill. :; Whiteheadw. Vineyard, supra. 
 
 Gl
 
 § 82.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 companies securing them, was held to embrace after-acquired lands, 
 although outside the railroad and not necessary to its use. The 
 term " road and property " is broad enough to cover by the lien 
 of the state all the corporate property of the companies named 
 in the act, and clearly shows an intention to cover all their prop- 
 erty. 1 A subsequent foreclosure and sale of the road and its 
 property under such act carries the title to such land, although 
 the company has in the mean time conveyed it to a purchaser. A 
 purchaser from the company subsequent to the mortgage can ac- 
 quire a clear title only through a release of the lien, or by virtue 
 of a statute authorizing sales by the company discharged of the 
 lien in favor of the state. 
 
 82. Release of statutory lien. — In 1868 the State of Missouri, 
 holding a statutory lien upon the Pacific Railroad of Missouri, as 
 indemnity for bonds issued in aid of that company to the aggre- 
 gate of 67,000,000, passed an act by which, in consideration of 
 $5, 000,000, the state would release and discharge the lien. This 
 amount was paid to the state by the railroad company, and the 
 release was made ; and on the faith of this release the company 
 mortgaged its road and sold its bonds with the intention of giving 
 a first mortgage lien. The state had previously provided in its 
 Constitution that in the event of any default in the payment of 
 bonds issued by the state in aid of railroad companies, the general 
 assembly should provide by law for the sale of the road and fran- 
 chises of the company thus making default, under the lien re- 
 served to the state ; but that the general assembly should have 
 no power, for any purpose whatever, to release the lien held by 
 the state upon any railroad. In 1873 the legislature of the state 
 directed the governor and attorney general of the state to fore- 
 close the mortgage which had been released, upon the ground 
 that the release was illegal. The trustees of the mortgage sub- 
 sequently made applied to the Circuit Court of the United States 
 for an injunction restraining this sale, and thus the constitution- 
 ality of the act of the legislature authorizing the release of the 
 lien in favor of the state was called in question. Judge Dillon, in 
 granting the injunction, upon this question said : 2 " Looking back 
 
 1 Whitehead v Vineyard, supra. on appeal, Woodson v. Murdock 22 Wall. 
 
 2 Murdock v. Woodson, 2 Dill. 188 ; af- 351. See, also, Darby v. Wright, 3 Blatchf. 
 firmed by the Supreme Court of the U. S. 170. 
 
 62
 
 STATUTORY LIENS AND MORTGAGES. [§ 83. 
 
 upon the transaction, I cannot say that the agreement to release 
 the security of the state for $5,000,000 should, under the circum- 
 stances, and as respects the innocent mortgagees of the company, 
 be held to be such a release as was forbidden by the Constitution. 
 The state had released or waived its first lien on the North Mis- 
 souri Railroad, receiving no consideration therefor, and agreed to 
 take a second lien. This was at or about the time the constitu- 
 tional convention was in session, and undoubtedly it was such a 
 transaction that was in the contemplation of the convention and 
 the people when they adopted the provision prohibiting the state 
 from releasing its lien on any railroad. It was not intended to 
 prohibit the release of a lien for full value ; and of such value 
 the legislature was left to be the judge, and with its judgment 
 the people of the state must be content. It is urged by counsel 
 that this view makes the constitutional provisions of little value, 
 since it leaves it in the power of the legislature to sacrifice the 
 interests of the people by corrupt or injudicious bargains, and the 
 court is appealed to, to prevent the sacrifice which, it is claimed, 
 the Act of 1868 decreed. But we have only to deal with the ques- 
 tion of legislative power ; and the legislature, as the representa- 
 tive of the state as a mortgagee, and as the representative of her 
 other interests, has full power except so far as restrained by the 
 Constitution. If it had been thought that the legislature could 
 not have been trusted with the sale or disposition of the state's 
 interest as to the amount to be received, undoubtedly additional 
 restraints would have been imposed. The state was not disabled 
 from releasing its security on receiving full value for it, and of its 
 value it was left by the Constitution to be the judge, — so left be- 
 cause there was nothing to restrain it. I feel quite clear in the 
 conviction that the equities of the bondholders under the plaintiff's 
 mortgage are superior to those of the state, and on this ground, 
 and on the ground that in case of controversy as to priority of 
 lien, the priority ought to be settled before an irredeemable sale 
 is made, 1 award a temporary injunction." 
 
 83. Not only may a statutory lien be waived, but another 
 
 person may be substituted by agreement of parties in place of 
 
 the. original lien holder. This proposition is illustrated in another 
 
 phase of the statutory lien last mentioned. 1 Trior to the release. 
 
 1 Ketcbum v. Pacific Railroad, i Dill. 78. 
 
 63
 
 § 84.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 by the State of Missouri of the lien in its favor, and the making 
 of the mortgage referred to, the county of St. Louis, under legis- 
 lative authority, had loaned its bonds to the railroad company to 
 the amount of $700,000, to enable it to complete the road. The 
 county was secured by a provision in the act authorizing the loan, 
 that the person who had been in custody of the earnings of the 
 road, in behalf of the state, should pay into the county treasury 
 out of such earnings a sum sufficient to meet the interest on the 
 bonds. The effect of this provision, when acted upon, was, that 
 the state, then having a complete and perfect lien upon all the 
 earnings of the road, waived it to this extent in favor of the 
 county, and the county was pro tanto substituted in its place. 
 This lien of the county was recognized in the subsequent legisla- 
 tion under which the state released its lien. The company hav- 
 ing afterwards made a second and third mortgage, a foreclosure 
 sale was made under the latter, the holders of which claimed that 
 the county was not entitled to any charge or lien upon the pro- 
 ceeds. The court, however, established the lien, upon the ground 
 that the effect of the act, and the acceptance of it by the county 
 and the company, was to convert its provisions into a contract 
 which created a lien, having its origin by statute, and equitable 
 in its nature, and of which the subsequent mortgagees had notice 
 through the statutes creating and recognizing it. 
 
 IV. Who may execute a Corporate Mortgage. 
 
 84. The directors of a railway corporation, in the absence 
 of any restriction in its charter or by-laws, may exercise all the 
 authority of the corporation itself in pledging its real or personal 
 property to secure any debts which it is authorized to contract. 1 
 Being the agents of the corporation rather than the corporate 
 body, they may exercise their powers beyond the state by whose 
 laws the corporation was created ; and therefore directors of a 
 Vermont corporation may grant a valid mortgage at a meeting 
 held in Massachusetts. 2 
 
 When a corporation has by law the power to execute a mort- 
 
 1 1 Jones on Mortgages, §§ 124-128. 2 Arms v. Conant, 36 Vt. 744; and see 
 
 Hendeeu. Pinkerton, 14 Allen (Mass.) 381, Galveston R. R. Co. v. Cowdrey, 11 Wall, 
 
 per Foster, J. ; McCurdy's Appeal, 65 Pa. 459 ; Ohio & Mississippi R. R. Co. v. Mc- 
 
 St. 290. And see Bank of Middlebury v. Pherson, 35 Mo. 13 ; Wright v. Bundy, 11 
 
 Rutland &. Washington R. R. Co. 30 Vt. Ind 398, 404; MeCall v. Byram Mfg. Co. 
 
 159, 1G9. 6 Conn. 428. 
 
 64
 
 WHO MAY EXECUTE A CORPORATE MORTGAGE. [§ 85. 
 
 gage of its franchises and property, a mortgage executed by au- 
 thority of the directors alone is valid. 1 Any doubt of the validity 
 of such a mortgage is removed by acts of the corporation in rati- 
 fication of it, such as the issuing of bonds under it and the pay- 
 ing of interest upon it. 2 
 
 It is a sufficient consideration for upholding a mortgage that it 
 was made in conformity with a binding resolution of the board of 
 directors to secure the payment of the company's bonds, so that 
 they might be more advantageously disposed of in the market. 3 
 
 85. A power to an officer or agent of a corporation to bor- 
 row money on its behalf includes authority to pledge its 
 bonds, or to give other ordinary securities for the money bor- 
 rowed. The Minnesota and Pacific Railroad Company authorized 
 its president to borrow such sums, for such length of time and at 
 such rate of interest, as he might think proper, and to purchase 
 iron rails, locomotives, and machinery on such terms as he might 
 deem advisable ; and in order to do so, to make, execute, and de- 
 liver obligations, bills of exchange, contracts, and agreements of 
 the company. The president accordingly made a contract in New 
 York for a purchase of railroad iron, and an advance of $16,000 
 to the company on its notes, and for the security of this contract 
 pledged $45,000 of bonds of the State of Minnesota belonging to 
 the company. The Supreme Court of the United States held 
 that he was clearly authorized to pledge the bonds. He was em- 
 powered to make actual purchases, and to borrow money, not 
 merely to make executory contracts for future purchases and 
 loans. To give collateral security for these undertakings was 
 within the limits of such a power. 4 
 
 The president of a railway corporation having authority by a 
 by-law to act as business and financial agent of the corporation 
 cannot bind it by a mortgage of personal property, even such as 
 a locomotive, given to secure a debt of the corporation. 5 His au- 
 thority in such case is confined to the ordinary business of the 
 corporation. The fact that he affixes to the instrument the cor- 
 porate seal adds nothing to the validity of the instrument. That 
 
 i McCurdy's Appeal, 65 Pa. St. 290. Oregon, 125 ; Hoyt v. Thompson, 5 N. Y. 
 
 2 McCurdy's Appeal, tupra. 320, 335; Whitwell v. Warner, 20 Vt. 
 
 15 Butler V. Kalim, 4G Md. 541. 425; Despatch Line of PacketBW. Bellamy 
 
 « Hatch v. Coddington, 95 U. S. 48. Manuf. Co. 12 N. 11. 205. 
 
 6 Luse v. Isthmus Transit Rv. Co. 6 
 
 65
 
 §§ 86, 87.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 does not make the instrument the deed of the company, unless it 
 was affixed by authority. The seal bears upon its face the pre- 
 sumption that the instrument was executed by competent author- 
 ity from the corporation ; but this presumption may be repelled by 
 showing that the seal was affixed without authority. ' In general, 
 it may be said that when a transfer of corporate property requires 
 the use of the common seal it cannot be made without the assent 
 and authority of the board of directors. 
 
 86. As regards the execution of a corporation mortgage, 
 if the deed purports to be the deed of the corporation, the 
 fact that it is not signed by the corporate name, but by an officer 
 having the power to execute the deed in behalf of the company, 
 in his individual name, does not invalidate it as the deed of the 
 corporation. 1 But if the deed purports to be the deed of the offi- 
 cer, and is signed by him in that manner, it is not the deed of the 
 corporation. 2 
 
 Where there is ambiguity on the face of a note signed by the 
 president of a railroad company in his individual name, without 
 addition, acknowledging indebtedness for labor performed on land 
 of the company, parol evidence is admissible to ascertain whether 
 the note be his own obligation or that of the company. 3 
 
 87. The mere fact that a mortgage deed has the seal of a 
 corporation attached does not make it the deed of the corpo- 
 ration, unless the seal was placed upon it by some one duly au- 
 thorized. The seal being affixed to the deed, there is a presump- 
 tion that it was rightfully affixed ; but this presumption may be 
 overthrown by parol evidence to the contrary. When it is shown 
 that the officers who executed the mortgage did not seal it then or 
 
 1 Haven v. Adams, 4 Allen (Mass ), 80. 2 Brinley v. Mann, 2 Cush. (Mass.) 337. 
 
 The mortgage in this case was executed in In this case the words were : " In witness 
 
 these words : "In testimony whereof, said whereof I (the treasurer), in behalf of 
 
 party of the first part have caused these said company, and as their treasurer, have 
 
 presents to be signed by their president, hereunto set my hand and seal. A. B., 
 
 and their common seal to be hereto af- Treasurer," &c, and seal. See, also, Miller 
 
 fixed. A. B., President," and seal. And see v. Rutland & Washington R. R. Co. 36 
 
 Despatch Line of Packets v. Bellamy Manf. Vt. 452. 
 
 Co. 12 N. H. 205. In Maine, see as to ef- s Richmond, Fredricksburg & Potomac 
 
 feet of statute in such case, Porter v. An- R. R. Co. v. Snead, \9 Gratt. 354. 
 droscoggin & Kennebec R. R. Co. 37 Me. 
 349. See 1 Jones on Mortgages, § 130. 
 
 66
 
 WHO MAY EXECUTE A CORPORATE MORTGAGE. [§ 88. 
 
 afterwards ; that the officer who had the seal in custody never af- 
 fixed it, nor authorized any one else to do so ; and that the instru- 
 ment was recorded without a seal, the burden is thrown upon the 
 mortgagee to prove that it was properly sealed. Otherwise the 
 conclusion will be drawn that the seal was fraudulently abstracted 
 from the lawful custodian of it, and wrongfully affixed to the 
 mortgage. 1 
 
 88. Ratification. — The execution of a mortgage by the offi- 
 cers of a railroad company, without previous authority from the 
 corporation, is ratified and confirmed by the payment of interest 
 upon the bonds, and by other acts showing a clear recognition of 
 the mortgage by the corporation. 2 
 
 The receiving and retaining of money advanced by bondholders 
 upon a railroad mortgage amounts to a ratification of the con- 
 tract under which the money was obtained, and it does not matter 
 that the resolution authorizing the giving of the mortgage did not 
 give the president and secretary authority to make so extensive a 
 mortgage as that which was in fact executed. 3 In like manner, if 
 the president and secretary of a railway company execute a mort- 
 gage in broader terms than they were authorized by the resolu- 
 tion of the directors to make it, and money is advanced in good 
 faith upon its bonds, and is received and used by the company 
 in constructino; its road, this will be deemed a ratification of the 
 contract under which the money was advanced. 4 
 
 Under a statute which provides that a majority of the stock- 
 holders at any legal meeting is requisite for the valid transaction 
 of any business, except that the board of directors shall not be em- 
 powered to mortgage or hypothecate the property of the company, 
 unless by a vote of two thirds in interest of the stockholders, 
 while it is competent for a majority to ratify the execution of a 
 promissory note of the company, it requires a two thirds vote to 
 ratify the execution of a mortgage given to secure such note. 
 Therefore, a subsequent resolution adopted by a majority of the 
 Stockholders, to levy an assessment for the express purpose of 
 liquidating the note, would be a distinct recognition of it, and 
 
 i Kochler v. Black River Falls Iron Co. 3 Klwell v. Grand St. & Newtown R. R. 
 2 Black, 715; and see Seed v. Bradley, 17 Co. f>7 Barb. (N. V.) 88. 
 1)1,-321. 4 Klwell r. Grand St & Newtown K. R. 
 
 - McCurdy'a Appeal, 65 Pa. St. 290. Co, supra. 
 
 G7
 
 § 89.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 equivalent to a previous authority to execute it. But the mort- 
 gage stands upon a different footing. It cannot be ratified by a 
 less number of stockholders than was required for its execution. 
 The assessment being valid, the stockholders had no option but to 
 pay it, and their understanding that the money was to be applied 
 to the payment of the note does not show that they admitted the 
 validity of the mortgage. 1 The subsequent assent of two thirds 
 of the number of stockholders by any instrument in writing which 
 identifies the mortgage is sufficient. The requirement as to the 
 number of stockholders necessary to authorize a mortgage has 
 reference to the stock actually issued, and not to the nominal 
 amount to which the capital stock is limited. 
 
 V. Construction of Various Provisions of Corporate Mortgages. 
 
 General statement. — Mortgages by railroad comapnies and 
 other corporations differ so widely in their form and provisions, 
 that it would be of little use to take up the several parts of a cor- 
 porate mortgage and treat in detail of their construction in the 
 way that the several parts of an ordinary mortgage might be 
 treated of. 2 Without, therefore, attempting anything of this nat- 
 ure, and without attempting to make a systematic examination of 
 the several provisions of railroad and other corporate mortgages, 
 it is proposed in this division of the chapter to state the construc- 
 tion which the courts have placed upon various clauses peculiar to 
 such mortgages. 
 
 89. Restrictions or provisions in a statute authorizing a 
 corporation to issue bonds secured by mortgage enter into 
 the contract, and bind the parties to it, although the mortgage it- 
 self contains inconsistent provisions. Thus, where a mortgage is 
 made to secure bonds with interest payable semi-annually, under 
 the authority of a statute which declares that the bonds shall not 
 mature at an earlier period than thirty years, a provision in them 
 that, upon a failure to pay any coupon when presented for pay- 
 ment, and a continued default thereon for six months, the whole 
 sum mentioned in the bonds shall become due and payable, is 
 void. In such case, however, the mortgage may properly provide 
 
 1 Forbes v. San Rafael Turnpike Co. Co. v. King's County Manuf. Co. 7 Hun 
 50 Cal. 340; and see Greenpoint Sugar (N. Y.). 44. 
 
 2 1 Jones on Mortgages, §§ 60-101. 
 
 68
 
 VARIOUS PROVISIONS OF CORPORATE MORTGAGES. [§ 90. 
 
 that it shall be foreclosed upon non-payment of interest. When a 
 foreclosure suit is brought in consequence of such default, and the 
 sum ascertained to be due on the coupons is paid within such rea- 
 sonable time as the court shall appoint, — say ninety days or six 
 months, or until the next term of court, — no further proceedings 
 in the suit can be had until there is another default. If the sum 
 be not so paid, a sale of the property, with a foreclosure of all the 
 rights subordinate to the mortgage, should be ordered, with a di- 
 rection to bring the proceeds into court. There can be but one 
 decree of foreclosure of the same mortgage on the same property ; 
 and it is a necessity of that foreclosure, under the principles of 
 equity, that all the sums secured by the mortgage shall be pro- 
 tected according to their priority of lien. The mortgagee will 
 have a lien on the money thus paid into court, not only for his 
 overdue coupons, but for his principal debt, and it must be pro- 
 vided for in the order distributing the proceeds of sale. 1 
 
 When authority is given in general terms to an officer or agent 
 of a corporation to execute a mortgage of its property, he has im- 
 plied authority to execute it in the usual form, and with the usual 
 provisions for mortgages of that kind ; but there is no implied au- 
 thority to execute a mortgage with unusual provisions. Thus, a 
 stipulation that the principal sum secured should become due at 
 the option of the holder, upon default in the payment of the in- 
 terest, being unusual in mortgages executed in Wisconsin, the Su- 
 preme Court of that state held that under such general authority 
 the agent could not bind the company by such a stipulation. The 
 unauthorized stipulation would not, however, invalidate the mort- 
 gage in any other respect. 2 
 
 90. The whole debt may be made to become due upon any 
 default in the payment of interest or of principal. A provision in 
 a railway mortgage made to trustees for the benefit of bondhold- 
 ers, that upon any default in the payment of any instalment of 
 the principal or interest, the whole debt shall become due and 
 payable, if not inserted in the bonds secured by the mortgage, may 
 not affect their payment, or enable a bondholder to enforce them 
 by suit at law as becoming due upon a default in the payment 
 of interest. In such case the interest clause is not regarded as 
 
 1 Howell v. Western B. B. Co. 94 U. S. 2 Jesup r. City Bank ofBaeine.U Wis. 
 
 463. 331 ; 1 Jones on Mortgages, § 129. 
 
 69
 
 § 91.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 having been placed in the mortgage to give the several bondhold- 
 ers a right of action upon it for the principal of the bonds, but 
 to give the trustees, with whom the covenant was made, in trust 
 for the bondholders, a right of action upon it, so that, through 
 foreclosing the mortgage, it might be a more complete security to 
 the bondholders with such a clause than it would be without it. 
 Such was the conclusion in one case, 1 although upon each of the 
 bonds was a certificate, signed by the trustees, which stated that 
 the said series of bonds was secured by a first mortgage, which 
 contained a provision, " that the principal sum secured by said 
 mortgage shall become due in case the interest on the bonds re- 
 mains unpaid for four months." A bondholder having brought 
 a suit upon some of the bonds before their maturity, it was held 
 that he could recover only the interest remaining unpaid and rep- 
 resented by the coupons. Aside from the fact that this clause 
 was not inserted in the bonds, reliance was placed by the court 
 upon the fact that in the mortgage this clause was connected with 
 other clauses, which had reference solely to the enforcing of the 
 mortgage security, and immediately following were the words : 
 "And the lien or incumbrance hereby created, for the security 
 thereof, may be at once enforced." The inference was, that the 
 interest clause had reference solely to the enforcement of the se- 
 curity by the trustees. 
 
 91. A mortgagee who does not choose to enforce his mort- 
 gage after a default in the payment of interest cannot be 
 compelled to receive payment of the principal debt before its 
 maturity, except in pursuance of some general law enacted previ- 
 ously to the making of the mortgage, and therefore entering into 
 the substance of the mortgage contract. The State of New Jer- 
 sey provided by statute 2 that whenever a railroad company of 
 that state became insolvent, or failed for ninety days after the 
 same became due, to pay the principal or interest on any mort- 
 gage upon the property and franchises of the company, upon the 
 application of any creditor, mortgagee, or stockholder of the com- 
 pany, the chancellor might appoint a receiver, and authorize him 
 to sell the property and franchises of the company free of all in- 
 
 1 Mallory v. West Shore Hudson River 2 Laws 1870 (March 17), ch. 430. 
 R. R. Co. 35 N. Y. Superior Ct. 174. See 
 1 Jones on Mortgages, § 76. 
 
 70
 
 VARIOUS PROVISIONS OF CORPORATE MORTGAGES. [§ 92. 
 
 cumbrances, and the money arising from such sale should be paid 
 into court subject to the same liens, to be disposed of as the 
 court might direct. Prior to this statute the New Jersey West 
 Line Railroad Company executed a mortgage to trustees, to se- 
 cure certain bonds, payable in the year 1900, one of the terms of 
 the mortgage being, that if the principal or interest should not be 
 paid at the time stated, the principal sum secui'ed by the mort- 
 gage should become immediately due " at the election of the trus- 
 tees." Upon the subsequent insolvency of the company, upon 
 the application of creditors, a receiver was appointed, and he was 
 authorized to sell the property free from the lien of the mort- 
 gage. The mortgagees resisted this order of sale, and the Court 
 of Errors and Appeals 1 held that the trustees, not having exer- 
 cised their election to regard the mortgage as due and payable, 
 the property could not be sold free from this lien. The time 
 fixed for payment of a mortgage loan is a material matter, and it 
 cannot be hastened or postponed without altering the contract in 
 point of substance. The mortgagee cannot be compelled by any 
 legislative act subsequently framed to accept payment at an earlier 
 period than the mortgage provides for. 
 
 92. The word " maturity," as applied to the time of pay- 
 ment of bonds bearing semi-annual interest, was a subject of in- 
 terpretation in the case of United States v. Union Pacific Hail- 
 road Company? where the question was whether the company was 
 required to pay the interest on the bonds issued by the United 
 States in aid of the company before the maturity of the princi- 
 pal of the bonds. The bonds were issued by the United States 
 innler an act of Congress, 3 giving a statutory mortgage upon the 
 property of the company for the amount of bonds to be issued, 
 and providing that upon a failure of said company to redeem the 
 bonds in accordance with the terms of the act, the secretary of 
 the treasury might take possession of the property for the use 
 anil benefit of the United States. The act further provided that 
 "• tin- grants aforesaid are made upon condition that said company 
 shall pay said bonds at maturity; .... and all compensation 
 for services rendered for tin! government shall be applied to the 
 
 1 R indolpTi r. Middleton, 20 X. J. Eq. - 01 IT. S. 72. 
 5i'!; S. C. Middleton v. X.J. West Line s Act of July 1, 1862; 12 Stats, at Large, 
 R. K. Co. 25 X. J. Eq. 306. p. 489. 
 
 71
 
 § 92.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 payment of said bonds and interest until the whole amount is 
 fully paid." *By a subsequent act, 1 it was provided that " only 
 one half of the compensation for services rendered for the govern- 
 ment shall be required to be applied to the payment of the bonds 
 issued by the government in aid of the construction of said road." 
 The Supreme Court of the United States, 2 upon consideration of 
 the act and the purposes contemplated by it, held that it was not 
 the intention of Congress to require the company to pay the in- 
 terest before the maturity of the principal of the bonds. Mr. Jus- 
 tice Davis, delivering the opinion of the court, said : " If the lan- 
 guage used is taken in its natural and obvious sense, there can be 
 no difficulty in arriving at the meaning of the condition ' to pay 
 said bonds at maturity.' As commonly understood, the word 'ma- 
 turity,' in its application to bonds and other similar instruments, 
 refers to the time fixed for their payment, which is the termina- 
 tion of the period they have to run. The bonds in question were 
 bonds of the United States, promising to pay to the holder of them 
 one thousand dollars thirty years after date, and the interest every 
 six months. This obligation the government was required to per- 
 form ; and, as the bonds were issued and delivered to the corpora- 
 tion to be sold for the purpose of raising money to construct its 
 road, it is insisted that Congress must have meant to impose a cor- 
 responding obligation on the corporation. In support of this con- 
 struction, it is sought to give to the word ' maturity ' a double sig- 
 nification, applying it to each payment of interest as it falls due, 
 as well as to the principal. But this is extending, contrary to all 
 legal rules, the operation of words by a forced construction beyond 
 their real and ordinary meaning. Courts cannot supply omissions 
 in legislation, nor afford relief because they are supposed to exist. 
 .... The words ' to pay said bonds at maturity ' do not bear 
 the sense which is sought to be attributed to them. They evi- 
 dently imply an obligation to pay both principal and interest 
 when the time fixed for the payment of the principal has arrived, 
 but not to pay the interest as it accrues. It is one thing to be re- 
 quired to pay principal and interest when the bonds have reached 
 maturity, and a wholly different thing to be required to pay the 
 interest every six months, and the principal at the end of thirty 
 years. The obligations are so different that they cannot both 
 
 1 July 2, 1864 ; 13 Stats, at Large, 356. Co. 91 U. S. 72. See, also, United States 
 
 2 United States v. Union Pacific R. R. v. Kansas Pacific Ry. Co. 4 Dill. 367. 
 
 72
 
 VARIOUS PROVISIONS OF CORPORATE MORTGAGES. [§§ 93, 94. 
 
 grow out of the words employed ; and it is necessary to superadd 
 other words, in order to include the payment of semi-annual in- 
 terest as it falls due. Neither on principle nor authority is such 
 a plain departure from the express letter of the statute warranted, 
 especially when it leads to so great change in the condition an- 
 nexed to the grant." 
 
 93. A mortgage deed should so fully and accurately de- 
 scribe the bonds to be secured by it, that their identity may be 
 readily established. But any doubt or ambiguity arising from an 
 imperfect or erroneous description may be removed by parol evi- 
 dence. Thus, bonds of the Worcester and Somerset Railroad 
 Company of Maryland, dated on the first day of October, were 
 held to be embraced in a mortgage deed dated the twenty-fifth 
 day of the same month, inasmuch as the bonds were in other re- 
 spects clearly described in the deed, and there was nothing in the 
 terms of the deed inconsistent with the fact that they had been 
 before executed, and any uncertainty that existed on the subject 
 had been removed by evidence that no other bonds were executed 
 or issued by the company. 1 
 
 94. Power reserved in mortgage to dispose of property not 
 necessary for the use of the road. — A provision in a mortgage, 
 which by its terms covers the present property of a railroad com- 
 pany, and its future acquisitions, its rolling stock, materials, ma- 
 chinery, and all other personal property, that the company might 
 dispose of, or pledge property not used or not necessary for the 
 road, provided it should apply all the proceeds to the use and 
 benefit of the road, does not nullify the mortgage, as to those ar- 
 ticles, and withdraw the lien of the mortgage as fast as such arti- 
 cles as broken wheels, rails, or ties, or the like, are cast aside. 
 The exercise of this power is regarded as merely incidental, and 
 necessary to the possession and working of the road. 2 
 
 A provision that " nothing herein contained shall prevent the 
 said company, before default in the payment of any of the said 
 bonds, or the interest due thereon, from selling, hypothecating, or 
 Otherwise disposing of any of their said property, real or personal, 
 nut necessary in their judgment for the use of the said road, nor 
 
 » Butler »•. Rahm, 46 M<1. 541. See 1 2 Coopers«. Wolf, IS Ohio St. 523, Brink- 
 Jones on Mortgages, §§ .'!4.')-356. erhoff, C. J., and Scott, J., dissenting. 
 
 73
 
 § 95.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 from collecting and applying any money clue to the said company 
 from any source whatever, provided said application shall not be 
 to the prejudice of any holder of any of the said bonds," does not 
 render the mortgage fraudulent and invalid. However suspicious 
 such a power might be in the case of a mortgage of ordinary 
 goods, the very nature of a railroad corporation, its business, the 
 wear and tear of its iron, ties, and rolling stock, the constant 
 necessity of replacing injured or worn-out appurtenances with 
 new, forbids the inference of a fraudulent purpose. The power 
 retained is in the interest of the mortgagees as well as of other 
 creditors of the company, and of the company itself. 1 
 
 95. Reservation of power to create a prior lien. — The 
 Texas and New Orleans Railroad Company, in 1858, executed a 
 first mortgage of its property with a special reservation, that when- 
 ever the company should procure from the State of Texas a loan 
 of six thousand dollars per mile out of the school fund, and should 
 execute its bonds to the state for the same, they should constitute 
 a lien upon the property mortgaged prior and superior to the lien 
 of the above mentioned mortgage. This reservation was made 
 in pursuance of the law of 1856, which entitled the company to 
 this school fund loan, and by which it was expressly provided, 
 that the bonds given to the state should constitute a lien upon the 
 road and charter rights of the company, including the road-bed, 
 right of way, and all property owned by the company as neces- 
 sary for its business ; and that they should have a priority over 
 all other claims against the company. Early in 1861 forty miles 
 of the road remained still unfinished and the resources of the com- 
 pany were exhausted. The school fund loan for this portion of 
 the line, on which the company had relied, was essential to enable 
 it to complete the work, but the state could not advance any more 
 school fund bonds, or at least did not. In this situation of affairs 
 an act was passed 2 entitled " An act for the relief of the Texas 
 and New Orleans Railroad Company," by which it was provided, 
 among other things, that the company might issue a first mortgage 
 upon this uncompleted portion of its road to the amount of $6,000 
 per mile, which should be a prior lien to the mortgage of 1868, pro- 
 vided the company would relinquish all claims to the state loan for 
 that portion of the road. The mortgage was executed accordingly. 
 1 Butler v. Rahm, 46 Md. 541. 2 Act of Feb. 7, 1871. 
 
 74
 
 VARIOUS PROVISIONS OF CORPORATE MORTGAGES. [§ 95. 
 
 The question afterwards arose whether the mortgage of 1858 or 
 the mortgage of 1861 should have priority, the holders of the 
 bonds of 1858 contending that although the company might have 
 given such a lien to the state upon borrowing money of it, yet 
 that it had relinquished this right, and therefore that these bonds 
 and the mortgage thus became the first lien on the road and its 
 appurtenances. Mr. Justice Bradley, delivering the opinion of the 
 Circuit Court, upon this point said : * " This certainly could never 
 have been the intention of the parties, for it would have been, on 
 the part of the company, a piece of the greatest fatuity thus to 
 surrender this most valuable resource for raising the means which 
 were necessary to enable it to complete its road and works. And 
 to my mind, it is proved quite conclusively, as far as parol proof 
 and the contemporary acts of the company and all dealing with it 
 at that time can go to prove a matter of this kind, that the Act 
 of February 7, 1871, was regarded and intended as a permission 
 and authority, given by the state to the company, to substitute 
 some other lender in its place, and to subrogate its right of priority 
 to such substituted creditor. The question is, could this be done ? 
 There seems to be no doubt that the state might have advanced 
 the loan, received the company's bonds, and assigned such bonds 
 to any other party, and might thus have substituted another party 
 in its stead. The state might have proposed to A., thus: 'Ad- 
 vance this loan to the Texas and New Orleans Railroad Company 
 for us, and you shall have the company's bonds to be received 
 therefor.' No reasonable objection to such a transaction would 
 have been made by prior mortgagees or bondholders. If either 
 of these things could be done, why could not the state, in the 
 exercise of its legislative power, have substituted another party in 
 its place as lender, and authorized a subrogation of all its rights 
 of priority to such lender? No substantial rights of any other 
 persons or parties would have been thereby invaded. Acts of 
 state legislation are to be sustained, if they do not invade any 
 substantial and vested rights. If the legislature of the state, by 
 the Ad of 1861, did this, I can see no objection to the validity of 
 the transaction." Tin- bonds authorized by this legislation were 
 issued for full value to parties who received them in good faith as 
 a lust lien upon that portion of tin; road ; and the Court held 
 
 1 Campbell v. Texas & New Orleans H. K. Co. 2 Woods, 268. 
 
 7 5
 
 § 96.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 that they were entitled to stand in the place of the state and 
 have a first lien on such road. 
 
 Objection was made that the substituted bonds varied from 
 those which the state was to give under the reservation contained 
 in the first mortgage, and therefore that they could not be sub- 
 stituted, even by legislative aid, without impairing the obligation 
 of the contract between the company and the bondholders of 1858. 
 One variance relied upon in this way was, that the substituted 
 bonds were made to run for a longer time, — for fifteen years, in- 
 stead of ten years. But the court did not regard this as of the 
 essence of the contract. There was no specific mention of the 
 time of credit in the reservation made in the mortgage, though 
 the statutes providing for the issue of such bonds directed the 
 officers of the state to allow them to run for ten years. The sub- 
 stantial circumstance as between the company and the bondholders 
 under the mortgage of 1858 was, that the company had the right 
 to impose upon the road a loan of $6,000 per mile and make it a 
 lien prior to the mortgage which secured their bonds. 
 
 Another variance relied upon was, that the substituted mort- 
 gage did not require a sinking fund to be reserved for the pay- 
 ment of the bonds, as was the case with the bonds which were to 
 be given to the state. This, again, was not regarded as affecting 
 the substance of the right as between the parties. It was rather 
 a mode of providing for payment, and the company was neither 
 richer nor poorer by reason of the sinking fund. This was a mat- 
 ter of detail for the officers of the state under the act authorizing 
 the loan, but not a matter of essential concern to the bondholders. 
 
 But a variance in the rate of interest, the bonds to be given for 
 the state loan bearing six per cent, interest, whereas the bonds 
 authorized in their stead bore eight per cent, interest, imposed an 
 additional burden upon the road beyond what was stipulated for. 
 The rights of the bondholders under the first mortgage were there- 
 fore invaded to the extent of this increase in the rate of interest, 
 and as against them the rate must be reduced to six per cent. 
 
 96. The mortgage usually provides in some form for the 
 payment of taxes by the mortgagor while in possession. A pro- 
 vision in the condition of a defeasance of a mortgage given by a 
 railroad company to secure its bonds, that the mortgage shall be 
 void if the mortgagor well and truly pays the debt and interest 
 76
 
 VARIOUS PROVISIONS OF CORPORATE MORTGAGES. [§ 97. 
 
 " without any deduction, defalcation, or abatement to be made of 
 anything for or in respect of any taxes, charges, or assessments 
 whatsoever," does not oblige the company to pay an income tax 
 of five per cent, imposed by act of Congress upon the interest 
 payable upon the bonds, and which such companies " are author- 
 ized to deduct and withhold from the payments on account of 
 any interest or coupons due and payable." On the contrary, the 
 company complies with its contract when it pays the interest, less 
 five per cent., and retains the tax for the government. The pro- 
 vision has reference only to ordinary taxes imposed upon the 
 company and the property in its possession. 1 
 
 97. A provision in the bonds of a corporation for their 
 conversion into the capital stock of the company at the 
 pleasure of the holder is inseparably connected with the 
 bonds themselves, and can be availed of only by a holder of such 
 bonds, and only so long as he continues to hold them. He cannot 
 assign this right of conversion, or his right of action for a breach 
 of the stipulation for conversion, separate from the bonds. To 
 recover in an action against the company for its refusal to convert 
 the bonds, the plaintiff must aver and prove that he was at the 
 commencement of his action the holder of the bonds for the con- 
 version of which he brought suit. 2 
 
 A privilege given in bonds issued by a company that the holders 
 may convert them, at their option, within a specified time, into 
 stock of the company, cannot be so exercised that a bondholder 
 shall receive interest on his bonds and interest or dividends on the 
 stock for the same period. Neither is he entitled to new stock 
 issued to stockholders in place of dividends before he exercises 
 his option to convert his bonds. 3 He is entitled merely to stock, 
 and not to stock with dividends or interest thereon. If that were 
 his right, the longer he delayed his election the more he would 
 receive. 
 
 Under a statute authorizing railroad corporations to borrow 
 money for certain purposes and to issue bonds secured by mort- 
 gages of the corporate franchises and property, and providing 
 
 I Haight». Railroad Co. 6 Wall. 15; S. - Denny v. Cleveland & Pittsburg II. 
 C. l Abbott C. & D. Ct. K. 81. See 1 It. Co. 28 Ohio St. 108. 
 Jones on Mortgages, § 358. :: Sutliff v. Cleveland & Mahoning K. 
 
 11. (Jo. 24 Ohio St. 147. 
 77
 
 § 98.] FORM AND CONSTRUCTION OF CORPORATE MORTGAGES. 
 
 that the " directors may confer on any holder of such bonds the 
 right to convert the principal due or owing thereon into stock, 
 under such regulations as the directors may see fit to adopt," it 
 was hold in Belmont v. Erie Railway Company that the directors 
 of this corporation had the power to issue such convertible bonds, 
 although the limit of the amount of capital stock fixed by its char- 
 ter had already been reached, there being no condition imposed 
 upon the right of the directors to authorize the conversion of such 
 bonds into stock, except that the bonds be issued for the purposes 
 specifically authorized ; and this being so, it was further held that 
 the directors had power to issue stock in conversion of such bonds. 1 
 It was declared, however, that if the court were satisfied that 
 bonds were about to be issued by the directors, not for the pay- 
 ment of money actually borrowed for the purposes authorized by 
 the statutes but as a part of a fraudulent device to increase the 
 stock, the issuing of them might be restrained by injunction ; 
 and moreover, that while the bonds remained in the hands of 
 any persons affected with notice that they did not represent a 
 bond fide indebtedness, but were issued with such fraudulent 
 design, the issuing of stock in conversion of the bonds might 
 also be enjoined. 2 
 
 This decision, that a corporation may, through the instrumen- 
 tality of convertible bonds, issue stock after it has already 
 reached the limit of its powers of issuing it, is of doubtful au- 
 thority ; but it illustrates one phase of the management of a 
 great corporation, so much of whose history has been one of fraud 
 and disaster from the beginning, reflecting no honor upon the 
 great state whose courts have had so much to do in making up 
 the humiliating record. 3 
 
 98. A mortgage deed may be reformed. — A mortgage to 
 trustees for bondholders, from which words of inheritance have 
 been inadvertently omitted, will be reformed as against subse- 
 quent incumbrancers and purchasers, when it appears from the 
 deed itself, as recorded, that the nature of the trust recpuired that 
 an estate in fee should pass by the deed. The New Jersey West 
 Line Railroad Company made such a mortgage, and constructive 
 
 1 Belmont v. Erie Ry. Co. 52 Barb. 2 Belmont v. Erie Ry. Co. supra, per 
 
 (N. Y.) 637 ; on.! see Kamsey v. Erie Ry. Cardozo, J. 
 
 Co. 38 How. Pr. (N. Y.) 193, 217. 8 See "Chapters of Erie," by Charles 
 
 78 F Adams, Jr.
 
 VARIOUS PROVISIONS OF CORPORATE MORTGAGES. [§ 98. 
 
 notice of the entire instrument was afforded by the record of it. 1 
 " It was a conveyance, by way of mortgage, in trust, and the 
 estate intended to be conveyed to the trustees may be ascertained 
 from the provisions of the trust itself. If they require for their 
 execution that the trustees shall have an estate in fee, then an 
 estate in fee will be held to have passed to them. The morto-ao-e 
 provides that, in case of default for the period of six months after 
 presentation of coupons for interest and demand of payment, or 
 default for six months in payment of principal, the trustees, or 
 the survivors of them, or their successors, may sell and dispose of 
 the mortgaged premises, and make and deliver to the purchaser or 
 purchasers thereof good and sufficient deed and deeds in the law, 
 in fee simple, therefor ; and that the sale and conveyance so made 
 shall be a perpetual bar, both in law and in equity, against the 
 company, and all claiming or to claim the property under it, or its 
 successors or assigns ; and that the sale shall vest the right, title, 
 estate, interest, property, and possession of, in, and to the premises, 
 wholly and absolutely in the purchaser or purchasers. To exe- 
 cute this provision of the mortgage a fee in the trustees is neces- 
 sary, for they could not convey a fee if they themselves had only 
 a less estate. This provision is of itself evidence and notice of 
 the estate intended to be conveyed by the mortgage, that it was 
 an estate in fee. The mortgage, therefore, may be reformed, as 
 prayed in the bill, in the words of conveyance and in the haben- 
 dum clause, as against all the defendants." 
 
 1 Randolph v. N. J. West Line R. R. common as aforesaid, to the only proper 
 
 Co. 28 N. J. Eq. 49. use, benefit, and behoof of the trustees, and 
 
 The habendum of the mortgage was to the survivor of them, and tlieir successors 
 
 the trustees, as joint-tenants, and not as and assigns, as joint-tenants, and not as 
 
 tenants in common, and to the survivors tenants in common as aforesaid, forever 
 
 of them, and tlieir successors and assigns, in tiust nevertheless, &c. See 1 Jones on 
 
 as joint-tenants, and not as teuants in Mortgages, §§ 97-99. 
 
 79
 
 CHAPTER III. 
 
 PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 I. What is embraced in a mortgage of the 
 undertaking, 99-103. 
 
 II. What property passes as appurtenant 
 to the franchise, 104-108. 
 
 III. What personal property passes as fixt- 
 ures, or parts of the realty, 109-113. 
 
 IV. What is covered by a mortgage of the 
 tolls and income of a railroad, 114— 
 120. 
 
 I. What is embraced in a Mortgage of the Undertaking . 
 
 99. In England a railway mortgage usually embraces only 
 the " undertaking " of the company, and the tolls and moneys 
 arising out of the " undertaking." This is different from a mort- 
 gage of the property of the company. 1 By the term " undertak- 
 ing " is meant the railway as a completed whole by which tolls 
 and profits are earned. Various ingredients go to make up the 
 undertaking, but these ingredients, strictly speaking, are not the 
 subjects of the mortgage, but only the completed work from which 
 the earnings come. The term undertaking is the proper style, not 
 for the ingredients, but for the completed work. " It is in this 
 sense, in my opinion," said Lord Cairns, 2 "that the ' undertaking' 
 is made the subject of a mortgage. Whatever may be the liability 
 to which any of the property or effects connected with it may be 
 subjected through the legal operation and consequences of a judg- 
 ment recovered against it, the undertaking, so far as these con- 
 tracts of mortgage are concerned, is, in my opinion, made over 
 as a thing complete, or to be completed, as a going concern, with 
 internal and parliamentary powers of management not to be in- 
 terfered with, — as a fruit-bearing tree, the produce of which is 
 the fund dedicated by the contract to secure and to pay the debt. 
 The living and going concern thus created by the legislature must 
 not, under a contract pledging it as security, be destroyed, broken 
 
 1 Perkins^ v. Pritchard, 3 Railw. & Ca- 2 Gardner v. London, Chatham & Do- 
 
 nal Cases, 95; Hart v. Eastern Union Ry. ver R. Co. L. R. 2 Ch. App. 201, 217 ; 36 
 
 Co. 6 lb. 818 ; S. C. 7 Exch. 265. L. J. Ch. 323. 
 80
 
 OF THE UNDERTAKING. [§ 99. 
 
 up, or annihilated. The tolls and sums of money ejusdem generis 
 — that is to say, the earnings of the undertaking — must be made 
 available to satisfy the mortgage ; but, in my opinion, the mort- 
 gagees cannot, under their mortgages, or as mortgagees, by seizing 
 or calling on this court to seize the capital or the lands, or the 
 proceeds of sales of land, or the stock of the undertaking, either 
 prevent its completion »r reduce it into its original elements when 
 it has been completed." 
 
 The London, Chatham, and Dover Railway Company, having 
 made a mortgage of its undertaking and the tolls and profits aris- 
 ing from that, a question arose upon default in the payment of 
 the money received, whether a receiver should be appointed of the 
 rents, and of the sale proceeds of certain surplus lands. Such 
 lands in England may be acquired in one of two ways : they may 
 be lands taken by the railway company in the belief that they 
 would be required for its line, or for the stations and works con- 
 nected with it ; or they may be lands which the owner has forced 
 the company to buy, in order that he may not have a severed 
 part of a tenement or field left on his hands. In either case 
 the company is obliged to resell the land within a limited time, 
 applying the proceeds to the purposes of the company. " It is 
 obvious from this," said Lord Justice Cairns, delivering the de- 
 cision of the court, 1 " that the surplus land is in truth the rep- 
 resentative and equivalent of a certain portion of the capital 
 provided by the company for the execution of their works, which 
 has — not for the purpose of profit, but for the protection of land- 
 owners — been temporarily diverted and invested in land to be 
 again resold, and which is to return to the capital of the com- 
 pany when the object for which it has been diverted has been 
 accomplished. And as regards the interim rents, if any, of sur- 
 plus lands, they would appear to be in the same position as the 
 income arising from capital provided by the company, and tempo- 
 rarily invested in any other manner until needed. The argument 
 by which the debenture holders maintain their right to a receiver 
 of the proceeds of the surplus lands is in substance this: They say 
 they are mortgagees of the undertaking, and of the tolls and sums 
 of money arising out of it, or by virtue of the art authorizing it. ; 
 that all the land taken by the company under its parliamentary 
 powers goes, in the first instance, to form a part of the under tak- 
 
 1 Gardner v. London, Chatham & Dover By. Co. supra. 
 
 G 81
 
 § 99.] PROPERTY COVERED BY RAILROAD MORTGAGES 
 
 ing ; that as soon as any land becomes surplus land, it becomes 
 subject at the same time to the parliamentary provision for its 
 resale, but the sale moneys are in return subjected to this trust; 
 that they are to be applied for the purposes of the special act, 
 that is, for the purposes of the undertaking ; that these moneys, 
 therefore, become and form a part of the undertaking, and there- 
 fore of the security, and ought to be preserved and applied for 
 them by this court. It is necessary to observe carefully to what 
 length this argument must go. A railway is made and main- 
 tained by means of its capital, by means of its borrowed money, 
 of its land, of its proceeds of sale of surplus land, of its perma- 
 nent way, of its rolling stock. All these maj^ be said, in a sense, 
 to be connected with, to be parts of, to make up, the undertaking. 
 If a mortgage of the undertaking carries in specie the sale mon- 
 eys of surplus lands, it must equally, and on the same principle, 
 carry in specie the ordinary land of the company, the capital, the 
 permanent way, the rolling stock, na} r , even the very money itself 
 lent on the mortgage. The assignment made by the mortgage 
 debenture is immediate, and is to continue for three years at the 
 least. If the debenture holders are right in their argument, they 
 become immediate assignees in specie of all the ingredients which 
 I have enumerated as going to make up the undertaking, and 
 they might from the first have asserted their rights as mortgagees 
 by taking and impounding, not merely the proceeds of surplus 
 lands, but the capital, the cash balances, the rolling stock, and 
 even their own money advanced. Now, it is beyond question 
 that the great object which parliament has in view, when it grants 
 to a railway company its compulsory and extraordinary powers 
 over private property, is to secure in return to the public the 
 making and maintaining of a great and complete means of public 
 communication ; and yet, according to the necessary consequence 
 of the plaintiffs' argument, the moment the company borrowed 
 money on debentures it would depend on the will or caprice of 
 the debenture holder whether the railway was made at all." In 
 conclusion, it was held that the debentures did not constitute a 
 mortgage of the whole of the property and effects of the com- 
 pany, as parts of the undertaking ; and therefore that the sale 
 moneys of the surplus lands were not embraced in the mortgage. 
 The company having given a charge upon these lands to contract- 
 8-2
 
 OF THE UNDERTAKING. [§ 100. 
 
 ors to the railway, a receiver was appointed of the proceeds of 
 the sale of them in favor of the assignees of the contractors. 
 
 100. The word " undertaking," having no settled mean- 
 ing, must be construed with reference to the obvious inten- 
 tion of those who employ it. While the word does not, primd 
 facie, include the lands of the company, it does not necessarily ex- 
 clude them. As declared by Mr. Justice Coleridge, 1 " That word 
 is ambiguous, and may be construed as meaning the speculation 
 generally, or possibly it may be taken to include the land itself." 
 This point is further illustrated by the case of the New Bruns- 
 wick and Canada Railway Company. By various acts of the 
 imperial and colonial legislatures, this company was entitled to 
 grants of a large amount of land not connected with or necessary 
 for the completion of the railway. This land the company had 
 taken as a land company, with the object of making it a source 
 of profit by sale and otherwise. It issued debentures, mortgaging 
 to each holder the undertaking, and all moneys to arise from the 
 sale of lands, and all future calls, and all tolls, engines, rolling- 
 stock, and all the estate, right, title, and interest of the company 
 in the same, provided, that nothing therein contained should be 
 held to limit the power of sale or appropriation by the company 
 of any of its lands, nor constitute a charge upon them. Certain 
 judgment creditors of the company issued execution against the 
 land of the company, whereupon the debenture holders, in order 
 to protect the lands of the company, and restrain a sale of the 
 lands by the judgment creditors, instituted a suit in the Supreme 
 Court of New Brunswick, and obtained an order appointing a re- 
 ceiver. A motion for an injunction having been refused by one 
 of the judges, and upon appeal, again refused by the Supreme 
 Court of Judicature of the province, an appeal was taken to the 
 Privy Council, which affirmed the decree of the provincial court. 2 
 Lord Chelmsford, delivering the opinion, said that the proviso 
 was not inconsistent with the sweeping and general terms of the 
 debenture, but merely explanatory of them. "It semis clear to 
 their Lordships that the lands not being in terms granted by the 
 mortgage debentures, the proviso makes the intention of the par- 
 
 i Myatt v. Si. Helen'a & Runcorn Gap - Wickham v. New Brunswick & Can 
 
 Ry. Cn. -i Q. B. 864. '«'li' 1{ y- <'<>• I- !>'■ ' !'■ C. 64j 1 Cox's 
 
 Joint Siock Cas. 519. 
 
 83
 
 § 101.] PROPERTY COVERED BY RAILROAD MORTGAGES 
 
 ties perfectly clear, that no general expression used in the grant 
 was intended to comprehend them, and therefore that the debent- 
 ure holders are not entitled to interfere with the sale of the lands 
 under the execution issued by the judgment creditors. But the 
 debenture holders insist, that, if they cannot stop the sale of the 
 lands, they are entitled, under the terms of the debentures, to all 
 the moneys arising from such sale. It is quite clear, however, 
 that the sales contemplated by the grant are those which are to 
 be made by the company in the course of their regular operations. 
 The judgment creditors take what belonged to the company, but 
 do not take under them ; and a sale by the sheriff under an ex- 
 ecution is a sale by law, and not by the company. It is clear, 
 upon the whole case, that the lands of the company did not pass 
 to the mortgagees under the debentures, nor are they entitled to 
 the proceeds of the forced sales." 
 
 101. The word undertaking is frequently used in connec- 
 tion with other general words, and the effect of that word, and 
 of the others as well, is to be determined in some measure by the 
 connection ; and especially is this the case in reference to the 
 question whether the charge is upon the income merely, or as well 
 upon the property. A mortgage of " the undertaking and all the 
 real and personal estate " was held to include all the personal 
 estate then existing, but not personalty subsequently acquired. 1 
 A company whose business was to buy and sell land, to build, 
 buy, and sell houses, to furnish houses for hotels, and to carry on 
 the business of hotel-keepers, pledged " the property belonging to 
 us for the time being, during the subsistence of the debenture, 
 with all the buildings and stock on, and connected with, our said 
 property, and all the receipts and revenues to arise therefrom," 
 and declared that the entire debenture loan and interest should be 
 a first chai'ge on "our undertaking, and property, and receipts, 
 and revenues aforesaid." Upon the winding up of the company, 
 it was held that the effect of the debentures was to give the hold- 
 ers a charge, in priority to other creditors, upon the land and 
 other property of the company. 2 
 
 Whether the term undertaking constitutes a charge upon the 
 
 1 New Clydock Sheet & Bar Iron Co. 2 Marine Mansion Co. in re, L. It. 4 Eq. 
 in re, L. It. 6 Eq. 514. 601. See, also, General South American 
 
 Co. in re, 2 Ch. D. 337. 
 
 84
 
 OF THE UNDERTAKING. [§ 102. 
 
 income merely, or as well upon the property itself, depends very 
 much upon the purpose of the corporation and the nature of the 
 property involved. When the property consists of a permanent 
 railway, all parts of which are essential to the continued existence 
 and operation of the company, whose charter was granted for the 
 purpose of securing the public convenience, it is not consistent 
 with the policy of the English law to allow the property itself 
 to be mortgaged, sold, or dealt with in any way, so as to endan- 
 ger the permanent maintenance of the railway ; and, therefore, a 
 mortgage of the undertaking is construed, with reference to the 
 peculiar subject matter to be affected, to mean the income of the 
 property and not the corpus of it. 1 
 
 102. The mortgage debenture in common use in England 
 is not accompanied by any separate instrument, such as a bond 
 or note, affording a personal remedy against the corporation ; but 
 the mortgage itself usually contains a covenant for the payment 
 of the principal of the loan. Such a debenture in the usual form 
 was made by the Eastern Union Railway Company, by which it 
 assigned " the said undertaking, and all the estate, right, title, 
 and interest of the company in the same, to hold until the sum of 
 £1,000, together with interest for the same at the rate of X5 for 
 every .£100 by the year, be satisfied; the principal sum to be 
 paid on the 1st day of January, 1851." The question arose 
 whether this instrument afforded a personal remedy against the 
 company. Baron Parke, delivering the opinion of the Court of 
 Exchequer, holding that an action was maintainable upon it, 2 said 
 of this instrument : " The first part merely assigns, in considera- 
 tion of £ 1,000, the undertaking, and all the tolls and sums of 
 money arising by virtue of the act, to hold until the sum of 
 X 1,000, with £5 per cent, interest per annum, should be satisfied. 
 If the instrument had stopped there, it would have operated sim- 
 ply as a transfer (commonly, but improperly, called a mortgage) 
 of the subject matter till the sum was satisfied thereout. The 
 subject conveyed would be the tolls, certainly the unpaid calls, 
 and all that belonged to the company as the proprietors of the 
 railway, which any oik; is at liberty to use on paying tolls, but 
 not the stock or property belonging to the company as common 
 
 « Sec L. K. 5 Ch. 321, per Gilford, - Bart v. Eastern Union Ry. Co. 6 Railw. 
 
 L J & Canal ( 'a,. 818 ; S. < '■ 1 Exch. 246, 268. 
 
 85
 
 § 10o.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 carriers of passengers or goods for hire, nor, according to the case 
 of Myati v. St. Helen's? the soil of the railway itself. The rail- 
 way acts have been prepared on the model of the canal acts, in 
 which the principal object of the company is the proprietorship of 
 the canal, and the profit there arises from the use of it by the 
 public in general ; but soon after the establishment of railways, 
 it was found that the companies alone could use them beneficially, 
 by themselves monopolizing the conveyance upon tbem ; so that 
 the theory of these acts and the practice under them are entirely 
 at variance. So far, the instrument we are considering would give 
 no right of action to the plaintiffs, and would resemble Pontc.t v. 
 Basingstoke Canal Company ; 2 but in the conclusion there is a 
 stipulation that the principal is to be paid on the 1st of January, 
 1851 ; and this certainly imports a covenant by the company that 
 the same shall be repaid, unless there be something in the acts 
 to qualify or alter the meaning of that expression. The effect, 
 then, of the instrument would be to pledge the tolls and property 
 of the company as proprietors, but not their stock or property as 
 carriers ; and to impose an obligation on them to repay the prin- 
 cipal on a certain day, for the breach of which an action would lie. 
 against the company, the judgment in which action would be sat- 
 isfied out of their general property not comprised in the pledge, 
 belonging to them as carriers or otherwise." A writ of error hav- 
 ing been brought on this judgment, it was affirmed. 3 
 
 103. In England future calls on the shareholders cannot 
 be mortgaged without express legislative authority, so as to 
 preclude the company from receiving and applying them to the 
 purposes of the company. 4 Existing unpaid calls, even, will not 
 be included in a mortgage, unless there are clear words showing 
 an intention to include them ; thus, where the terms employed 
 were, " all the lands, tenements, and estates of the company, and 
 all their undertaking," it was held that calls, whether to be made 
 or whether made and remaining unpaid, were not included. 5 
 
 i 2 Q. B. 364. Brook Coal Co. in re, L. R. 10 Eq. 381 ; 
 
 2 3 Bing. N. C. 433. Companies Clauses Consolidation Act, 
 
 3 Eastern Union Ry. Co. v. Hart, 8 1845, 8 & 9 Vict. c. 16, § 43 ; Gardner v. 
 Exch. 116. London, Chatham & Dover Ry. Co., per 
 
 4 British Provident Life & Fire Ass. Cairns, L. J. L. R. 2 Ch. 201, 215. 
 Co. in re, 4 De G., J. & S. 407; Sankey 5 King v. Marshall, 33 Beav. 565. 
 
 86
 
 WHAT PASSES AS APPURTENANT TO THE FRANCHISE. [§ 104. 
 
 II. What Property passes as appurtenant to the Franchise. 
 
 104. Under a mortgage of a road, " with its corporate priv- 
 ileges and appurtenances," only such property passes as is 
 directly appurtenant to the road and is indispensably necessary 
 to the enjoyment of its franchises. Therefore such a mortgage 
 does not cover town lots adjoining the road-bed, without specific 
 mention of the lots, although purchased by the company ostensi- 
 bly for a basin to connect the road with river navigation, unless 
 as a matter of fact such lots are essential to the enjoyment of the 
 corporate franchises. 1 Upon the relation of such property to the 
 road, Mr. Justice Agnew said : " So far as the railroad was in- 
 volved, its purposes were of a public nature, — the transportation 
 of freight and passengers ; but so far as the company prosecuted 
 the coal trade, it was an object of private gain, not essential to 
 the railroad franchise, and which they might or might not prose- 
 cute at pleasure. Now, admitting that the company might, by 
 implication from the language of the charter, establish a basin, as 
 a device for the more convenient carrying on of the coal trade, 
 yet it was a work not essential to the railroad franchise involving 
 the public interests, and therefore one the company might estab- 
 lish or withdraw at their pleasure. A basin may be very conven- 
 ient to enable boats to approach a railroad and take freight from 
 its cars ; but clearly it does not belong to it, constitutes no essen- 
 tial incident, and, therefore, like warehouses, coal-yards, machine- 
 shops, &c, is an independent structure." 
 
 A mortgage of all the franchises, lands, and appointments of 
 the main line of a railroad, then owned by the company or there- 
 after to be acquired, does not include a lateral branch, or exten- 
 sion subsequently made 2 
 
 A mortgage of the main line of a railroad and its appurte- 
 nances, located in the State of Arkansas, does not cover real es- 
 tate, depot buildings, and track ways, situated in Tennessee, across 
 the state line from the terminal point of the main railroad line; 
 but such property is subject to attachment in the courts of the lat- 
 ter Btate. 8 
 
 i Sbamokin Valley It. It. Co. v. Liver- n Back v. Memphis & Little Rock It. It. 
 more, 47 Pa. St. 165. Co. 4 C. L. J. 430. See § 162. 
 
 - Randolph v. N. J. West Line It. It. 
 c». 28 N. ■(. Eq. 4'J. 
 
 si
 
 §§ 105, 106.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 105. Change of route. — A mortgage conveying the franchise 
 of a railroad company and all property to be acquired, covers the 
 road as built, although a change be made in the route from that 
 originally contemplated and described in the mortgage. The 
 purchasers at a foreclosure sale under such mortgage acquire all 
 the title to the road that the bondholders had a right to have 
 sold ; or, in other words, title to the road as constructed. 1 
 
 In Iowa, it is provided that upon a change of location or re- 
 moval of the line of road, all mortgage liens and other incum- 
 brances on the line of road which the company is authorized by 
 the court to change shall remain valid liens and incumbrances on 
 the line of road to which the change is made, and shall take 
 priority of all other liens and incumbrances upon such new line of 
 road. 2 
 
 It is also provided in Ohio that when any railroad company 
 shall, with the written consent of three fourths in interest of the 
 stockholders, change its line or any part of it, either partly or 
 wholly constructed, or the proposed termini, and shall file a copy 
 of the resolution with the secretary of state, the record of any 
 mortgage the company may have executed to secure bonds for the 
 construction of such a road, in each county through which the 
 changed line of such railroad shall pass, is as effectual to create 
 a lien upon the changed line of such railroad and upon all the 
 property of such company as if such mortgage contained a com- 
 plete description of such changed line and of such property. 3 
 
 106. "Woodland not connected with the road. — The Racine 
 and Mississippi Railroad Company made a mortgage of its road 
 and superstructure, track, and all appurtenances, made or to be 
 made, the land upon which the road had been or should be con- 
 structed, including the depots, shops, engine-houses, and other 
 constructions at the termini and along the line of the road, and 
 the land upon which the same were erected, and that which should 
 be used for depot and station purposes. The company afterwards 
 purchased a large tract of woodland, situated seven miles from 
 the road, for the purpose of supplying it with timber and fuel. 
 Upon a foreclosure of the mortgage it was insisted that this tract 
 of land was embraced in the mortgage ; but the Supreme Court 
 
 1 Elwell v. Grand St. & Newtown R. R. 2 Laws 1876J ch. 118, § 5. 
 Co. 67 Barb. 83. 3 Laws 1876, ch. 115.
 
 WHAT PASSES AS APPURTENANT TO THE FRANCHISE. [§§ 107, 108. 
 
 of Wisconsin held otherwise upon the ground that this land was 
 not included within the express terms of the mortgage. 1 
 
 A mortgage of a railroad, its property and franchises, does not 
 without special mention include land purchased under the au- 
 thority of a provision in its charter which authorized the com- 
 pany to hold such an amount of land, not exceeding five acres in 
 any one place, and improvements, at the termination and along 
 the line of the road necessary for water stations, the accommoda- 
 tion of passengers, and the shipping of goods, and for shops and 
 like purposes, if the land so purchased be not appropriated or used 
 for these purposes. 2 
 
 107. Canal boats owned by a railroad company and used by it 
 in connection with its road, but beyond the terminus of it, are not 
 included in a mortgage of the road which does not specify them, 
 except under the general description of " all other personal prop- 
 erty whatsoever in any way belonging or appertaining to the said 
 railroad." The boats might be said to be in a general way ac- 
 cessory to the business of the road, but they cannot be said to 
 belong or appertain to the road. 3 
 
 Although a corporation, in excess of the powers conferred upon 
 it by its charter, purchase and pay for steamboats and canal boats, 
 it may, when once in possession of such property, make a valid 
 mortgage of them. Neither the corporation nor any one claiming 
 under it can set up a violation of its chartered powers to defeat 
 the title of a mortgagee. On the other hand, the mortgagee hav- 
 ing sold the property under his mortgage cannot on this ground 
 excuse himself from accounting for the proceeds of the sale upon 
 the mortgage debt. 4 
 
 108. An equitable right of action may be the subject of a 
 mortgage, yet it is important that such right should he described, 
 both in the mortgage and in the advertisement of tin? sale under 
 it, so that it shall be apparent that the intention was to include 
 the right in the mortgage and the sale. The La Crosse and Mil- 
 waukee Railroad Company having mortgaged its road, afterwards 
 
 1 Dinsmorei;. Racine&Miss. It. K. Co. ■'■ Parish v. Wheeler, 22 N. Y. 494. 
 12 Wis. 649. •' Parish v. Wheeler, 22 N. V. 494 ; and 
 
 - JToungman v. Elmira & Williamsport see Bissell v. Mich. South. & North. End. 
 R. K. Co. 65 Pa. St. 278. R. R. Co. [b. 258. 
 
 89
 
 § 108.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 sold and conveyed one branch or division of it to the Milwaukee 
 and Western Railroad Company, which assumed the payment of 
 a portion of the mortgage debt, and covenanted that upon default 
 in the payment of the principal or interest of such portion the 
 former company might reenter upon the premises and foreclose 
 and sell the same. Subsequently the La Crosse and Milwaukee 
 Company executed another mortgage of its line of road from Mil- 
 waukee to La Crosse, with all the real property, rolling stock, and 
 franchises connected with the road, together with all the bonds, 
 negotiable paper, accounts, " causes of action, demands and choses 
 in action, of whatever nature," which the company might own or 
 have any interest in on the day of its first making default on the 
 bonds secured by the mortgages. Default was made under this 
 mortgage, and the property as described in the mortgage was sold 
 under a power of sale, and was bought by a trustee in behalf of 
 the bondholders. The purchaser claimed the benefit of the cov- 
 enant made by the Milwaukee and Western Company in favor of 
 the La Crosse and Milwaukee Company, and sought to enforce it 
 by suit. It was held, however, that whether a right to enforce 
 the covenant could be mortgaged by general language like that 
 contained in this mortgage or not, still such a right would not pass 
 by a sale under the power without a more definite description in 
 the notice of sale, so that purchasers might know what they were 
 purchasing. 1 Mr. Justice Cole, delivering the opinion of the court, 
 said : " A sale at auction and upon notice implies that there is 
 some designation of the thing offered to be sold, so that persons 
 whom the law invites to such auction may be able to know where 
 and what is the property they are about to purchase. In case of 
 selling a railroad, it might be sufficient to designate the property 
 sold as a railroad between given points, with its rights, privileges, 
 and franchises. But it seems to me, if choses in action and legal 
 instruments are to be sold, there ought to be some description or 
 designation of them. Otherwise such sales will be a mere idle 
 ceremony, resulting frequently in great injury to the debtor com- 
 pany, and leading to the most fraudulent speculations. If the 
 covenants in this indenture were actually sold by the trustee, and 
 he bid in reference to them, it should be so averred." 
 
 Book debts of a company may be mortgaged under a power to 
 raise money by mortgage, with or without power of sale, of any of 
 
 1 Milwaukee & Minn. Ry. Co. v. Milwaukee & Western R. R. Co. 20 Wis. 174. 
 
 90
 
 WHAT PERSONAL PROPERTY PASSES AS FIXTURES. [§§ 109, 110. 
 
 the property of the company. Such debts, whether accrued or 
 not, are property. 1 
 
 III. What Personal Property passes as Fixtures or Part of the 
 
 Realty. 
 
 109. A railroad track laid down for the permanent use of 
 the road is a fixture and a part of the realty. But a track may 
 be personal property and no part of the real estate. Whether in 
 anv case it be realty or personalty is perhaps a mixed question of 
 law and of fact, like most questions as to fixtures. A track laid, 
 for instance, for the purpose of taking gravel from gravel pits, may 
 be realty or personalty ; and in determining which it is, the purpose 
 with which it was put down is of more importance than the man- 
 ner in which it is annexed to the land. If permanent in its charac- 
 ter and use, or intended to be appropriated to the land for its use 
 and benefit, and adapted to any use or purpose to which the land 
 could be put, and if at the same time it is so laid that it cannot 
 be easily moved, it is a part of the realty and passes by a convey- 
 ance. But if the track was neither originally built upon the land 
 for the use and benefit of the land, nor in anywise adapted to the 
 uses to which the land could be put ; and if the structure be 
 not of a permanent character, but temporary, so that it could be 
 easi y moved on the ground and taken therefrom without any in- 
 jury to the land, and it was not intended by the parties who built 
 it and owned the land at the time it was built that it should be 
 appropriated to the use of the land, but simply to enable the rail- 
 road company to take the gravel from the land, the track would 
 not be a fixture or appurtenance belonging to the land, but per- 
 sonal property, which might be removed by the owner of the track 
 without incurring any liability to the owner of the land. 2 
 
 110. Material placed upon the land of a railway for use in 
 repairing the road, such as iron rails, chairs, spikes, ami ties, con- 
 stitute a part of the realty and pass by a mortgage of the road. 8 
 " Nor do wo want analogies in the well settled principles <»!' the, 
 common law to hold that materials provided and designed to be 
 attached to the road arc, for tint purposes of a mortgage or a con- 
 
 ' Bloomer v. Union Coal & Iron Co. L. N. J. 38 X. J. I- 165 ; S. C. 18 An.. Ry. 
 R. 16 Eq.383. R. ' :; 
 
 - Van Kearen v. Central R. R. Co. of :J Palmer v. Forbes, 28 til. 801, 802. 
 
 91
 
 §§ 111, 112.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 veyance, a part of the real estate itself. It is a familiar principle 
 to all, that rails hauled on to the land, designed to be laid into a 
 fence, or timber for a building, although not yet raised, but lying 
 around loose, and in no way attached to the soil, are treated as a 
 part of the realty, and pass with the land as appurtenances. By 
 applying these familiar principles of the common law, we may be 
 enabled to determine what we should consider as appurtenant to 
 the freehold, and what should pass by a conveyance of the road, 
 and consequently what is covered by and embraced within a mort- 
 gage encumberingthe road, acknowledged and recorded as a mort- 
 gage of real estate." 1 
 
 111. An iron safe not attached to the freehold is personal 
 property, and liable to be taken on execution against the com- 
 pany ; and an iron planing-machine is also personal property, 
 unless it is so connected with and attached to the realty as to 
 indicate that it is designed to be permanent, or its removal would 
 be injurious to the freehold. 2 
 
 That such property as station-houses, engine-houses, freight- 
 houses, and the workshops of a railroad company, with their ap- 
 purtenances, and also piers and wharves and their appendages, 
 when annexed to land of the company covered by a mortgage, be- 
 come part of the realty embraced in the mortgage, would be ques- 
 tioned by no one. But tools and implements in the workshops, 
 and furniture in station-houses, and all other property of a per- 
 sonal nature, such as is commonly used for other than railway 
 purposes, are not part of the realty subject to such mortgage. 3 
 
 112. Cast-off articles, such as broken wheels, broken rails, 
 broken ties, and other scrap and refuse iron, once forming a part 
 of the road, or used in its operation, and subject to a mortgage 
 of it, but which have ceased to be of any value to the company, 
 except for sale, or for recasting into new articles for the use of the 
 road, still remain subject to the lien of the mortgage, if a proper 
 management of the road required that they should be repaired, 
 recast, or exchanged for new articles. 4 " If such property is lia- 
 
 1 Chief Justice Caton in Palmer v. 3 Williamson v. N. J. Southern R. R. 
 Forbes, supra. Co. 28 N. J. Eq. 277, 284, per Runyon, 
 
 2 Titus v. Mabee, 25 111. 257. See § 141. Chancellor. 
 
 * Coopers v. Wolf, 15 Ohio St. 523. 
 
 92
 
 ' WHAT PERSONAL PROPERTY PASSES AS FIXTURES. [ [§ 113. 
 
 ble to execution," said Mr. Justice Welch, delivering the opinion 
 of the court, " where shall we draw the line between the prop- 
 erty of the mortgagees and that of the company ? When a bridge 
 breaks down, or a tunnel falls in, or when trains are thrown from 
 the track and broken, shall executions be immediately levied upon 
 the stone, the timbers, and the broken cars or engines ? Shall 
 creditors of an insolvent company line its track, and watch for 
 and seize its worn-out rails, broken wheels, fragments and scraps, 
 as fast as they come to hand ; their priority over each other de- 
 pending on their diligence in the business ? If so, it is easy to 
 see that the security of the mortgagees, which depends, ultimately 
 and almost solely, upon the ability of the road to run, and pro- 
 duce a revenue, would be seriously impaired. Besides, it would 
 be almost impracticable to mark the boundary between the rights 
 of the mortgagees and those of the judgment creditors, and the 
 result would be a scramble between creditors, continual litigation, 
 without any nearer approximation to justice and equity between 
 the parties." 
 
 113. Coal, wood, oil, and property of like description in- 
 tended for daily consumption, are personal property, and subject 
 to the rules that govern the transfer of such property. 1 
 
 In a case before the Supreme Court of Illinois, the question 
 whether fuel, office furniture, and other detached property of like 
 nature, of a railway company, was embraced within a mortgage 
 executed and recorded as a mortgage of real estate, was consid- 
 ered in all its aspects. 2 It was first determined that such prop- 
 erty could not be considered as attached to the realty, or as savor- 
 ing of it so as to pass as fixtures, or incident to it. " When it 
 became apparent," said Mr. Justice Walker, delivering the opin- 
 ion of the court, " that the exception was untenable, that it was 
 real estate, then refuge was sought under the broad mantle — 
 franchise ; and wood, coal, writing-desks, stationery, and all kinds 
 of household furniture, which could not be called real estate, and 
 must not be called chattels, and subject to the rules of law gov- 
 erning such property, were called franchise. What, then, is this 
 franchise, which it is claimed may transmute personal into real 
 estate, and change the very nature and use of things in such a 
 
 1 Palmer v. Forbes, 32 111.301,302. Sec * Hunt v. Bullock, 23 111. 820. 
 §140. 
 
 93
 
 § 113.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 manner? It is only an immunity, privilege, or exemption from 
 the ordinary burdens and restrictions to which the citizens of the 
 state or government are generally subject, and is usually granted 
 to bodies corporate or politic, for public convenience. This privi- 
 lege, or the franchise, when granted to such bodies, is found alone 
 in their charters, or the law which brings them into existence. In 
 all other things outside, and independent of their charter privi- 
 leges, they have always been held amenable to, and are governed 
 b} T , the general laws of the state, to the same extent and in the 
 same manner as individuals. The courts are powerless to extend 
 tlnir privileges beyond the grant contained in their charter, either 
 in express terms, or from necessary implication, to effectuate the 
 objects of their creation." 
 
 It was likewise urged, that railroad companies, in executing 
 mortgages or deeds of trust, are not required to conform to the 
 statute regulating chattel mortgages, in respect to property which 
 is purely personal ; that public policy requires that effect should 
 be given these instruments in despite of the statute ; but the 
 court held the statute to be as obligatory upon railroad compa- 
 nies as upon other corporations or upon individuals. " That these 
 corporations, when they mortgage their road, tracks, and fran- 
 chises, thereby mortgage all of the permanent fixtures, such as 
 the road equipments for their continued use, and connected with 
 them, we have no doubt. And by such a mortgage all future 
 additions to it, of the same permanent nature, being an incident 
 to the real estate, must become subject to the mortgage as do im- 
 provements to other real estate mortgaged by individuals. So of 
 repairs to personal property of the road legally mortgaged, and 
 not designed for daily consumption. But that fuel, office fur- 
 niture, stationery, materials for lights, and all other detached 
 property of that character is personalty, we have no hesitation in 
 determining. To hold otherwise would, it seems to us, involve 
 us in an absurdity, if followed to its inevitable consequences, that 
 we are not prepared to adopt, for the purpose of relieving against 
 what might appear to be a hardship in a particular case." 
 
 In Indiana, however, it has been held that a mortgage of a 
 railroad and its appurtenances, " with the superstructure, rails, 
 and other materials used thereon" embraces wood provided for the 
 use of the road from time to time. 1 Although such property may 
 
 1 Coe v. McBrown, 22 Ind. 252. 
 
 94
 
 OF TOLLS AND INCOME OF A RAILROAD. [§ 114. 
 
 be levied upon by a creditor of the railroad company, and the 
 mortgagee is not entitled to an injunction against the proceeding, 
 because the mortgagor's right of redemption is a leviable interest, 
 yet the purchaser at the sheriff's sale is not entitled to possession 
 of the property sold until he complies with the conditions of the 
 mortgage. 1 Practically, therefore, under this rule, there can be 
 no effectual levy upon the mortgaged property. 
 
 IV. What is covered by a Mortgage of the Tolls and Income of a 
 
 Railroad. 
 
 114. The earnings of a railroad, while it is allowed to re- 
 main in the possession of the mortgagor, are not subject to the 
 lien of the mortgage, although in terms the mortgage covers the 
 tolls of the road, if at the same time the mortgage implies that the 
 mortgagor is to hold possession and receive the earnings of the 
 road until the mortgagee takes possession. 2 Thus the Des Moines 
 Valley Railroad Company executed to trustees a mortgage of its 
 road, property, and franchises, " together with the tolls, rents, and 
 profits, to be had, gained, or levied therefrom." The mortgage 
 provided that after default continued for a certain period, the 
 trustees might enter and take possession ; but that until such time 
 the mortgagor should have the sole right of possession, use, and 
 management of the mortgaged premises. The mortgagees subse- 
 quently commenced a suit to foreclose the mortgage, but did not 
 take possession of the property or ask for the appointment of a, 
 receiver in the suit, rending the suit a creditor of the company 
 obtained judgment against it, and attached as garnishee an agent 
 of the company who had money belonging to it received from the 
 sale of passenger tickets and for freight charges. A receiver was 
 subsequently appointed in behalf of the mortgagees, who also 
 claimed tin- funds attached in the hands of the agent and received 
 by him before the appointment of the receiver. The Supremo 
 Court of the United States adjudged that the mortgagees had no 
 right to the earnings of the road until they took possession through 
 the receiver. 8 "Possession," said Mr. Justice Swayne, delivering 
 the opinion of the court, "draws after it the right to receive and 
 apply the income. Without this the road could not be operated, 
 
 1 (',,,■ >,v. McBrown, supra. '■'■ Gilman y. Illinois & Miss. Telegruph 
 
 - Merchants' Bank <•. Petersburg R. K. Co. 91 U. S. 60S. 
 ■2\ Pittsburg I.. -I. 192. 
 
 95
 
 § 114.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 and no profits could be made. Mere possession would have been 
 useless to all concerned. The right to apply enough of the income 
 to operate the road will not be questioned. The amount to be so 
 applied was within the discretion of the company. The same dis- 
 cretion extended to the surplus. It was for the company to de- 
 cide what should be done with it. In this condition of things the 
 whole fund belonged to the company, and was subject to its con- 
 trol. It was, therefore, liable to the creditors of the company as 
 if the mortgages did not exist. They in no wise affected it. If 
 the mortgagees were not satisfied, they had the remedy in their 
 own hands, and could at any moment invoke the aid of the law, 
 or interpose themselves without it." 
 
 The same question had previously been passed upon by the Su- 
 preme Court of the United States in the case of G-alveston R. R. 
 Co. v. Cowdrey. 1 The mortgages conveyed the road and other cor- 
 porate property, and all tolls, issues, and profits, whenever default 
 should be made in paying the bonds ; but they provided that so 
 long as no default was made in payment of principal or interest, 
 the property should remain in the company's possession ; but if it 
 should be in default for the space of three months in payment of 
 either, and on request in writing by any holder of the bonds, the 
 trustees might take actual possession of the road, and, after notice, 
 sell the same. The trustees claimed that they were entitled under 
 the mortgage to the tolls and income received by the purchasers 
 of the road during the time it was operated b}' them after default 
 and before possession was taken under the mortgage ; but the 
 court were of opinion that the clause of the mortgage providing 
 for the taking of possession under it pointed out the manner in 
 which the pledge of the tolls and income was to be practically car- 
 ried into effect ; and they held that at any rate until a regular 
 demand for the tolls and income was made, the purchasers in 
 possession of the road were not accountable for them. 
 
 Again, in a still more recent case, the Supreme Court of the 
 United States has reiterated its decision that a pledge of rents 
 and profits can be made available to the mortgagee only upon his 
 taking possession himself or having a receiver appointed and put 
 in possession. 2 The mortgage in this case included, besides the 
 
 1 11 Wall. 459. proving Galveston R. R. Co. v. Cowdrey, 
 
 2 American Bridge Co. v. Heidelbach, 11 Wall. 459; Gilmanv. Illinois Telegraph 
 94 U. S. 79S ; 4 C. L. J. 3G7, citing and ap- Co. 91 U. S. 603. 
 
 96
 
 OF TOLLS AND INCOME OF A RAILROAD. [§ 115. 
 
 bridge, " the rents, issues, and profits of said bridge, as far as the 
 same are not required to pay the necessary expenses of keeping 
 in repair and operating said bridge, which rents, issues, and profits 
 .... are hereby pledged to the payment of said interest as it 
 matures." It was further provided that after default for a certain 
 period the mortgage trustees might take possession. A judgment 
 creditor of the bridge company claimed priority of payment out of 
 money in its possession, and out of rents due to it from a railroad 
 company, while the mortgage trustees sought to have these funds 
 applied upon the mortgage ; but the court held that inasmuch as 
 the trustees had not taken possession they were no more entitled 
 to these funds than they would be to property that was never 
 within the scope of the mortgage. Of course, after the trustees 
 under such a mortgage have taken possession, the earnings belong 
 to them and are no longer subject to garnishment. 1 
 
 Under such a mortgage, also, it seems that after specific income 
 of a road has been set apart by the corporation for the payment 
 of interest on its bonds and as a sinking fund for their redemption, 
 by agreement with the mortgagees, although in advance of the 
 earnings of the money, it is not subject to attachment by a cred- 
 itor of the corporation. Such income is in that case specifically 
 pledged to the use of the bondholders, and becomes theirs as soon 
 as it is earned. 2 
 
 115. The earnings of a railroad company, before foreclos- 
 ure or possession taken by the trustee, are liable to garnish- 
 ment, although included in a previous mortgage, where this pro- 
 vides that until default the company may possess and use the 
 road, and receive the rents and profits arising from it. 3 Thus 
 the Mississippi Valley and Western Railway Company conveyed 4 
 its "rights, powers, franchises, emoluments, income, and prop- 
 erty," to trustees by a mortgage, which provided that after a de- 
 fault continued for six months it should be the duty of the trus- 
 tees, upon request of a certain portion of the bondholders, " to 
 
 1 Galena & Chicago Union R. R. Co. v. 341; 53 Me. 308 ; Noycs v. Rich, 52 Mo. 
 
 Menzies, 26 111. 121. 1 15, overruling Woodman v. York & Cum- 
 
 - Galena & Chicago Union R. R Co. y. berland K. R. Co. 15 Me. 207 j Merchants' 
 
 Menzies, supra. Bankv. Petersburg R. 1!. 34 Leg. int. 240. 
 
 :; Smith v. I astern I!. I!. Co. 124 Mn^. ' Mississippi Valley >.< Western Ry. Co. 
 
 154; Ellis >. Boston, Hartford & Erie R. v. Q. S. Express Co.81 [11.534. 
 R. I o. 107 Mass. l ; Hath v. Miller, 51 Me. 
 
 7 97
 
 § 115.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 enter, forthwith, upon the railroad property," and to use and 
 operate it until all over-due coupons should be paid, or until the 
 road and its property should be sold pursuant to the power in 
 the mortgages or under a decree of court ; but until default the 
 company is to possess and use the road and property, and receive 
 the rents, profits, and income arising therefrom. Earnings of the 
 company in the hands of the United States Express Company 
 were attached by garnishee process, whereupon the mortgage 
 trustees interpleaded, claiming the amount due from the express 
 com pan v as belonging to them under the mortgage. The court, 
 however, was unable to discover an intention to vest a right to the 
 income in the trustees, until default in the condition and posses- 
 sion taken by the trustees. While it is the duty of the railroad 
 company to apply the income, after payment of current expenses, 
 including necessary repairs and improvements, to the liquidation 
 of the interest due upon its bonds, " this obligation, of its own 
 force, no more carries title to the particular money received as 
 income to the bondholders or trustees, than does the obligation 
 to pay a debt, in ordinary cases, carry title to the creditors of 
 the money in the debtor's pocket. The fact that the mortgagor 
 is in possession, operating the road, renders it indispensable that 
 he shall pay current expenses, and necessary repairs and im- 
 provements, and that he shall exercise his judgment and discre- 
 tion as to the extent repairs and improvements shall be made ; 
 and this can only be paid out of the income. It is inconsistent 
 with such control over the income that it shall be the property 
 of the trustees." 
 
 The views of the court in this case were grounded upon the 
 common law rule that the mortgagor is not required to account to 
 the mortgagee for rents and profits while he remains in posses- 
 sion. 1 The railroad company was incorporated by acts of the leg- 
 islatures of the States of Iowa and Missouri, and its road was lo- 
 cated in those states, although its cars were also run over the 
 bridge which crosses the Mississippi River at Quincy, and into the 
 State of Illinois. It was insisted, therefore, that comity required 
 that the court should follow the construction of this question 
 given by the Supreme Court of Iowa, which had decided that the 
 income of a railroad under such a mortgage belongs to the trus- 
 tees, and could not be reached by process of garnishment at the 
 1 Jones on Mortgages § 670; Moore v. Titraan, 44 111.367, 371. 
 
 98
 
 OF TOLLS AND INCOME OF A RAILROAD. [§ 116. 
 
 instance of creditors. 1 But the court of Illinois declined to fol- 
 low the ruling in Iowa, on the ground that comity in no case re- 
 quired that court to follow other than what it regarded as the 
 clearly established law of the foreign jurisdiction, with reference 
 to the contract to be affected by it. Here the contract was af- 
 fected by the laws of two foreign jurisdictions. Neither is supe- 
 rior to the other. While the law of Iowa was known to the court, 
 that of Missouri was not ; therefore the case was regarded as one 
 in which the obligations of inter-state comit} r , in the application 
 of the law, cannot be appealed to, and the court must follow that 
 construction which it believes to be authorized by law. 2 
 
 116. At law a railroad mortgage cannot be made to operate 
 upon the future earnings of the road as against attaching cred- 
 itors of the company. The European and North American Rail- 
 way Company executed a mortgage of " all its right, title, and in- 
 terest in and to all and singular its property real and personal, of 
 whatever nature and description, now possessed, or to be hereafter 
 acquired, including all its rights, privileges, franchises, and ease- 
 ments." Subsequently it entered into a contract with the East- 
 ern Express Company to carry their freight for five years at a 
 stipulated price, to be paid in monthly instalments. Upon the 
 first day of November, 1875, the express company became in- 
 debted to the railroad company for a month's service under the 
 contract. On that day the express company was summoned as 
 trustee of the railroad company. The trustee under the mort- 
 gage took formal possession of the road on the twenty-seventh day 
 of October preceding, for condition broken. He claimed the 
 monthly payment in the hands of the express company, as cov- 
 ered by the mortgage. The Supreme Court of Maine 3 decided 
 against this claim. They regarded the contest as one where legal 
 and not equitable rules are to prevail, the action being at law. 
 Tin' contract with the express company did not exist at the time 
 of the mortgage, even if this could be held to include it under 
 the general terms of the description. At law, therefore, the con- 
 tract was not assigned by the mortgage. Neither does it come 
 within any of the modifications of the common law principle that 
 
 1 Dunham v [sett, 15 Iowa, 284. z Emerson v. European & N. A. Rjr. Co. 
 
 2 Mississippi Valley & Western Ry. Co. 07 Me. 387. 
 v. U. S. Express Co. 81 111. 534. 
 
 99
 
 § 117.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 a conveyance cannot be made of what does not at the time exist. 
 Such a contract is not accessory to the road or its franchise, or 
 any of its property. Moreover, even in equity an assignment of 
 claims not then existing, to be upheld, must be of such claims as 
 both parties expected would exist. In conclusion, the court say 
 that the portion of the fund earned before the trustee took pos- 
 session cannot be regarded as any part of the property mort- 
 gaged, but rather the earnings derived from the use of such 
 property by the mortgagor in possession. The trustee is entitled 
 to the earnings of the road from the time he took possession, and 
 therefore the monthly payment should be apportioned, and the 
 trustee charged for^the part earned at the time the trustee took 
 possession. 
 
 117. Only the net income of the road, after the payment of 
 all expenses, so long as the mortgagors remain in possession, is 
 covered by a mortgage of all the tools, income, rents, issues, and 
 profits of a railroad, which also provides that upon default the 
 mortgagees may take possession, work the road, and apply the 
 net income to the payment of the debt, but that until default the 
 mortgagors shall remain in possession. Therefore, the railroad 
 company, while in the possession and management of the road, 
 may contract for such articles as enter into the expense of main- 
 taining and operating the road, and a creditor furnishing such ar- 
 ticles may attach, by trustee or garnishee process, tolls due to the 
 mortgagors from another corporation. 1 
 
 A mortgage made by the Virginia and Tennessee Railroad 
 Company conveyed its property in esse, and all it might after- 
 wards acquire, with all tolls, issues, and income, and provided that 
 the company might remain in possession until default, and should 
 have the right to apply any of the money or personal property 
 of the company to the construction or repair of the road or to its 
 current expenses, or the payment of debts ; and moreover should 
 have the right, after deducting from the net profits an amount suf- 
 ficient to pay the interest on its bonds, and to lay aside a sinking 
 fund of one per cent, upon the amount of the bonds, to distribute 
 the balance in dividends ; and further, that in case of default, the 
 trustees should take possession of the road and use the same ac- 
 cording to the rules and regulations and lawful directions of the 
 
 ' Parkhurst v. Northern Central R. R. Co. 19 Md. 472. 
 100
 
 OF TOLLS AND INCOME OF A RAILROAD. [§ 118. 
 
 president and directors. Before default a creditor, whose debt 
 was properly chargeable to the expense account, attached tolls 
 belonging to the road. The Supreme Court of Tennessee held 
 that inasmuch as the creditor had attached the tolls before they 
 came to the hands of the trustees, and before any default had oc- 
 curred in the payment of the bonds or interest, and while the 
 road remained in the hands of the company, he acquired a lien 
 superior to that of the mortgage. 1 The receipts of the road were 
 not regarded as coming under the mortgage lien until the net 
 profits had been ascertained. " This, we think, is the plain mean- 
 ing of the stipulations of the deed. To construe the deed as in- 
 tending to fasten the lien of the mortgage on the gross earnings, 
 would result in depriving the company of appropriating them to 
 the current expenses of the road, and effecting the objects and 
 purposes of the deed itself. The mortgagees look to the net earn- 
 ings of the road for the payment of their interest and their bonds. 
 They agree that the company shall operate the road, in order 
 that net profits maybe produced. To enable them to do this, 
 they leave in the hands of the company the gross earnings, to be 
 used in meeting current expenses and debts." 
 
 So long as mortgage trustees or the bondholders omit to take 
 possession of the mortgaged property after a default, they cannot 
 complain that the income of the road is applied to completing and 
 operating the road, and to the payment of floating debts. 2 
 
 118. Money in the hands of the treasurer of a railroad com- 
 pany at the time possession is taken, under a mortgage cover- 
 ing its property and earnings, belongs to the corporation and not 
 to the trustees, in case the mortgage provides that until default 
 the company may retain possession; and if the trustees take pos- 
 session of this money, inasmuch as it is not subject to the lien of 
 the mortgage, it is subject to garnishment at the suit of judgment 
 creditors of the company. The mortgage of the St. Paul and 
 Pacific Railroad Company covered the road and franchises, and 
 ik the tolls, incomes, rents, issues, and profits." It provided that 
 until default in payment of the principal and interest of the bonds 
 secured, the company was to operate the road and use the rents 
 and profits as if the mortgages had not been made ; but that in 
 
 1 Clay r. Ea I Tennessee & 7a. R. It. 2 Williamson v. New Albany, &c.R K 
 Co. C Heisk. (Term.) 121. Co. 1 Uiss. 198. 
 
 101
 
 § 118.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 case of default, the trustees might enter into possession, collect 
 and receive all tolls and freights, and operate the road for the 
 benefit of the bondholders. When the trustees under the mort- 
 gage took possession of the road, they also took possession of a 
 considerable sum of money then in the treasurer's hands; and 
 soon afterwards were summoned in a garnishee process by judg- 
 ment creditors of the company, who claimed that the funds were 
 subject to their judgment debt. This money or debt, said the 
 court, was the subject of garnishment, unless the trustees had 
 the right to take and hold it by virtue of some lien created by 
 the mortgagees. Whenever, by the terms of a mortgage upon 
 this kind of property, either expressly or by implication, the right 
 is reserved to a company mortgagor, who is the general owner, to 
 retain the possession and use of the mortgaged property, by oper- 
 ating the road, receiving the earnings, and applying them in 
 its discretion towards defraying the operating expenses, such 
 mortgagor must be regarded as the owner of all such earnings 
 acquired by the continuance of its possession, and as invested 
 with the absolute right of disposal as fully as any general owner 
 of property enjoys. This right is wholly inconsistent with the 
 exercise of any specific lien under the mortgage in favor of the 
 mortgage trustees. 1 
 
 A similar decision has been made by the Supreme Court of 
 Tennessee, which in a recent case held that under a mortgage, 
 covering the income of a railroad, the earnings of the road in the 
 hands of the treasurer are not subject to attachment when this is 
 made subsequently to the registration of the trust deed. 2 
 
 Money in the hands of a station agent of a railroad company, 
 received for tickets sold and freight collected, cannot be attached 
 in his hands by trustee process in a suit against the company by 
 a creditor. Such an agent is considered as the corporation itself 
 in such business. There may be a limit to the application of this 
 principle. There may be an agent of such a corporation who is 
 not invested with its personalty. But all regular agents doing 
 the business for which the corporation was organized must be 
 considered as identical with the corporation, and their possession 
 
 i De Graff v. St. Paul & Pacific R. R. J. 192 ; 5 Cent. L. J. 74 ; Sprague v. Steam 
 
 Co. in Supreme Court of Minn. April, Navigat. Co. 52 Me. 592. 
 
 1878 ; 5 Reporter, 561 ; and see Merchants' 2 Buck v. Memphis & Little Rock R. R. 
 
 Bank v. Petersburg R. R. 24 Pittsburg L. Co. March T. 1877, 4 C. L. J. 430. 
 102
 
 OF TOLLS AND INCOME OF A RAILROAD. [§ 119. 
 
 as the possession of the company. 1 Therefore they cannot be 
 held as its trustees. 
 
 Funds in the hands of the treasurer of a railroad company at 
 the time of its making a trust mortgage of all its property, and 
 embraced in the mortgage, cannot be held by creditors by means 
 of a trustee process, although the mortgage trustees have per- 
 mitted the company to use and manage the road and its other 
 property. 2 
 
 119. A mortgage of the tolls and income of a railroad has, 
 however, been enforced against the mortgagor for the income 
 received by him while in possession, under a mortgage quite 
 similar in terms to those already mentioned. 3 In 1848 the legis- 
 lature of Indiana chartered a company to make a railroad from 
 Richmond to New Castle in that state, a distance of twenty- 
 seven miles. In 1851 the charter was amended so as to enable 
 the company to extend its road, and to borrow money on a mort- 
 gage of its "road, income, and other property." In 1852 the 
 company issued its bonds to the amount of $300,000, payable in 
 fifteen years, and secured them by a mortgage of " all the present 
 and future to be acquired property of the said The New Castle 
 and Richmond Railway Company ; that is to say, the first sec- 
 tion of their road from Richmond to New Castle as aforesaid, 
 with the superstructure, and all rails and other materials used 
 therein, and all rights therein, tolls, and income, and any rights 
 thereto or interest therein, together with the tolls or income to be 
 had or levied therefrom, and all franchises, rights, and privileges 
 of the said The New Castle and Richmond Railroad Company 
 of, in, to, or concerning the same." 4 The mortgage provided 
 that the trustees named in the deed, upon default of the company 
 to pay either interest or principal of the bonds, might enter and 
 take possession of the mortgaged property, and use the same, and 
 
 1 Pettintrill v. Androscoggin R. R. Co. 2 lb. 390. From the facts of the case as 
 
 51 Me. 370; Fowler v. Pittsburgh, Fort they appear in these reports, it seems that 
 Wayne & Chicago R. R. Co. 35 Pa. St. 22. the decision is not in accordance with gen- 
 
 2 Woodman v. York & Cumberland R. eral principles <>r general authorities. 
 
 R. Co. 4") Me. 207; and see Noyes v. Rich, 4 Pullan v. Cincinnati & Chicago Air 
 
 52 Me. 115. Line R. B. Co. 4 Hiss. 35. "Suchis the 
 • Pullan v.Cincinnati & Chicago Air Line verbose language of the deed," per Me- 
 lt, i: f,,. r, Bias. 2.",:. See, also, 8. C. i [b. Donald, J. 
 
 85, and Rill /■. New Albany, &c. Rv. Co. 
 
 in:;
 
 § 119.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 apply the proceeds of such use to the payment of the principal 
 and interest of the bonds ; and that, if it should become necessary, 
 the trustees might sell the mortgaged property at auction, and 
 apply the proceeds to the payment of the principal and interest. 
 Other mortgages were afterwards made of the whole line of road 
 from Logansport to Richmond, a distance of one hundred and 
 eight miles ; and under one of these mortgages the property was 
 sold, subject to the above mortgage, and was purchased by the 
 Cincinnati and Chicago Air Line Railroad Company, which took 
 possession of the road on the first day of July, 1860. In 1804 a 
 bill was filed in the Circuit Court of the United States to foreclose 
 the mortgage of 1852, upon which neither principal nor interest 
 had been paid. Litigation upon this bill was continued until 
 1873, when the case was finally disposed of. 1 During this long 
 period much had occurred in the progress of the case ; many 
 orders had been made by the court ; and, among others, an inter- 
 locutory decree by Mr. Justice Davis in 1869, which found that 
 the mortgage of 1852 covered the railroad and its revenues be- 
 tween Richmond and New Castle, but not the road or income of 
 any other part of the road ; and that it covered a ratable portion 
 of the rolling stock, or one fourth part of it, that being the rela- 
 tive length of this portion of the road to the length of the whole 
 line of road. 
 
 One of the principal questions to be determined upon final hear- 
 ing was whether the mortgage covered the income which had in 
 the mean time been secured from this section of the road. The 
 interlocutory oi-der of Judge Davis declared the plaintiff entitled 
 to the income from the date of the filing of the bill in 1864. It 
 does not appear why that date was fixed upon, unless it was con- 
 sidered that the filing of the bill was a demand for the earnings. 
 In 1872, however, the master was authorized to take an account 
 of the earnings of the road from the first day of July, 1860, when 
 the defendant company took possession of the road ; and he found 
 that from that date up to the beginning of the suit the income 
 amounted to $95,344.08, and the questions of the right to the in- 
 come and of the time for which it should be taken became of im- 
 portance. The court held that the mortgagee was entitled to the 
 income from the time the defendant took possession of the road ; 
 that notwithstanding the general rule that the mortgagor, until 
 1 Pulian v. Cincinnati & Chicago Air Line R. R. Co. 5 Biss. 287. 
 
 104
 
 OF TOLLS AND INCOME OF A RAILROAD. [§ 119. 
 
 some action by the mortgagee, is entitled to the earnings and 
 profits of the mortgaged property, it is competent for the parties 
 to agree in the mortgage that such earnings and profits shall be 
 subject to the lien, and that under such agreement the income, 
 •when received, is held by the party receiving it in trust for the 
 morto-ao-ee. It was claimed by the defence that the defendant 
 company would certainly not be chargeable with any income after 
 it had offered in open court to deliver up and surrender to the 
 plaintiff the property covered by the mortgage. To this the court 
 replied, that the mortgage took effect upon the income, when 
 earned ; and as long as the mortgagor or its assignee operated 
 the road and earned income, the responsibility growing out of 
 these facts could not be avoided. The court further suggested, 
 but did not decide, that although the mortgage in this case cov- 
 ered only the section between Richmond and New Castle, as it 
 included the income of this section, and the company in possession 
 operated the whole road as an entirety and kept no separate ac- 
 counts of that section, its whole property and interest in the road 
 might be equitably bound for any decree for such income that 
 might be rendered against it. 
 
 In Iowa it has also been held that it is competent for a railroad 
 company to mortgage its future net earnings, although the road 
 be not in esse at the time of the execution of the mortgage ; and 
 when such earnings have accrued a creditor cannot intercept them 
 in the hands of the servants of the company. 1 
 
 The Mississippi and Missouri River Railroad Company, incor- 
 porated under the laws of Iowa, executed a mortgage of its road 
 and property, together with " all the tolls, incomes, issues, and 
 profits to be had from the same." The mortgage provided that 
 " all of the rights of the bondholders or trustees are subject to 
 the possession, control, and management of the directors of said 
 company until default." The earnings of the road subsequently 
 proved insuflG dent to pay the ordinary operating expenses and 
 tli- interest on the bonds. A judgment creditor of the company 
 attempted to reach and apply to the payment of his demand 
 credits of the company for freight and other earnings in the hands 
 of several persons. The Supreme Court of Iowa held, however, 
 that the revenues of the company were not subject to attachment 
 or execution, and that a creditor attempting so to apply them 
 
 1 Jcssiip v. Bridge, 11 Iowa, 572 ; Dunham V. Isett, 15 Iowa, 284. 
 
 1 05
 
 § 120.] PROPERTY COVERED BY RAILROAD MORTGAGES. 
 
 might properly be restrained by injunction on application to a 
 court of equity. 1 This case contains no discussion of the question, 
 and the authority cited, Galena £ Chicago R. R. Co. v. Menzies? 
 is not applicable, because the moneys sought to be held in that 
 case were earned after the mortgagees took possession of the road. 
 
 120. In estimating the earnings of a section of a road cov- 
 ered by a mortgage, the master may make a pro rata esti- 
 mate of the earnings and expenses of the whole road, when 
 such section has not been operated separately, but as a part of 
 the whole road, and no separate accounts have been kept of that 
 part. Under such circumstances the master could not probably 
 adopt any other rule, and although the result is not an accurate 
 one, it is the best that could be reached. A railroad company, 
 after neglecting to keep separate accounts for such section, cannot 
 be heard to complain of the adoption of this rule. 3 
 
 1 Dunham v. Isett, 15 Iowa, 284. for methods of estimating the net earn- 
 
 2 26 111. 121. in^s of a section of a road, the rental value 
 8 Pullan v. Cincinnati & Chicago Air of rolling stock, and the like. 
 
 Line R. R. Co. 5 Biss. 237. See this case 
 
 106
 
 CHAPTER IV. 
 
 MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 I. Principles upon which after-acquired 
 property may be charged, 121-127. 
 
 II. What terms are sufficient to include 
 after-acquired property, 128-141. 
 
 III. Mortgages attach to after-acquired 
 property subject to lien upon it when 
 acquired, 142-145. 
 
 I. Principles upon which after-acquired Property may be 
 
 charged. 
 
 121. After-acquired property at law. — " It is a common 
 learning in the law," says Perkins, 1 "that a man cannot grant 
 or charge that which he hath not.' 1 Qui non hahet, Me non 
 dat. Yet even at law this rule is not without some qualifications. 
 Many instances of accessions and increase of property passing 
 with a grant are given in the old books. Then, coming to the 
 doctrine of fixtures, there is no doubt entertained as to the prop- 
 osition, that at law a mortgage of land will pass all structures 
 and things attached to it in the nature of fixtures that may be 
 placed upon it by the mortgagor. But according to the doctrine 
 of some cases, it is not necessary to maintain that the rolling stock 
 and equipments of a railroad are parts of its accretions and fixt- 
 ures, so as to make the transfer good at law. Such a mortgage, 
 whether good at law or not, is held good in equity. 
 
 At law, an agreement to create a lien, either upon property in 
 possession at the time or upon that which may be acquired after- 
 wards, must have reference to specific property, which must be 
 definitely and intelligibly pointed out. But this description may 
 be made in general terms. A mortgage of all lands which the 
 mortgagor might afterwards acquire would create no specific lien 
 upon any land ; but would be merely an executory contract bind- 
 ing upon the mortgagor personally. 2 
 
 122. In equity it is common learning that a covenant for a val- 
 1 A Profitable Book, tit. Grants, § 05. '-' See Winslow v. Merchants' [ns. <'<>. i 
 
 Met. (Mass.) .■!()('., .'Hf,, per Shaw, <\ .1 
 
 107
 
 § 122.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 uable consideration to convey particular lands is deemed a spe- 
 cific lien upon those hinds, which will be enforced against the 
 covenantor and all persons claiming under him, except purchasers 
 for value, without notice of such covenant. 1 Equity considers that 
 done which one has distinctly agreed to do, and is in conscience 
 bound to do. Equity, therefore, treats a mortgage of things not 
 in esse as a contract which attaches itself to the things when 
 they come into being, and enforces it. Upon the principle, that 
 upon every acquisition of property within the description con- 
 tained in the mortgage a chancellor would decree the mortgagor 
 to execute a mortgage of such subject, it will be considered as 
 though it had been done, and that of every article of property as 
 acquired, there was an actual mortgage then executed. 2 That a 
 contract by way of mortgage intended by the parties to create 
 a positive lien or charge either upon real or personal property, 
 whether owned by the mortgagor or not, or, if personal property, 
 whether it is then in being or not, attaches in equity as a lien 
 or charge upon the particular property as soon as the mortgagor 
 acquires title thereto, is a proposition that is almost universally 
 supported by recent authorities, both English and American. 3 A 
 conveyance of what does not exist does not operate as a present 
 transfer in equity any more than it does at law. The difference 
 is merely that at law the conveyance, having nothing to operate 
 upon, is void ; while in equity what is in form a conveyance oper- 
 ates, by way of present contract, to take effect and attach to the 
 subject of it as soon as it comes into being ; the agreement to 
 convey then ripens into an actual transfer. 4 
 
 A mortgage of after-acquired property, being a specific lien, 
 and good in equity, is preferred to a subsequent legal lien by 
 judgment or mortgage. 5 
 
 1 Fonblanque, b. 1. eh. 5, § 8 ; Frc- Dist. of Mass. 1876, 14 Nl. Bank Reg. 
 moult v. Dedire, 1 P. Wms. 429. 469 ; Dillon v. Barnard, 1 Holmes, 386, 
 
 2 Per .Mr. Justice Sharswood, Philadel- 394 ; Williamson v. N. J. Southern R. R. 
 phia, Wil. & Bait. R. R. Co. v. Woelpper, Co. 29 N. J. Eq. 31 1 ; S. C. 15 Am. Railw. 
 64 Pa. St. 366 ; Covey f. Pittsburg, Fort R, 572; Butler v. Rahm, 46 Md. 541; 
 Wayne & Chicago R. R. Co. 3 Phila. Cook v. Corthell, 11 R. I. 482, dissenting 
 (Pa.) 173, per Agnew, P. J. opinion ; Morrill v. Noyes, 56 Me. 458. 
 
 3 Holroyd v. Marshall, 10 H. L. 191 ; 4 Emerson v. European & N. A. Ry. 
 Pennoek v. Coe, 23 How. 117; Mit- Co. 67 Me. 387. 
 
 chell v. Winslow, 2 Story, 630, 644; 5 Stevens v. Watson, 4 Abb. (N. Y.) 
 Brett v. Carter, 2 Lowell, 458; Barnard v. App. Dec. 302; and see D wight v. New- 
 Norwich & Worcester R. R. Co., C. C. for ell, 3 N. Y. 185. 
 108
 
 CHARGING AFTER-ACQUIRED PROPERTY. [§ 123. 
 
 In Louisiana, a mortgage does not extend to property acquired 
 after the date of it. 1 The Civil Code provides that future prop- 
 erty cannot be the subject of a conventional mortgage. 2 
 
 123. A railroad company having authority to mortgage its 
 corporate property and franchise may include in the mort- 
 gage after-acquired property, 3 without exceeding the limits of 
 its power. " To build a railroad requires a vast capital beyond 
 ordinary means, and to borrow it, ' to carry into effect the objects 
 of the corporation,' demands all the security within the possible 
 power of the corporation to give. By necessity and practice, the 
 money of the creditor capitalist finishes and equips the road ; and 
 slender indeed would his security be which extends not beyond 
 the worn-out rails and rolling stock and equipment first in use, 
 and these, indeed, not often in being at the time of the execution 
 of the mortgage. In giving the power to borrow and pledge, it 
 must be supposed the power was given to its fullest extent in 
 order to carry into effect the objects of the incorporation." 4 
 
 A company empowered to borrow money on the security of its 
 property and income is authorized to mortgage every species of 
 property necessary to the operating of the road, whether then 
 owned by it or afterwards acquired. 5 
 
 The Philadelphia and Baltimore Central Railroad Company, in 
 pursuance of authority given by charter, executed a mortgage to 
 trustees of all their corporate property and franchises then held or 
 thereafter to be acquired, to secure their bonds, not exceeding 
 81,o00,000 in amount. The mortgage also provided a mode by 
 which the whole mortgaged property might be sold together by 
 the trustees, at the request of bondholders, to the amount of 
 $100,000. The Philadelphia, Wilmington, and Baltimore Kail- 
 road Company, in a suit upon bonds secured by this mortgage, 
 recovered judgment for $122,942.11 against the mortgagors; 
 and an execution was issued which was levied upon four locomo- 
 tive engines, a number of cars, shop and quarry tools, cross-ties, 
 iron rails, and furniture at stations. Woelpper was the holder 
 
 i State '•. New Orleans & Nashville R. 4 Per Agnew, P. J., in Covey v. l'ins- 
 
 11. Co. i Rob. (La.) 231 ; State v. Mexi- burg, Fort Wayne & Chicago R. R. <'... :: 
 
 can Gulf Ry. Co. :: lb. 513. Phila. (I'm.) 17:s. 
 
 2 Rev. Code 1870, art. 3308. : ' Ludlow v. Hurd, 1 Dis. (Ohio) . r >">-' ; 
 
 ' Dunham v. Cincinnati, Pern, &c. Ry. Coopers '•. Wolf, 15 Ohio St, 
 
 Co. ] Wall. 254. 
 
 L09
 
 § 123.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 of bonds, secured by the mortgage, amounting to .$7,200. He 
 brought a bill in equity against the mortgagor and the judgment 
 creditor, joining also the trustees under the mortgage, praying a 
 decree, that the property levied upon was a part of the mortgaged 
 premises, and as such exempt from levy and sale under execu- 
 tion ; and also that the judgment creditors be restrained from 
 further levying the execution. The Philadelphia, Wilmington, 
 and Baltimore Railroad Company contended that the property 
 levied on was not covered by the mortgage, because it was ac- 
 quired after the delivery of the mortgage ; but the court held 
 otherwise, and perpetually enjoined them from levying the execu- 
 tion. 1 
 
 Authority given to a railway company, by statute or charter, to 
 mortgage " all, or any part of the road, property, rights, liberties, 
 and franchises of said company," gives the company the right to 
 include in the mortgage all future accessions of the road. 2 " Prop- 
 erty," says Mr. Justice Sharswood, delivering the opinion of the 
 Supreme Court of Pennsylvania in this case, " is whatever is a 
 man's own. His future acquisitions, though subject to a contin- 
 gency, are his own ; and if, as we have seen, they can be granted 
 or assigned, they are his present property, valuable now to him, 
 because they can be enjoyed or used by anticipation. There is 
 no refinement in this reasoning, as applied to the construction of 
 this statute. The legislature evidently intended it. Every law is 
 to be interpreted according to its subject matter. This act relates 
 to a railroad and its usual necessary appurtenances. The words 
 are ' road, property, rights, liberties, and franchises,' including the 
 road and all its adjuncts. The very objects of the loan, and of 
 the mortgage to secure it, as expressed in the act, was l for the 
 purpose of constructing and equipping the road.' It evidently 
 contemplated a condition of things in the future. The bare road, 
 only then constructed in part, without any rolling stock or equip- 
 ments, would have been no security, or a very inadequate one. 
 Had the road even been fully equipped at the date of the mort- 
 gage, can it be doubted that the legislature meant that it should 
 comprise everything subsequently acquired, to replace old and 
 worn-out materials, and to maintain and keep up the equipment? 
 No money would have been loaned on a security daily deterio- 
 
 1 Philadelphia, Wil. & Bait. R. II. Co. 2 Philadelphia, Wil. & Bait. R. R. Co. 
 v. Woelpper, 64 Pa. St. 366. v. Woelpper, supra. 
 
 110
 
 CHARGING AFTER-ACQUIRED PROPERTY. [§ 124. 
 
 rating, and which must eventually perish entirely." The learned 
 judge quotes with approval the remarks of Mr. Justice Agnew, 
 already given above. 
 
 124. A railroad with its franchises has sometimes been 
 regarded as one entire thing, a unity constituting one indivis- 
 ible whole, so that a mortgage of it must necessarily embrace all 
 property of every description essential for the use of the road ; 
 and must necessarily attach to all property subsequently ac- 
 quired for its use, as an incident to the principal thing, although 
 there be no language in the deed applicable in terms to such 
 property. 1 
 
 This doctrine, that the mortgage of a railroad as an entire 
 thing covers parts of the thing which have been acquired or con- 
 structed after its execution, so far as it relates to such after-ac- 
 quired property as actually becomes a part of the original thing- 
 mortgaged, rests upon the doctrine of accession, which prevails in 
 ordinary mortgages where improvements are made upon real es- 
 tate mortgaged which becomes a part of the realty, or where re- 
 pairs are made on an article of personal property. 2 
 
 The right of a railroad corporation to mortgage its after-ac- 
 quired property is implied from any authority given it to mort- 
 gage its rights, franchises, and property as an entire thing; for, to 
 be effectual, the mortgage must embrace all such future acqui- 
 sitions of the corporation as are proper accessories to the thing 
 pledged and essential to its enjoyment. In short, the power to 
 mortgage after-acquired property is implied in the power to make 
 any mortgage at all. 3 " Whatever is added to the original struct- 
 ure becomes a part of it, and cannot be severed from it; and if 
 the security by the mortgage is to continue to be of any value 
 during the period that must transpire before the bonds become 
 due, it must depend upon the implied covenant of the company 
 to keep it in running order, and thus earn the necessary sums to 
 discharge the accruing interest, and, eventually, indemnify the 
 creditors for the principal debt." 4 
 
 i Dinsmore v. Racine & Miss. 11. R. » Phillips v. Winslow, 18 B. Mon. (Ky.) 
 Co. L2 Wis. 649,656. 4:$l. See Pennock v. Coe, 23 How. 117; 
 
 - Farmers' Loan & Trust Co. v. Com- Shaww. Bill, 95 U. S. 10, L6. 
 mercial Bank, n Wis. 207, 212, per 4 Ludlow v. Hurd, I Dis. (Ohio) 552, 
 Paine, J. per Storer, J. 
 
 111
 
 § 125.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 125. This doctrine rests upon the authority of a few cases, 
 of which Pierce v. Emery 1 is perhaps the most important. The 
 Portsmouth and Concord Railroad was authorized by the legisla- 
 ture of New Hampshire to issue bonds for a loan of money, and, 
 for security, to make a mortgage to trustees of all the property, 
 and all the rights, franchises, powers, and privileges of the corpo- 
 ration, and in the mortgage to give the trustees power, on breach 
 of tin; condition, to sell the real and personal estate, and all the 
 rights, franchises, powers, and privileges named in the mortgage, 
 by a deed which should convey to the purchasers all the rights, 
 franchises, powers, and privileges which the corporation possessed, 
 and the use of the railroad, with all its property and rights of 
 property, for the same purposes and to the same extent that the 
 corporation could use the same if the deeds had not been made, 
 subject to the same liability as to the use of the road that the 
 corporation would have been under if the deed had not been 
 made. The corporation issued bonds and made a mortgage under 
 this authority, which conveyed the road and all its franchises and 
 all the personal property of the company as it was then used, and 
 as Jhe same might thereafter be changed or renewed. After the 
 making of the mortgage the company purchased a cargo of iron 
 vails, and it being subject to a lien of the United States for duties, 
 an agreement was made with certain parties that they should pay 
 the duties and that the railroad might lay the iron on their track ; 
 but that the parties advancing the money might take up the iron 
 and hold it for security for the money advanced, provided the 
 company did not repay them within a specified time the money 
 advanced. The court held that when this agreement was made 
 the iron was already subject to the prior mortgage, and that all 
 that the company could convey or deal with was an equity of re- 
 demption subject to that mortgage ; that the iron having passed 
 according to this bargain into the possession of the road, that the 
 lien for the duties was gone and could not be asserted as against 
 the mortgage. 
 
 As to the effect of this mortgage, the court regarded it as in 
 substance a conveyance, under legislative authority, of the road 
 and corporation, as an entire thing, and that subsequently ac- 
 quired property became a part of it as an incident and accession. 
 
 1 32 N. H. 484. See, however, Boston, Concord & Montreal R. E. Co. v. Gilmore, 
 37 X. H. 410, and § 168. 
 112
 
 CHARGING AFTER-ACQUIRED PROPERTY. [§ 126. 
 
 Upon a sale of the property under the mortgage, all the rights 
 and franchises of the corporation and the use of the road would 
 be transferred to the purchasers, who would hold them subject 
 to the same liabilities by which the corporation was bound before 
 the sale. " It is not easy to see how the original corporation, in 
 the hands of the former corporators, could, after such a sale, have 
 any practical or even legal and theoretical existence. They could 
 hold no property ; they could maintain no action, nor elect any 
 corporate officer ; these powers are all rights and franchises of 
 the corporation, created and granted by the act of incorpora- 
 tion, and are all transferred and conveyed by the deed of the 
 trustees to the purchasers under their sale. In some cases, after 
 the franchises of a corporation are lost by forfeiture, the corpo- 
 ration is still held to exist in contemplation of law, so far as to 
 be capable of being revived by a regrant from the government. 
 But here the franchises would not be forfeited to the state, but 
 transferred to the purchasers ; and the state could not revive the 
 old corporation by a regrant of the franchises which had become 
 vested in the purchasers. The sale would in substance transfer 
 the road and the corporation to the purchasers." 1 
 
 126. The doctrine is not generally supported that after-ac- 
 quired property of a railroad company passes, as incident to 
 the franchise to acquire property, by a mortgage of the franchises 
 and property of the company executed by lawful authority. This 
 view was strongly urged upon the court in the case of Dinsmore 
 v. Racine $ Mississippi Railroad Company ; 2 but the court, 
 after examining the grounds of the doctrine and some of the 
 cases supporting it, declined to adopt it, and stated the objec- 
 tions to it. It is true that at that time there was no statute in 
 force in Wisconsin authorizing a railroad company to mortgage its 
 franchises, and it is admitted that a corporation would have no 
 power to make a mortgage by which property after acquired would 
 pass as incident to the franchise to acquire property, except by 
 virtue of express legislative authority to convey the franchises of 
 ih«- corporation. None of the cases which support this doctrine 
 do so upon the general principle that a railroad, with its fran- 
 chises and property, is an indivisible, entire tiling, except as it be- 
 
 1 Per Chief Justice Perley, delivering * 12 Wis. G49. 
 
 the opinion <>f the court. 
 
 8 113
 
 § 126.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 comes so by virtue of some special or general legislative author- 
 ity. 1 On general principles of law, a railroad corporation, with 
 its franchises and property, though undoubtedly having many 
 things peculiar to itself, cannot be regarded as one entire and in- 
 divisible thing. It cannot be likened to a machine, or to a vessel. 
 If a mortgage, which does not in terms include after-acquired 
 property, can be held to embrace property which is personal in its 
 nature, and is not attached to the realty as fixtures, without a 
 special statute manifesting an intention on the part of the legis- 
 lature that such mortgage should pass the entire franchises and 
 property of the company, and without any general law giving to 
 a mortgage made by a railroad company greater effect than is 
 given to a mortgage by a natural person, a revolution would be 
 worked in the registry laws. This objection is forcibly stated by 
 Mr. Justice Cole, of the Supreme Court of Wisconsin : 2 " If the 
 mortgage of the Farmers' Loan and Trust Company became a 
 prior lien upon the timber lands mentioned in this case, by virtue 
 of the doctrine of entirety, there could be no safety in depending 
 upon the record. For a person going to buy these lands of the 
 railroad company would find nothing upon the record to apprise 
 him that they had been mortgaged to that company. If he looked 
 into that mortgage, he would find nothing in the description of 
 the mortgaged premises which related to them. Finding the title 
 of record in the railroad company unincumbered, so far as he 
 could see, he might buy or take a mortgage upon the lands, trust- 
 ing to the registry law. Thinking that the same legal conse- 
 quences attached to a mortgage given by a railroad company as 
 would attach to one given by a natural person, he would find that 
 the record was but a snare. But still, if this is the settled law of 
 the land in reference to railroads and railroad property, such a 
 person could only complain of his ignorance and foll} r . This 
 mortgage given the Farmers' Loan and Trust Company was 
 made by virtue of the general power of the railroad company to 
 dispose of its property, and not under any law of the state author- 
 izing such corporations to mortgage their rights and franchises. 
 If the mortgage had been made by an individual, within the de- 
 
 1 See Pierce v. Emery, 32 N. H. 484 ; 2 In Dinsmore v. Racine & Miss. R. R. 
 Phillips v. Winslow, 18 B. Mon. (Ky.) Co. supra. 
 431 ; Willink ;•. Morris Canal & Banking 
 Co. 3 Green (N. J.) Ch. 377. 
 114
 
 WHAT TERMS INCLUDE AFTER-ACQUIRED PROPERTY. [§§ 127, 128. 
 
 cisions of this court, it would not have bound his subsequently ac- 
 quired property. If the mortgage in this case embraced in its 
 terms these timber lands, we might have to consider whether it 
 did not fall within the principle of our decisions upon that sub- 
 ject ; but it does not. The mortgage of the Farmers' Loan and 
 Trust Company can only hold these lands by virtue of this doc- 
 trine of entirety. We have endeavored to show that in reason, 
 and from the nature of railroad property, there is no ground for 
 saying that a railroad, with all its rights, franchises, and property, 
 real and personal, is an indivisible, entire thing. Practically, we 
 believe, they are not so regarded. Mortgages are given upon the 
 personal property of railroads, or upon some portion of it, or upon 
 some portion of the real estate, or a portion of the road. The 
 property has been treated as though it might be separated, and 
 appropriated to the payment of debts, without destroying the in- 
 tegrity of the company." 
 
 127. This doctrine cannot be applied where several mort- 
 gages are given on separate divisions of the road. The doc- 
 trine is based upon the ground that the property acquired after 
 the making of a mortgage of the property and franchises of a 
 railroad company passes as an incident to the franchise to acquire 
 property. Such a mortgage, when duly authorized, is moreover 
 regarded as a conveyance of the property and franchises of the 
 company as an entire thing. A division of the franchise by a 
 mortgage of a part of the road is impracticable. 1 
 
 II. What Terms are sufficient to include after-acquired Property. 
 
 128. The word " undertaking " may have the effect, whether 
 by itself or in connection with other words, to create not only a 
 charge upon the property itself of the corporation, as distinguished 
 from its income merely, but also a charge upon after-acquired 
 property. The circumstances of the case have much to do in de- 
 termining the effect of the word. Thus, a steamship company 
 having power to issue mortgages, bonds, or debentures, issued 
 mortgage debentures, charging " the undertaking, and all sums 
 of money arising therefrom," with the repayment of the Loan. 
 Before the maturity of these obligations, the company was wound 
 up, and the ships and other property of the company were sold. 
 
 1 Farmers' Loan & Trust Co. v. Commercial Bank, 1 1 Wis. 207. 
 
 115
 
 §§129,130.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 The court held that the debentures were a charge upon the prop- 
 erty of the company, both that which existed at the time, and that 
 which was afterwards acquired ; 1 Giffard, L. J., saying : " I have 
 no hesitation in saying that, in this particular case, and having re- 
 gard to the state of this particular company, the word ' undertak- 
 ing ' had reference to all the property of the company, not only 
 which existed at the date of the debenture, but which might after- 
 wards become the property of the company. And I take the 
 object and meaning of the debenture to be this, that the word 
 ' undertaking ' necessarily infers that the company will go on, and 
 that the debenture holder could not interfere until either the inter- 
 est which was due was unpaid, or until the period had arrived for 
 the payment of his principal and that principal was unpaid. I 
 think the meaning and object of the security was this, that the 
 company might go on during that interval ; and, furthermore, that 
 during that interval the debenture holder would not be entitled to 
 any account of mesne profits, or of any dealing with the property of 
 the company in the ordinary course of carrying on their business." 
 
 129. A railroad company having the right by its charter 
 to construct a branch road, although not laid out at the time 
 of the original location of the road, and not then contemplated, 
 and although not laid out or perfected at the time of a mortgage 
 of all the lands which might afterwards be acquired for the use of 
 the road, such branch road and the land acquired for it, and for 
 purposes connected with the use of the branch road, pass to the 
 mortgagee. Such branch road might, under some circumstances, 
 be regarded as a legitimate incident of the main road, and as nec- 
 essary for its use as are side tracks, shops, and engine-houses. 2 
 If, however, the building of the branch road was not authorized 
 at the time of making the mortgage, but w r as authorized by a sub- 
 sequent charter giving other persons as well as the railroad com- 
 pany the right to become stockholders, the mortgage will not 
 operate upon such branch road. 3 
 
 130. When a railroad company has the right to change its 
 location, land acquired for its new location will be embraced in a 
 
 1 Panama, New Zealand & Australian 2 Seymour v. Canandaigua & Niagara 
 Royal Mail Co. in re, L. R. 5 Ch. 318- Falls R. R. Co. 25 Barb. (N. Y.) 284. 
 322 ; S. C. 4 Cox's Joint Stock Cas. 35. 3 Mever v. Johnston, 53 Ala. 237, 331. 
 
 116
 
 WHAT TERMS INCLUDE AFTER-ACQUIRED PROPERTY. [§ 131. 
 
 mortgage previously made of all lands which it might afterwards 
 acquire for the purposes of the road. Such land is sufficiently 
 defined by reference to the charter of the road which confers a 
 privilege of changing its location within certain limits. 1 To hold 
 that by deviating from the route laid down the road could be, 
 pro tanto, freed from the lien, would be not only a violation of 
 the terms of a mortgage covering all property to be acquired, but 
 would be a very dangerous doctrine, and one contrary to public 
 policy, which is, to encourage the construction of necessary public 
 works. 2 The lien of a mortgage previously executed is not im- 
 paired by any deviation in the route so long as this is kept within 
 the general plan and direction authorized by the charter of the 
 road. 3 If a company, after partially building a portion of its road, 
 abandons it for another route on which the road is actually built, 
 the lien of the mortgage will cover the latter location, but not the 
 former, over which the company had only a right of way ; for 
 that, in consequence of the abandonment, reverts to the owners of 
 the soil. 4 
 
 A mortgage by a railway company of its road constructed and 
 to be constructed, and of all lands owned by it, or which, it might 
 afterwards acquire for the purposes of its road, takes effect as a 
 specific lien upon such lands as soon as they are acquired. The 
 description of the land is made intelligible and definite by refer- 
 ence to the charter of the road, which defines the land the com- 
 pany may take. 5 It is immaterial whether the road has been 
 definitely located at the time of the mortgage ; when it is located, 
 the lands acquired within the line of its location and for the use 
 of the road so located will be embraced in the mortgage. 
 
 131. The operation of a mortgage in respect to future-ac- 
 quired property may of course be limited to such property 
 as might be purchased with the money obtained from the mort- 
 gage loan. Such was claimed to be the effect of certain mortgages 
 of the New Albany and Salem Railroad Company, incorporated 
 under the laws of Indiana. The mortgage covered all the present 
 and future to be acquired property pertaining to the road ; k * that 
 
 i Seymour v Canandaigua & Niagara 8 Meyer v. Johnston, 53 Ala. 287, 830. 
 Falls R. I;. Co. 25 Barb. (N. Y.) 284. ' Meyer v. Johnston, supra. 
 
 rellw. Grand St. & Newtown E.R. ° Seymour v. Canandaigua & Niagara 
 Co. 67 Barb. (N. Y.) 83. Falls B. R. Co. 25 Barb. (N. IT.) 284. 
 
 117
 
 § 132.] MORTGAGES OF AFTER- ACQUIRED PROPERTY. 
 
 is to say, their road, made and to be made, including the right of 
 way and land occupied thereby, together with the superstructure 
 and tracks thereon, and all rails and other materials used therein, 
 or procured therefor, inclusive of the iron rails purchased, or to 
 be purchased or paid for with the above-described bonds, or the 
 money obtained therefor, and the machinery purchased with the 
 same ; bridges, viaducts, culverts, fences, depot grounds and build- 
 ings thereon, engines, tenders, cars, tools, materials, machinery, 
 and all other personal property, right thereto, or interest therein, 
 pertaining as aforesaid, together with the tolls, rents, or income 
 to be had or levied therefrom, and all franchises, rights, and priv- 
 ileges of the said parties of the first part of, in, to, or concerning 
 the same." The Supreme Court of the United States, 1 however, 
 decided that the terms of the mortgage were broad enough to 
 cover all property pertaining to the road, not only that existing 
 at the date of the mortgage, but also such as was afterwards sub- 
 stituted for property then existing, or was subsequently added by 
 the company, and was in existence at the time of the foreclosure. 
 The reference made in the description to the property which 
 might afterwards be purchased with the bonds issued was declared 
 not to operate as a limitation of the lien of the mortgage to such 
 after-acquired property, but only to remove any doubt that might 
 otherwise possibly arise, whether the property thus purchased 
 would also go to increase the security offered. It was not deemed 
 of any moment whether the rolling stock and machinery in use 
 by the company at the date of the decree were acquired with the 
 proceeds of the bonds or with the subsequent earnings of the com- 
 pany. 
 
 132. After-acquired land, not within the terms of a mort- 
 gage, is not covered by it. A mortgage of a road and its ap- 
 purtenances, the land on which it is constructed, and which it 
 may acquire for stations, engine houses, shops, and other struct- 
 ures, or upon which embankments, drains, and fences might be 
 built, does not create any lien upon a tract of woodland afterwards 
 acquired by the company, situate seven miles from the road, al- 
 though such land was purchased and used by the company for the 
 purpose of supplying the road with timber and wood. The mort- 
 gage in terms relates to land along the line of the road, in im- 
 l Shawy. Bill, 95 U. S. 10. 
 
 118
 
 WHAT TERMS INCLUDE AFTER-ACQUIRED PROPERTY. [§ 133. 
 
 mediate connection with it, and necessary for the operation of it ; 
 and it contains no apt and proper language to embrace land re- 
 mote from the road and which cannot be used for any of the spe- 
 cific purposes mentioned. 1 
 
 A mortgage by a railway company of its " road, .... whether 
 made or to be made, acquired or to be acquired, and all its prop- 
 erty, real and personal, whether now owned or hereafter to be 
 acquired, used, or appropriated for the operating or maintaining 
 the said road," is by its terms restricted to property so used or ap- 
 propriated. 2 Lands acquired by the company, and not thus used 
 or employed for the purposes of the road, would not come within 
 the description of the mortgage. 3 
 
 133. After-acquired personalty not within the terms of the 
 mortgage. — A mortgage conveying a " railroad, with its super- 
 structure, track, and all other appurtenances, made or to be 
 made," and also the " railroad furniture, including engines, ten- 
 ders, cars of every description, tools, materials, machinery, and 
 every other kind of personal property which shall be used for oper- 
 ating said railroad," does not purport to grant property thereafter 
 to be acquired by the company, except so far as it becomes appur- 
 tenant to the road, or is used in it. Chairs intended for fastening 
 down the rails afterwards acquired, which were never used in its 
 construction, but were lying upon the ground in heaps, are not ap- 
 purtenant to the road or used in operating it within the terms of 
 the mortgage, and consequently are not covered by it. There is no 
 language in the instrument which purports to convey materials to 
 be thereafter acquired for the construction or repair of the road. 4 
 
 Upon a second trial of this case additional evidence was intro- 
 duced to show that the intention of the parties was to grant every- 
 thing that the company then owned or might afterwards acquire ; 
 and it was claimed that the intention of the parties should be ar- 
 rived at, as well from consideration of their situation and the gen- 
 eral nature and object of railroad mortgages, as from the words 
 in the instrument. " But it must be borne in mind.'* say the 
 
 1 Dinsmore v. Racine & Miss. R. R. Co. mercial Bank, 11 Wis. 207; affirmed in 
 
 12 Wis. 649. Dinsmore v. Racine & Miss. R. K. Co. 12 
 
 - Walsh v. Barton, 24 Ohio St. 28. Wis. 649; Farmers' Loan & Trust Co. 
 
 ? - Seymour v. Canandaigua & Niagara v. Cary, 13 Wis. 110; Farmers' Loan &. 
 
 Falls K. i:. Co. 25 Barb. (\. V.) 284. Trust Co. v. Commercial Ban* of Racine, 
 
 * Farmers' Loan & Trust Co. v. Com- 15 Wis. 424, 
 
 ll'.l
 
 § 134.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 court, 1 " that it is not the business of construction to look outside 
 of the instrument to get at the intention of the parties, and then 
 carry out that intention, whether the instrument contains language 
 sufficient to express it or not ; but the sole duty of construction is, 
 to find out what was meant by the language of the instrument. 
 And this language must be sufficient, when looked at in the light 
 of such facts as the court is entitled to consider, to sustain what- 
 ever effect is given to the instrument. And we can see nothing 
 in the additional evidence now before us which we think ought to 
 change the effect before given to the mortgages under which the 
 appellant claims." 
 
 Upon this principle, a mortgage of the Vermont Central Rail- 
 road Company of its road and appurtenances, together with " all 
 other personal property belonging to said company, as the same 
 now is in use by said company, or as the same may be hereafter 
 changed or renewed by said company," was held not to embrace 
 certain machinery for " burnetizing " ties and timber so as to ren- 
 der them more durable, which machinery was not in existence at 
 the time of the mortgage, and took the place of nothing that was 
 therein specified. Neither is such machinery any part of the 
 necessary furniture or equipment of the road ; and therefore al- 
 though such a mortgage might cover new engines, or cars, or the 
 like, procured to replace such as had been worn out, it could not 
 be extended so as to embrace property not used upon the road, 
 and in no sense a part of it. 2 
 
 134. A land grant which the corporation has no power to 
 accept. — But the authority of a railroad company to bind its fut- 
 ure acquisitions by mortgage is held to be limited to such acqui- 
 sitions as it then has the power by charter or by general law to 
 make. Upon this ground it was held that a mortgage by the Ala- 
 bama and Tennessee River Railroad Company did not cover a 
 grant of lands subsequently made by the United States, which the 
 company was by special act empowered to accept, because it had 
 no power to accept such a grant when the mortgage was given, 
 and the acquisition of such a land grant was not then contem- 
 plated. Although the mortgage in terms covered the road and 
 the corporate franchises, together with " all other property now 
 
 1 Farmers' Loan & Trust Co. v. Com- - Brainerd v. Peck, 34 Vt. 496. 
 mercial Bank of Racine, 15 Wis. 424, 438. 
 120
 
 WHAT TERMS INCLUDE AFTER-ACQUIRED PROPERTY. [§ 135. 
 
 owned and which may be hereafter owned by the railroad com- 
 pany," its operation was restricted to such property as the com- 
 pany then had power to receive and hold. 1 
 
 135. In a mortgage of a land grant not yet earned, an ele- 
 ment of uncertainty may be introduced by including only a por- 
 tion of the grant without particularly describing that portion. 
 Thus where a railroad company, which, upon completing its road 
 according to certain conditions, would become entitled to receive 
 sixteen sections of land of six hundred and forty acres each for 
 each mile of road, included in a mortgage only twelve sections 
 per mile, amounting to thirteen hundred and twenty sections, 
 reserving four sections per mile, or four hundred and forty 
 sections in all, in constructing their road, and afterwards trans- 
 ferred to a contractor four hundred and seventy-two sections, 
 who received the certificates in good faith without any knowl- 
 edge of their being mortgaged or pledged in any manner, it 
 was held that he acquired a good title to these sections, free 
 from the incumbrance of the mortgage. 2 For the mortgage 
 bondholders it was contended that the land grant, to the extent 
 of thirteen hundred and twenty sections, became a lien upon this 
 number of sections as soon as the company received them from 
 the state ; and that if there was any difficulty in finding the bal- 
 ance the contractor must meet it ; and therefore they demanded 
 that the contractor should surrender all the certificates held by 
 him, or, at all events, that the land should be subject to sale under 
 the decree, until the number of thirteen hundred and twenty sec- 
 tions had been made good. Their claim, however, was not by 
 absolute grant or assignment, but through the effect of the trust 
 deed operating by way of estoppel ; for at the time the deed was 
 executed the company hail not received the grant nor earned it by 
 the building of the road. The deed amounted to a covenant on 
 the pari of the company that the certificates for the land should 
 be included in the mortgage when they should come into exist- 
 ence. lt This is the doctrine in equity," said Mr. Justice Bradley, 
 delivering the opinion of the United States Circuit Court. "To 
 this the court holds the company, and as against it and its as- 
 signee, having notice of the contract, they treat the certificates as 
 
 1 Meyer v. Johnston, 53 Ala. 2J7, 331. 2 Campbell v. Texas* New Orleans K. 
 
 R, Co.2 Woods, 
 
 121
 
 § 136.] MORTGAGES OF AFTER- ACQUIRED PROPERTY. 
 
 if they had been in existence, and had been embraced in the trust 
 deeds when they were executed. But the courts will not over- 
 ride other equities in coming to this result. If parties purchased 
 the certificates in good faith, and without notice of any such estop- 
 pel, it would be doing injustice to them to deprive them of the 
 certificates so purchased. In the case before us there was a mar- 
 gin of four sections per mile, over and above the amount or num- 
 ber of sections pledged to the bondholders, which the company 
 itself had a perfect right to dispose of. It would be naturally sup- 
 posed by parties dealing with the company, even if they knew of 
 the existence of the trust deeds, that so long as the company kept 
 within the line of this margin in issuing additional certificates, no 
 interference was made with those to which the trustees under the 
 trust deeds were entitled. If a man sells me fifty bushels from a 
 lot of one hundred bushels of corn, and a third person afterwards, 
 with knowledge of the sale to me, purchase the remainder, and re- 
 moves his part of the lot, leaving my quantity undisturbed, how 
 can he be liable to me, even though the seller should afterwards 
 fraudulently dispose of my part to other parties ? " The learned 
 judge was therefore brought to the conclusion that the contractor 
 was entitled to be protected in the possession and enjoyment of 
 the certificates transferred to him. 
 
 This decision, upon the facts stated, cannot be questioned. It 
 does not appear from anything stated in the report of the case 
 whether the trust deed was duly recorded or not. If it was re- 
 corded, it is difficult to see how the contractor could have received 
 the certificates without notice of the prior right of the mortgagee 
 to receive certificates for twelve sections of land per mile of road, 
 and, consequently, why he had not a prior lien upon the land to 
 the amount of thirteen hundred and twenty sections. 
 
 136. A mortgage by a railroad company embracing all 
 property which it may subsequently acquire includes a lease 
 which it afterwards takes of another railroad. Upon the sub- 
 sequent bankruptcy of the corporation, its assignees in bankruptcy 
 cannot maintain a title to the leased road as against the mort- 
 gage trustees^ 
 
 Lands which a railroad company has contracted for after a 
 
 i Barnard v. Norwich & Worcester 11. 14 Nl. Bank. R. 469 ; S. C. 3 Cent. 
 R. Co. U. S. Circuit Court for Mass. 1876, L. J. 608. 
 
 122
 
 WHAT TERMS INCLUDE AFTER-ACQUIRED PROPERTY. [§§ 137, 138. 
 
 mortgage of all its property, and has taken possession of and used 
 for depot grounds, paying a portion of the purchase money, are 
 subject to the mortgage, and the mortgagee, or the purchaser 
 under the mortgage, may compel the execution of a conveyance 
 upon the payment of the balance of the purchase money. 1 
 
 137. The enumeration of some articles excludes others. — 
 The Vermont Central Railroad Company having made a mort- 
 gage which by its terms covered such personal property as might 
 afterwards be changed or removed by the company, some years 
 afterwards made a conveyance apparently in confirmation of this 
 provision of the mortgage, reciting that the personal property ex- 
 isting at the date of it had become diminished and impaired by 
 use, and other personal property acquired, which had gone into 
 the possession of the trustees, and therefore this deed was exe- 
 cuted to carry the mortgage into effect. The deed, however, was 
 " of all the articles of personal property acquired by the company 
 since the date of the mortgage, consisting, among other things, of 
 the following, to wit ; " and then enumerated by name several en- 
 gines, and by number several different kinds of cars. It was held 
 that these general words should be construed as referring only to 
 articles of the same nature and kind as those specifically named, 
 and therefore did not embrace machinery for " burnetizing " ties 
 and timber. 2 
 
 138. Capital stock of another company. — A mortgage given 
 upon the real and personal property of a railroad corporation then 
 held or acquired, or thereafter to be held or acquired, covers the 
 capital stock of another railroad company, subsequently purchased 
 by the mortgagors for the purpose of effecting a consolidation of 
 the roads. 3 It is not necessary to the validity of such a mortgage 
 that it should have been filed in accordance with the provisions 
 of the, act concerning chattel mortgages. The capital stock <>l a 
 corporation is not goods or chattels within the meaning ol the 
 statute, which has reference only to pledges of personal property 
 of a kind which is capable of visible possession. 4 
 
 i Farmers' Loan & Trust Co. v. Fisher, "Williamson v. N. J. Southern R. R. 
 17 Wis. m. Co. 26 N. J. Eq. 398. 
 
 - Brainerd v. I'eck.s-t Vt. 490. 4 Williamson v. X. J. Southern R. R. 
 
 Co. supra. 
 
 123
 
 § 139.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 139. Iron rails not laid. — A mortgage of " all rolling stock, 
 equipments, and materials whatsoever," which may be acquired by 
 the mortgagor, or furnished for the use of its road, embraces iron 
 rails purchased by the company for its use, although still in the 
 hands of its agents at a distant port. The St. Paul and Pacific 
 Railroad Company having made such a mortgage after having 
 purchased a large amount of iron, by a resolution of its board 
 of directors authorized one of the mortgage trustees to pledge, 
 hypothecate, sell, or dispose of the iron rails of the company, then 
 in New York or elsewhere, or afterward to arrive, for such sums 
 and on such terms as were in his judgment best for the interest 
 of the company, for the purpose of raising money necessary to 
 meet past and future estimates for construction account of the ex- 
 tension of the roads, and for duties, freights, and advances on the 
 same account ; and the trustee accordingly disposed of the rail- 
 way iron principally to the firms of Jay Cook & Co., and Jay 
 Cook, McCulloek & Co., of both of which firms this trustee was 
 a member. He was also the acting man of the mortgage trus- 
 tees, and the construction agent of the company. An action was 
 brought against the company, the mortgage trustees and others, to 
 restrain this fraudulent diversion of the iron, and it was held that 
 the action could be maintained, and that an injunction restrain- 
 ing the completion of the transfer of the property was properly 
 granted. 1 The iron rails became a part of the security in equity 
 against persons buying them with notice of the facts, or without 
 paying value for them. To that extent the bondholders had an 
 equitable right that they should be used only for the purposes for 
 which they had been bought, and that was, to construct the rail- 
 road track with them. The firms, of which the trustee was a 
 member, are chargeable with knowledge of the mortgage, and the 
 equitable lien of it upon this property, and therefore they could 
 acquire no title as against the bondholders. A portion of the 
 iron was transferred by Jay Cook, McCulloek & Co., to the secre- 
 tary of the navy of the United States, in part to secure a debt 
 of the firm and in part to secure an advance made at the time. 
 Accordingly, it was held that the transfer was invalid so far as it 
 secured a prior indebtedness, because the secretary relinquished 
 nothing for the transfer, and took no better title than the firm 
 themselves had ; but so far as the transfer secured an advance 
 i Weetjon v. St. Paul & Pacific R. R. Co. 4 Hun (N. Y.), 529. 
 
 121
 
 MORTGAGES ATTACH, SUBJECT TO LIENS. [§§ 140-142. 
 
 made at the time the transaction was valid, being without notice 
 of the equity of the bondholders and for an actual consideration 
 paid. 
 
 140. Fuel. — The Androscoggin Railroad Company having 
 been authorized to extend its road, and to make a mortgage of 
 the property then owned by both the new and old portions of the 
 road, and " all the property of said extension subsequently to be 
 acquired," and having executed the mortgage accordingly, after- 
 wards purchased with the earnings of the whole road wood for 
 the use of the whole road. It was held that such wood was not 
 property of the extension afterwards acquired, within the terms 
 of the mortgage, and was therefore subject to attachment at the 
 suit of a creditor of the company. 1 
 
 141. Office furniture, suitable in kind and of a necessary 
 amount, provided for the use of the employees of the company 
 in the performance of their daily duties, as well as for the use 
 of the directors of the company to transact their business, is 
 embraced in a mortgage of a road, its franchises and property 
 then owned or thereafter to be acquired. Such property is at- 
 tached to or incident to the road itself. The mortgagee may, 
 upon default, take possession of it ; or if a judgment creditor at- 
 tempts to levy an execution upon it, the mortgagee may have the 
 proceedings enjoined, especially if it appears that the other mort- 
 gaged property would be insufficient to pay in full the mortgage 
 debt.- 
 
 III. Mortgages attach to after-acquired Property subject to Liens 
 upon it tvhen acquired. 
 
 142. A mortgage of after-acquired property can only at- 
 tach to such property in the condition in which it comes 
 into the mortgagor's hands. 3 — If it is already subject to mort- 
 gages or other liens, the general mortgage does not displace them 
 although they may be junior in point of time. They only attach 
 
 i City of Bath v. Miller, 53 Me. 308. Co. 1 Wall. 254 ; Galveston It. B. Co. ?•. 
 
 Sec § 113. Cowdrey, 11 lb. 159; United States v. N. 
 
 a Ludlow r. Bard, l Dis. (Ohio) 552. 0. B. B. Co. 12 Wall. 36*2; Willink v. 
 
 See §111. Morris Canal & BankingCo. 3 Green (N. 
 
 ■ : Dunham v. Cincinnati, Pern, fr.liv. J.)Ch. 377. 
 
 1 25
 
 § 143.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 to such interest as the mortgagor acquires. Therefore, a mechan- 
 ic's lien for work done and materials furnished in building for a 
 railroad company docks, wharves, and piers upon a branch road, 
 acquired after the making of the mortgage, takes precedence of 
 the mortgage. It is immaterial in such case that the property- 
 was acquired, not by grant but by obtaining a controlling interest 
 in the capital stock of another road which owned the property. 1 
 When in this case the decree of the chancellor was signed, which 
 established the lien of the mortgage upon the branch road, a 
 mechanic's lien had been acquired on the premises, which related 
 back to the commencement of the building, and was entitled to 
 priority over all conveyances, mortgages, or incumbrances subse- 
 quent thereto. This lien was not displaced by the chancellor's 
 decree, which, in the absence of fraud, could be effective only to 
 bring under the mortgage the lands of the branch company, sub- 
 ject to such liens as were lawfully acquired, while the legal estate 
 was in that company. 2 
 
 143. When a railroad company holds property under a con- 
 ditional sale, as for instance when railroad iron has been an- 
 nexed under an agreement that it shall be laid upon a designated 
 part of the track, and that upon payment it shall become the prop- 
 erty of the company, but that the title should not pass until such 
 payment, a subsequent mortgagee of the road with notice of the 
 agreement acquires no interest in it. 3 There is in such case no 
 difficulty in tracing and identifying the iron. It is unlike a case 
 where bricks, or nails, or other materials are used in the construc- 
 tion of a house, and are so incorporated with the building that they 
 cannot be separated and traced. It is rather analogous to the 
 case of a house or a fence set on land of another, with his assent, 
 and under an agreement that the house or fence should remain 
 the personal property of the original owner. The agreement of 
 the parties would supersede the general rule of law, and prevent 
 the house or fence becoming annexed in law to the land. The 
 mortgagee with notice stands in the same position as the company 
 itself. Notice to the trustees under the mortgage is notice to the 
 bondholders. It would be impracticable to affect the bondholders 
 
 1 Williamson v. N.J. Southern Hy. Co. March T. 1878, affirming the Chancellor's 
 28 N.J. Eq. 277, 298; 29 lb. 311. decree upon this point . 29 N. J. Eq. 311. 
 
 - S. C. in Court of Errors and Appeals, 3 Haven v. Emery, 33 N. H. 66. 
 
 126
 
 MORTGAGES ATTACH, SUBJECT TO LIENS. [§ 144. 
 
 with actual notice in any way except through the trustees, through 
 whom the bondholders claim. 
 
 But a verbal agreement of the mortgagor that after-acquired 
 property shall remain the property of the vendor until it is paid 
 for, does not constitute a lien within the rule that a mortgagee 
 takes after-acquired property cum onere ; at any rate such is the 
 law when the property is personal, and a statute makes an agree- 
 ment that the vendor shall retain the title invalid against creditors 
 without notice unless the instrument be in writing and recorded. 1 
 
 144. The mortgage does not cover property afterwards ac- 
 quired through fraud. — Mortgagees of a railway who have taken 
 possession of the road under their mortgage cannot, however, re- 
 tain possession of rolling stock which the company has acquired 
 by fraud. The Lehigh Car Manufacturing Company contracted 
 to deliver to the New Jersey Southern Railroad Company one 
 hundred box cars at a stipulated price, payable in the notes of the 
 company secured by its first mortgage bonds. A part of the cars 
 was delivered to the company, which gave its notes and certain 
 bonds called consolidated first mortgage bonds as security. The 
 manufacturers having been informed some time afterwards that 
 the bonds were not first mortgage bonds, inquired of the secretary 
 of the company about them, and was assured that they were such 
 bonds. Some two or three months afterwards the manufacturers 
 having discovered that the bonds received were worthless de- 
 manded a return of the cars, which was refused. The company 
 was shortly afterwards declared insolvent, and possession of its 
 property was delivered to the trustees of the first mortgage bond- 
 holders. The trustees insisted that the car company could not 
 be permitted to rescind the contract of sale and retake the cars, 
 because they did not elect to do so within a reasonable time. The 
 car company, on the other hand, claimed that they were defrauded 
 in the transaction, and that they took advantage of the fraud in 
 due season after the discovery of it. It appeared that the consoli- 
 dated bonds were issued under a scheme stalled by Jay Gould, 
 then the president of the road, for the consolidation of several 
 roads, and the retiring of the existing bonds of the road by issuing 
 the Dew consolidated bonds. The consolidation of the roads never 
 took plaee, and the bonds issued to I he ear company were worth - 
 1 Taylor v. Burlington, Cedar Rapids & Minn. I>'v. n West. Jur. 337. 
 
 L27
 
 § 144.] MORTGAGKS OF AFTER-ACQUIRED PROPERTY. 
 
 less. The chancellor held that although the property passed by 
 the sale, which was not void but only voidable at the election of 
 the vendor, the latter might rescind the contract of sale at any 
 time after the discovery of the fraud, so long as no innocent third 
 party had acquired an interest in the property, and the position of 
 the railroad company was no worse by reason of the delay. The 
 sale was regarded as conditional, the conditions being that the se- 
 cnritv provided for in the contract should be given simultaneously 
 with the delivery of the property. The car company did not lose 
 its property in the cars by delivering them to the railroad com- 
 pany, because the cars, being built according to specifications, the 
 vendee had the right, as incident to the contract, to require a de- 
 livery of them for the purpose of inspection and examination. 1 
 
 Moreover, the car company having been induced to part with 
 the cars by fraudulent means, could, within a reasonable time, 
 disaffirm the sale and reclaim the property. Although delivery 
 had been made, no title would pass until with knowledge of the 
 fraud it elected to ratif}^ and confirm the sale, or third persons act- 
 ing upon the supposition of the ownership by the fraudulent vendee 
 had, in good faith and for a valuable consideration, acquired 
 rights therein. But the mortgagee in this case occupied no better 
 position, either at law or in equity, than the railroad company. 
 When he took possession of the road under the mortgage, he took 
 possession of the cars as part of the equipment; but he paid no 
 consideration for them, and parted with nothing on the faith of 
 the supposed ownership of the property by the mortgagor. Al- 
 though a mortgage of property afterwards to be acquired attaches 
 to the property as soon as it comes into the possession of the 
 mortgagor, this is only in accordance with the principle of equity, 
 that what ought to be done is considered as done. Unless the 
 mortgagee has an equitable right to hold such property, such as 
 would be the ground of a decree of specific performance, a court 
 of equity will not aid him in enforcing the contract. 
 
 Upon appeal from the decree of the chancellor, Mr. Justice 
 Depue, delivering the opinion of the Court of Errors and Appeals, 
 upon this part of the case, said : " The decree of the chancellor, 
 recognizing the rights of the car company as superior to those of 
 the complainant, is consistent with principles of equity. But the 
 relief granted is, in my judgment, too circumscribed. The de- 
 
 1 Williamson v. N. J. Southern R. R. Co. 23 N. J. Eq. 277. 
 128
 
 MORTGAGES ATTACH, SUBJECT TO LIENS. [§ 144. 
 
 cree merely directs that the complainant deliver up the said cars 
 to the car company. The complainant obtained the possession of 
 the cars when he was put in possession of the railroad, in January, 
 1874. He has ever since operated the road with the rolling stock, 
 including these cars, practically under the supervision of the 
 Court of Chancery. In February, 1876, the car company made 
 a demand of the complainant for the return of the cars, and on 
 the 5th of February, 1876, began an action of replevin in the Su- 
 preme Court of this state against the complainant individually, 
 for the recovery of the same. Under the writ issued in that suit, 
 the sheriff of Hudson County seized the said cars, and held them 
 in his possession until they were redelivered to the complainant, 
 pursuant to the ninth section of the act concerning replevin. 1 The 
 car company was made a party to this suit, by the second supple- 
 mental bill filed on the 20th of September, 1876, and the pros- 
 ecution of the replevin suit was enjoined. Under the proof in 
 this case, the car company would have succeeded in its action of 
 replevin, and the damages recoverable would have been the value 
 of the property at the time of demand made, and damages for 
 its detention therefor ; and the complainant, after judgment paid, 
 would have been entitled to be reimbursed the amount thereof 
 out of the trust funds in his hands. 2 
 
 " The decree does not do complete justice to the car company, 
 nor does it give the complainant adequate indemnity. In sub- 
 stance, it merely releases the hold of the court upon the property, 
 and directs the complainant to redeliver it. The car company, 
 having brought its action of replevin, and the cars having been 
 redelivered to the defendant in that suit, it is not bound to accept 
 a return of its property in satisfaction of its cause of action. In 
 replevin, where the property has been redelivered to the defend- 
 ant, the plaintiff may have its value adjudged to him absolutely as 
 part of his damages, and the defendant cannot discharge himself 
 from the payment of such damages by a return of the property. 3 
 To Leave the Litigation open in the suit at law, with a result that 
 c;m be foreseen, is not advisable at this stage of the ca'se, A 
 Court of Equity always aims to make its determination com- 
 plete, if it 1m; possible. That may be done in this instance, within 
 
 i Revision 1877, p. '.m. 8 Field v. Post, 9 Vroom (N.J.), 346. 
 
 - Frazier v. Fredericks, i Zab. (N'.J.) 
 162. 
 
 9 L29
 
 § 145.] MORTGAGES OF AFTER-ACQUIRED PROPERTY. 
 
 the scope which this litigation has been permitted to assume. Nor 
 would it be proper relief to remit the car company to the position 
 of the holder of the bonds of the railroad company to the amount 
 of the bonds deliverable under the original contract. The bonds 
 which the car company should have received had then a market 
 value which they probably do not now possess. Having taken 
 proper steps to rescind the contract of sale on justifiable grounds, 
 the legal result of the rescission was, to revest the property in the 
 company, with a right to maintain an action for its recovery, in 
 which the measure of redress was the value of the property at the 
 time of the demand made on the complainant, and damages there- 
 after. The Court of Chancery having assumed jurisdiction of 
 that controversy, should grant the same measure of relief as 
 would have been obtained in the action at law. To that end the 
 decree of the chancellor should be modified, and a decree made in 
 favor of the car company for the value of the cars in the com- 
 plainant's possession at the time of demand made on him at what 
 they were then worth, with interest on such valuation, to be asr 
 certain ed by a reference to a master." 1 
 
 145. Junior mortgagees of railroad property who by ex- 
 press terms take subject to a prior mortgage of the road, 
 constructed or to be constructed, all property then owned by 
 the corporation or afterwards to be acquired for the use of the 
 road, cannot claim such after-acquired property as against the 
 prior mortgagees. The junior mortgagees are not in such case 
 bond fide purchasers for value without notice. 2 And in like man- 
 ner the holders of a chattel mortgage upon the rolling stock of a 
 railroad, who had previously as agents of the railroad company 
 actively participated in negotiating a prior mortgage of the road 
 and all its after-acquired property, cannot claim to avoid such 
 prior mortgage in respect to after-acquired rolling stock, or ques- 
 tion its validity because it was not filed as a chattel mortgage. 3 
 
 1 Williamson v. N. J. Southern R. R. 3 Benjamin v. Elmira, Jefferson & Can- 
 Co. 29 N. J. Eq. 311, 321. andaigua R. R, Co. 54 N. Y. 675 ; S. G. 
 
 2 Stevens v. Watson, 4 Abb. (N. Y.) 49 Barb. 441. 
 App. Dec. 302. 
 
 130
 
 CHAPTER V. 
 
 LEGAL NATURE OF ROLLING STOCK OF RAILROADS. 
 
 I. After-acquired rolling stock is subject 
 to mortgage, 146-153. 
 
 II. Rolling stock regarded as fixtures, 
 154-163. 
 
 III. Rolling stock regarded as personal 
 property, 164-170. 
 
 IV. Constitutional and statutory provi- 
 sions regarding rolling stock, 171-187. 
 
 146. Introductory. — Questions as to the legal nature of the 
 property of railroad companies embraced under the general term 
 of rolling stock have, within the last few years, frequently come 
 before our courts, both state and federal, for determination. These 
 questions are presented in various forms. More frequently than in 
 any other way they have arisen in the endeavors of the general cred- 
 itors of such corporations to attach, or levy executions upon, rolling 
 stock as personal property, when either the companies themselves 
 or their mortgage creditors have claimed that such property is a 
 part of the realty, or, at least, is an incident of the franchise, so 
 that it cannot be separated by seizure and sale under execution. 
 Sometimes the inquiry has been whether mortgages which do not 
 in terms apply to the rolling stock nevertheless embrace it as fixt- 
 ures of the realty ; or whether mortgages which in terms do apply 
 to such property are effectual when recorded only as real property 
 mortgages. Again, the subject has been presented in another as- 
 pect, under laws of taxation which have not expressly or impliedly 
 defined the status of this species of property. 
 
 When rolling stock is mortgaged in connection with the real 
 property of a railroad company, the effect of the mortgage may be 
 considered as between the parties themselves, or as between the 
 mortgagees and subsequent purchasers or judgment creditors. Be- 
 tween the parties themselves, no question as to the proper regis! ra- 
 tion of the mortgage; can arise; ; and, generally, the only question 
 between them respecting such property is whether the morl 
 covers after-acquired property of this kind. The same question 
 may arise between the mortgagees and subsequent purchasers or 
 
 LSI
 
 § 147.] LEGAL NATURE OF ROLLING STOCK. 
 
 incumbrancers. Quite different principles, however, are applica- 
 ble to the determination of this inquiry from those that apply to 
 the contentions of the same parties whether such property is a fixt- 
 ure — and, therefore, a part of the realty itself — or is personalty. 
 Upon this part of the subject there is great confusion and con- 
 tradiction of authority. In many states there are now statutory 
 enactments which attempt to dispose of the vexed questions; but 
 these enactments are as diverse as were the decisions of the courts. 
 It is of little consequence, however, whether the statutes fix the 
 status of such property as realty or personalty, so long as they 
 afford a fixed rule for the guidance of the parties. 
 
 Discriminating, therefore, between the different aspects of the 
 subject presented by these legal questions, the first proposition to 
 be considered is : — 
 
 I. After-acquired Rolling Stock is subject to Mortgage. 
 
 147. A mortgage of a railroad afterwards to be built, and of 
 the rolling-stock and other property appurtenant to such 
 road, attaches to the road and the rolling stock as they are built 
 and acquired. Such a mortgage is a lien superior to that of a 
 subsequent mortgage, ma^de after the road has been completed 
 and equipped ; and in like manner superior to a judgment lien 
 which has afterwards attached to such property. 1 Although the 
 mortgage may have been " given before a shovel had been put 
 into the ground towards constructing the railroad, yet, if it as- 
 sumed to convey and mortgage the railroad which the company 
 was authorized by law to build, together with its superstructure, 
 appurtenances, fixtures, and rolling stock, these several items of 
 property, as they came into existence, would become instantly at- 
 tached to and covered by, the deed and would have fed the estop- 
 pel created thereby. No other rational or equitable rule can be 
 adopted for such cases. To hold otherwise would render it neces- 
 sary for a railroad company to borrow money in small parcels, as 
 sections of the road were completed, and trust deeds could safely 
 be given thereon. The practice of the country and its necessities 
 are in coincidence with the rule." 2 
 
 1 Pennoek v. Coe, 23 How. 117; Gal- ton & Springfield R. R. Co. 6 Biss. 529, 
 
 veston R. R. Co. v. Cowdrey, 11 Wall. 535. 
 
 459, 481 ; Dunham v. Cincinnati, Peru, 2 Galveston R. R. Co. v. Cowdrey, 11 
 
 &c. Ry. Co. 1 Wall. 254, 266; Meyer v. Wall. 459, 481, per Bradley, J. 
 Johnson, 53 Ala. 237, 324; Scott v. Clin- 
 
 132
 
 AFTER-ACQUIRED, SUBJECT TO MORTGAGE. [§ 148. 
 
 148. Coe v. Pennock. 1 — One of the earliest cases involving a 
 judicial construction of a mortgage of the rolling stock of a rail- 
 road company was decided by the Circuit Court of the United 
 States in 1857, and two years afterwards by the Supreme Court. 2 
 
 The Cleveland, Zanesville, and Cincinnati Railroad Company 
 executed a mortgage of all its present and subsequently acquired 
 property, including engines, tenders, cars, and all other personal 
 property. The railroad was in course of construction, and only a 
 small portion of it was finished at the time of the mortgage. This 
 contained a covenant that the money borrowed should be applied 
 to the construction and equipment of the road. The rolling stock 
 was afterwards levied upon by holders of subsequent mortgage 
 bonds. Whereupon the trustees under the first mortgage filed a 
 bill to restrain a sale under the execution. The Circuit Court ren- 
 dered a decree perpetually enjoining the sale, and this decree was 
 affirmed by the Supreme Court. Mr. Justice Nelson, delivering 
 the opinion of the Supreme Court, said : " If we are at liberty to 
 determine this question by the terms and clear intent of the agree- 
 ment of the parties, it will be found a very plain one. The com- 
 pany have agreed with the bondholders (for the mortgagee repre 
 sents them) that, if they will advance their money to build the 
 road and equip it, the road and equipments thus constructed, and 
 as fast as constructed, shall be pledged as a security for the loan. 
 This is the simple contract when stripped of form and verbiage ; 
 and, in order to carry out this intent most effectually, and with as 
 little hazard as possible to the lender, the company specially stip- 
 ulate that the money thus borrowed shall be faithfully applied in 
 the construction and equipment of the road. And in further ful- 
 filment of the intent, the company agree that, in case of default 
 in payment of principal or interest, the bondholders may enter 
 and take possession of the road, and run it themselves, by their 
 agents, applying the net proceeds to the payment of the debt." 
 The bondholders, he continued, have fulfilled their part of the 
 agreement by advancing the money on the faitli of the security; 
 and Hi" question is whether there is any rule of law or principle 
 of equity that denies them the benefit of the security they con- 
 tracted for. After examining the arguments against giving effect 
 to a mortgage of after-acquired property, in conclusion, he says that. 
 
 i f, Am. Law Keg. 27; 2 Redf. Am. - Sub nom. Pennock '•• <'<"•, -'.■! How. 
 Ry. Cases, 667. 117. 
 
 L33
 
 § 149.] LEGAL NATURE OF ROLLING STOCK. 
 
 the court is satisfied that the mortgage attached to the future 
 acquisitions, as described in it, from the time they came into ex- 
 istence. 
 
 149. It is not essential that the rolling-stock should be es- 
 pecially mentioned in the mortgage in order that it may pass 
 by it. 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," embraces cars, locomotives, and other 
 rolling stock purchased by the company from time to time after the 
 making of the mortgage. 1 In like manner a mortgage of an entire 
 line of railroad, "with all the revenue or tolls thereof," was held 
 to cover, not only the line of the road, but all the rolling stock 
 and fixtures, whether movable or immovable, essential to the pro- 
 duction of tolls and revenues. 2 The same view was expressed 
 by the district judge of the United States for the District of In- 
 diana, 3 as to the effect of a mortgage by a railway company of 
 " all the present and future to be acquired property of the com- 
 pany," " together with the tolls or income to be had or levied 
 therefrom." The latter clause seemed to be regarded as more de- 
 cisive than the former that the rolling stock of the road was in- 
 cluded. Applying the maxim, that whosoever grants a thing is 
 supposed also, tacitly, to grant that without which the grant itself 
 would be of no effect, 4 the tolls and income being expressly mort- 
 gaged, the rolling stock, which is essential to the production of 
 tolls and income, must be included in the grant. " On a fore- 
 closure the lands, superstructures, and fixtures might, indeed, be 
 sold ; but the tolls and income could not be. Besides, the deed of 
 trust provides another remedy to the mortgagees in case of a de- 
 fault by the mortgagors — the very remedy which the complain- 
 ant is now seeking through a receiver. It provides that in case 
 of a default the trustees may enter and take possession of the 
 mortgaged property, and use and operate the same, and apply the 
 proceeds thereof to the payment of the interest and principal of 
 the bonds intended to be secured by the mortgage. Now, in pur- 
 suing this remedy, of what avail would all the other property be 
 
 1 Meyer v. Johnston, 53 Ala. 237, 332. 4 Cuicunque aliquis quid concedit, con- 
 
 2 State of Maryland v. Northern Cen- cedere videtur et id sine quo res ipsa esse 
 tral Ry. Co. 18 Md. 193. non potuit. 11 Rep. 52 ; Broom's Leg. 
 
 8 Pullan v. Cincinnati & Chicago Air Max. 479. 
 Line R. R. Co. 4 Biss. 35, 43. 
 134
 
 AFTER-ACQUIRED, SUBJECT TO MORTGAGE. [§ 150. 
 
 if the rolling stock cannot be used ? Nay, could the remedy be 
 pursued at all without the use of the rolling stock ? The reason 
 of the rule — that, when a man grants a tract of land in the cen- 
 tre of a larger tract owned by him, he also grants, by implication, 
 a right of way into it — fully applies to the case in question ; and 
 it strongly applies to the mortgage of tolls and income." 
 
 A mortgage of a " road and its franchise " was, however, re- 
 garded by the Supreme Court of Vermont as excluding from its 
 operation the rolling stock, and other personal chattels that go to 
 make up the usual and necessary equipment and furnishing of 
 the road, but not so affixed to the land as to partake of the char- 
 acter of realty. 1 
 
 If rolling stock be regarded as an accession, in the nature of a 
 fixture to the road, it passes by a mortgage of the road without 
 express mention ; and it is then immaterial whether it be in ex- 
 istence when the mortgage is given, or be afterwards acquired. 
 
 150. Many authorities, without going to the extent of hold- 
 ing that engines and cars are fixtures, regard them as so in- 
 dispensable to the operation of a railroad that they make a 
 distinction between the rolling stock and other kinds of personal 
 property, in respect to the rule that property not in esse cannot 
 be conveyed. The rolling stock of a railroad is regarded as so 
 appurtenant to the road, that when the company makes a mort- 
 gage of its road and franchise, it has a present existing interest 
 in the rolling stock to be acquired for its use sufficient to uphold a 
 grant of it as incident to the road. Their title to the road and 
 franchise is the foundation of an interest in the cars and engines 
 to bo acquired for its use. 2 A lien, moreover, may be created 
 without a grant. A contract intended as a grant, or one stipu- 
 lating the making of a grant at a future time, may be upheld in 
 equity as a present lien. 
 
 The York and Cumberland Railroad Company, in 1851, issued 
 bonds secured by a mortgage, in trust, of its road and franchise, 
 
 ether with all "cars, engines, and furniture that may have 
 been or may be purchased by said company." Some two years 
 afterwards the company purchased an engine and certain cars, 
 
 1 Miller t\ Rutland & Washington It. 2 Morrill v. NoycH, 56 Mo. 158, 471. 
 R. Co. 3C Vt. 452. 
 
 l:;.
 
 § 151.] LEGAL NATURE OF ROLLING STOCK. 
 
 which they subsequently mortgaged. In 1859, a suit in equity 
 was commenced in behalf of the bondholders under the first mort- 
 gage to compel the execution of the trust, and a receiver was ap- 
 pointed, who took possession of all the property of the company, 
 including the engine and cars which were the subject of the sec- 
 ond mortgage, and which were in daily use upon the road. The 
 second mortgagee, after a demand for their surrender, brought an 
 action of trover, and obtained leave of court to prosecute it. It 
 was held that the lien of the existing mortgage attached to the 
 rolling stock as soon as it was purchased and placed upon the road, 
 and that the second mortgagee acquired no title which he could 
 maintain against the former mortgage. 1 
 
 This decision might have been placed upon the ground that the 
 mortgagee of the rolling stock had notice of the prior mortgage 
 in which this property was also included ; and in that case the 
 question of the proper registry of the first mortgage would not 
 be raised, for the knowledge of the second mortgagee of the ex- 
 istence of such mortgage would be equivalent to a due record of it. 
 
 A mortgage of a railroad, " together Avith the superstructure 
 and tracks thereon, and all rails and other materials used there- 
 on or procured therefor, and engines, tenders, cars, tools, mate- 
 rials, machinery, contracts, and all other personal property " 
 then owned by it, or in future to be acquired, was held to include 
 cars, wheels, firewood obtained for the use of the engines, and 
 coal for the use of a machine-shop, as things incident and indis- 
 pensable to the use and enjoyment of the principal thing con- 
 veyed. 2 
 
 151. A mortgage attaches to rolling stock subject to the 
 liens existing upon it when it is acquired. — The New Orleans 
 and Ohio Railroad Company, having made a mortgage covering 
 all future-acquired property, afterwards purchased of the United 
 States certain locomotives and cars, for which it gave a bond stipu- 
 lating that the United States should have a lien upon the prop- 
 erty for the purchase money, and that the company should not 
 part with it without written consent until payment of the price. 
 The trustee for the bondholders claimed that the mortgage upon 
 
 1 Morrill v. Noyes, 56 Me. 458. 2 Phillips v. Winslow, 18 B. Mon. (Ky.) 
 
 431, 448. 
 
 136
 
 AFTER-ACQUIRED, SUBJECT TO MORTGAGE. [§ 152. 
 
 the road, being prior in date to the bond, attached to the property 
 as soon as purchased, and displaced any junior lien. " This, we 
 apprehend," said Mr. Justice Bradley, delivering the opinion of 
 the court, 1 " is an erroneous view of the doctrine by which after- 
 acquired property is made to serve the uses of a mortgage. That 
 doctrine is intended to subserve the purposes of justice and not 
 injustice. Such an application of it as is sought by the appellants 
 would often result in gross injustice. A mortgage intended to 
 cover after-acquired property can only attach itself to such prop- 
 erty in the condition in which it comes into the mortgagor's hands. 
 If that property is already subject to mortgages or other liens, the 
 general mortgage does not displace them, though they may be 
 junior to it in point of time. It only attaches to such interest as 
 the mortgagor acquires ; and, if he purchase property and give a 
 mortgage for the purchase money, the deed which he receives and 
 the mortgage which he gives are regarded as one transaction, and 
 no general lien impending over him, whether in the shape of a 
 general mortgage, or judgment, or recognizance, can displace such 
 mortgage for purchase money. And in such cases a failure to 
 register the mortgage for purchase money makes no difference. It 
 does not come within the reason of the registry laws. These 
 laws are intended for the protection of subsequent, not prior, pur- 
 chasers and creditors. Had the property sold by the government 
 to the railroad company been rails, as in the case of the Galves- 
 ton Railroad Company v. Cowdrey, 2 or any other material which 
 became affixed to, and a part of, the principal thing, the result 
 would have been different. But, being loose property, susceptible 
 of separate ownership and separate liens, such liens, if binding 
 on the railroad itself, are unaffected by a prior general mortgage 
 given by the company, and paramount thereto. In the case before 
 us the United States, at the time of making the sale, reserved a 
 lien on the property, and imposed a condition of non-alienation 
 until the price should be paid. Taken altogether, the transaction 
 amounts to a transfer sub modo, and the lien must be regarded 
 as attaching to the property itself, and as paramount to any other 
 Liens arising from the prior act of the company." 
 
 152. In Alabama it is held that rolling stock so appertains 
 
 i United States v. New Orleans R. K. a ll Wall. 459. 
 Co. 12 Wall, 362, 3G4. 
 
 137
 
 § 152.] LEGAL NATURE OF ROLLING STOCK. 
 
 to a railroad as to become subject, on this ground, to a mortgage 
 of it and its after- acquired property, whenever such property is 
 acquired. Yet the rolling stock, as personal chattels not identified 
 with the realty, does not become released from the liens under 
 which the company has acquired it. 1 The Alabama and Tennessee 
 River Railroad Company, in 1852, executed a mortgage of its road 
 then constructed and to be constructed, and of all other property 
 then owned and which might thereafter be owned by the company, 
 together with its tolls and income. Some years afterwards this 
 road was united with other roads, and a new name was given to 
 the consolidated roads, and other mortgages were made by these. 
 Upon a foreclosure of a subsequent mortgage it was held that 
 the lien of the first mortgage extended to the cars, locomotives, 
 and other personal movable property appertaining to the railroad ; 
 and that this lien was not restricted to so much of the rolling stock 
 as remained of what the company owned at the time of the con- 
 solidation. If the Alabama and Tennessee River Railroad Com- 
 pany had then ceased to exist, the lien of the mortgage would not 
 have attached to any rolling stock acquired afterwards, because 
 the acquisition would not have been made by the mortgagor ; but, 
 as the court held that this company continued its existence after 
 the consolidation under a new name, it necessarily follows that 
 the mortgage given by it embraced the rolling stock held at the 
 time of the foreclosure to the same extent, or in the same propor- 
 tion, that it embraced the railroad itself. 2 
 
 In 1873 the receivers were authorized, pending the foreclosure 
 suit, to buy a large quantity of rolling stock, and for that purpose 
 to issue certificates and make them a prior lien upon the road and 
 property. Some part of the rolling stock so purchased was al- 
 ready upon the road, and in use by it under contracts and leases ; 
 and it was contended by some of the mortgage creditors that such 
 rolling stock, although not paid for by the company, became sub- 
 ject to the liens of the mortgages when put upon the mortgaged 
 road ; and, moreover, that even the new rolling stock purchased 
 by the receivers, and put upon the road by them under authority 
 of the court, became subject to the liens of the mortgages in pref- 
 erence to the liens authorized by the court in the order for pur- 
 chase. But the court held that the lien authorized by the court 
 
 1 Meyer v. Johnston, 53 Ala. 237, 324, 2 Meyer v. Johnston, 53 Ala. 332. 
 353. 
 
 138
 
 REGARDED AS FIXTURES. [§§ 153, 154. 
 
 could not be superseded or lessened by the mortgages ; that while 
 it is true that when a railroad company which has executed sev- 
 eral successive mortgages of its road, equipments, and appurte- 
 nances, purchases and puts upon its road rolling stock which is then 
 free from all liens, this property so appertains to the road as to 
 become subject to the mortgages which have priority, according to 
 the date of their execution ; yet such property does not become 
 so identified with the realty by being placed upon it that it is re- 
 leased from the liens attaching to it when it was acquired. Liens 
 upon the rolling stock existing upon it when it comes into the 
 mortgagor's possession remain binding upon it, and superior to 
 those of the mortgage existing at the time upon the railroad. 1 
 
 153. It may, therefore, be regarded as judicially settled, 
 with little or no divergence of opinion, that, in equity, a mortgage 
 of a railroad will be held to apply to after -acquired rolling stock, 
 and other personal property, if the terms of the mortgage cover 
 such future acquisitions ; with the qualification, however, that the 
 mortgage will attach to such property subject to the liens existing 
 upon it when it comes into the hands of the mortgagor. 
 
 II. Rolling Stock regarded as Fixtures. 
 
 154. There are many considerations why rolling stock 
 should be regarded as strictly of the nature of fixtures. — 
 It is fitted to the gauge of the road and adapted particularly for 
 use upon it. Without it the road is not only worthless to the 
 company, but it ceases to be of use to the public, which is one of 
 tin- purposes for which the company was chartered. The fart 
 that the rolling stock is not actually attached to the land, but may 
 be transferred to another road and used upon that equally well, is 
 not decisive against its being a fixture. The manner and degree 
 of annexation to the realty is only one element in determining 
 whether any article of personal property is a fixture or not ; while 
 the intention of the parties with reference to making it a per- 
 manent accession to the freehold, and its adaptation to the use 
 and purpose for which it is attached, are considerations of equal 
 importance, at least, in determining the question. These consid- 
 erations are to be unitedly applied. 
 
 1 Meyer v. Johnston, 58 Ala. 852. 
 
 L39
 
 §§ 155, 156.] LEGAL NATURE OF ROLLING STOCK. 
 
 155. The actual fastening of a personal article to the free- 
 hold is not essential to its becoming a fixture. — " If a billiard- 
 table be fastened to the floor so as to be conceded a fixture, would 
 not the balls and cues pass also? A bucket in a well may be 
 detached, and it is movable, running from top to bottom of the 
 well, yet it is a fixture by common consent. A shuttle in a loom 
 is thrown from place to place by the motive power of the ma- 
 chinery, yet it is an essential part of the machine." In the cases 
 mentioned, the billiard-balls, the bucket, and the shuttle are fixt- 
 ures solely because they are essential to the use of the property 
 of which they are parts, although disconnected parts. In like 
 manner the cars and engines of a railroad are essential to the use 
 of the road. " The right to buy and own rolling stock is a fran- 
 chise, and can only be exercised as an accessory to the operation 
 of a railroad. Any buying or selling of cars, engines, and the 
 like, by the company, for the mere purpose of speculation, would 
 be unauthorized and illegal. Here, then, is a consideration show- 
 ing that a company intends the rolling stock to be used only for 
 the road, or, in other words, to become a permanent accession to 
 the real estate of the company. The intention of the owner, the 
 use for which the property was designed, the connection between 
 the road and the cars, and the essential relation between them for 
 the purpose of revenue, all combine to declare the rolling stock 
 real estate." 1 
 
 156. It is not necessary, as to rolling stock, to record a 
 mortgage of it as a chattel mortgage. — One of the latest cases 
 supporting this view came before the United States Circuit Court 
 for the District of Kansas. 2 The mortgage covered the rolling 
 stock and other property appertaining to the defendant railroad 
 company. The mortgage had been duly recorded as a real estate 
 mortgage, but not as a chattel mortgage. Certain judgment 
 creditors of the mortgagor levied upon the rolling stock embraced 
 in the mortgage ; and the question was whether their rights were 
 prior to those of the mortgagees. Mr. Justice Miller, of the Su- 
 preme Court of the United States, delivered the opinion of the 
 
 1 Minnesota Co. v. St. Paul Co. 2 Wall. 2 Farmers' Loan & Trust Co. v. St. Jo- 
 609; note, p. 648, on rolling stock as a seph & Denver City Ry. Co. 3 Dill. 412. 
 fixture, being an extract from brief of 
 Mr. Carpenter. 
 
 140
 
 REGARDED AS FIXTURES. [§ 156. 
 
 court, Judge Dillon concurring : " After having taken time to con- 
 sider the question involved in this case, my judgment is that it was 
 not necessary, as to the rolling stock, to record the instrument as 
 a chattel mortgage. As to this it is sufficient, even as to creditors, 
 that the mortgage was duly registered as a mortgage of real es- 
 tate. In my opinion rolling stock and other property strictly and 
 properly appurtenant to the road is part of the road and covered 
 by the mortgage in question, which in terms embraces rolling stock. 
 The cases are conflicting upon the point of the nature of rolling 
 stock ; but, considering the peculiar character of a railroad, the 
 true principle is the one above stated. Under the provisions of 
 this mortgage a different principle would apply to fuel or other 
 property personal in its nature, and which is used, or is such as is 
 commonly used, for other than railway purposes. Such property 
 would be subject to the levy, and not be held by the mortgage." 
 The opinion of the court does not clearly indicate whether the 
 registry was considered sufficient on the ground that the rolling 
 stock is a fixture, or on the ground that such property does not 
 come within the purview of the statute relating to the record of 
 chattel mortgages ; but it would seem to be on the former ground. 
 The La Crosse and Milwaukee Railroad Company, in 1856, 
 mortgaged the western division of its road, from Portage to La 
 Crosse, a distance of 105 miles ; and in the following year mort- 
 gaged its eastern division, from Milwaukee to Portage, a distance 
 of 95 miles, to secure other bondholders ; and again, in the next 
 following year, executed a mortgage of the whole line of its road 
 from Milwaukee to La Crosse to secure another issue of bonds. 
 Each mortgage embraced " all and singular the locomotive en- 
 gines and other rolling stock, and all other equipments of every 
 kind and description which have already been or may hereafter be 
 procured for or used on said road ; " and each was in terms made 
 subject to all prior mortgages of the road. The rolling stock was 
 purchased with the funds of the company, and was placed and 
 used on the entire lino of the road, embracing both divisions, and 
 no division of it was ever made between the two divisions. It. 
 was held, therefore, that the mortgages operated upon all the roll- 
 ing stock in the order of their dates; and that the rtgage of 
 
 the western division, being the oldest, had priority of lien upon 
 the entire rolling stock of the company. 1 
 
 ' Minnesota Co. v. St. Paul Co. 6 Wall. 742. 
 
 1 II
 
 § 157.] LEGAL NATURE OF ROLLING STOCK. 
 
 It is possible, however, for a railroad company owning the 
 whole of a long road, and all the rolling stock upon it, to assign 
 certain cars and engines to particular divisions of the road, so that 
 such rolling stock would attend such divisions and pass by sepa- 
 rate mortgages of them. Whether in any particular case a rail- 
 road company has divided its rolling stock and mortgaged it in 
 this way is a question of intention. 1 
 
 157. In Illinois it was settled that rolling stock is a fixture 
 which passes by a mortgage of the road, 2 by several cases decided 
 as early as 1860 and 1861. As a part of the realty, such prop- 
 erty was not subject to the laws relating to mortgages of personal 
 chattels. Locomotives and cars in and upon the road, or intended 
 for immediate use upon it, could not be taken on execution by a 
 creditor and severed from the road so as to change them into per- 
 sonalty. If this could be done, say the court, in one case, houses, 
 fences, timber, fruit-trees, and almost every description of im- 
 provements might in the same way be converted into personalty. 3 
 In all the cases it seemed to be taken as an unquestioned doctrine 
 that the rolling stock passed as a portion of the realty. 
 
 Thus stood the law on this subject until the Constitution of 
 1870 4 provided that " rolling stock, and all other movable prop- 
 erty belonging to any railroad company or corporation in this 
 state, shall be considered personal property, and shall be liable to 
 execution and sale in the same manner as the personal property of 
 individuals, and the general assembly shall pass no law exempt- 
 ing any such property from execution and sale." But even this 
 provision is declared by the Circuit Court of the United States 
 not to change the rule that a mortgage made by a railroad com- 
 pany, covering all after-acquired property, includes rolling stock, 
 if the mortgage be given before the rights of execution creditors 
 attach. 5 Such a mortgage seizes the property or operates on it 
 by way of estoppel as soon as it comes into existence, and is in 
 
 i Minnesota Co. v. St. Paul Co. 2 Wall, more a part of the road than is the furni- 
 
 609. ture of a house a part of a house. San- 
 
 2 Palmer v. Forbes, 23 111. 301, 302; gamon & Morgan, R. R. Co. v. County of 
 
 Hunt u.Bullock, 23 111.320; Titus v. Morgan, 14 111. 163. 
 
 Mabee, 25 111. 257 ; Titus v. Ginheimer, 3 Titus v. Mabee, 25 111. 257, per Walk- 
 
 27 111. 462. See, however, an earlier er, J. 
 
 case, in which it was held that a road 4 Art. 11, § 10. 
 
 and its furniture do not constitute one 5 Scott r. Clinton & Springfield R. R. 
 
 thing ; that the furniture of a road is no Co. 6 Biss. 529. 
 
 142
 
 REGARDED AS FIXTURES. [§ 158. 
 
 possession of the mortgagor, and confers an equity prior to claims 
 under judgments and executions subsequently obtained. The prin- 
 ciple is the same whether the property be regarded as real or 
 personal. 1 
 
 158. That the franchise, lands, and property of corporations 
 chartered for the use and accommodation of the public cannot 
 be levied upon or sold under execution has been declared by 
 numerous authorities, on the ground that the value and usefulness 
 of the entire corporate property, and of the corporate franchise, 
 would thus be destroyed. This was the view taken by the Supreme 
 Court of the United States in the case of Gue v. Tide Water Ca- 
 nal Company? The property levied on in this case was, however, 
 land and fixtures, such as canal-locks, admitted to be necessary 
 to the working of the canal. The sheriff being about to sell the 
 property, the company filed a bill, praying for an injunction 
 against the sale, which was granted and made perpetual by the 
 Circuit Court, and, on appeal, this decree was affirmed. Chief 
 Justice Taney, delivering the opinion of the court, said: "The 
 property seized by the marshal is of itself of scarcely any value, 
 apart from the franchise of taking toll, with which it is connected 
 in the hands of the company ; and if sold under this fieri facias, 
 without the franchise, would bring scarcely anything ; but would 
 yet, as it is essential to the working of the canal, render the prop- 
 erty of the company in the franchise, now so valuable and pro- 
 ductive, utterly valueless. Now, it is very clear that the franchise 
 or right to the toll on boats going through the canal would not 
 pass to the purchaser under this execution. The franchise being 
 an incorporeal hereditament cannot, upon the settled principles 
 of the common law, be seized under a fieri facias. If it can be 
 done in any of the states, it must be under a statutory provision 
 of the state ; and there is no statute of Maryland changing the 
 common law in this respect. Indeed, the marshal's return and 
 the agreement of the parties show it was not seized, and, conse- 
 quently, if the sale had taken place, the result would have been 
 to destroy utterly the value of the property owned by the com- 
 pany, while the creditor himself would, most probably, realize 
 scarcely anything from those useless canal-locks and lots adjoin- 
 ing them. The record and proceedings before ,us show that there 
 
 i I'cr Drummond, J. - - l Iluxv - - :,: - 
 
 1 13
 
 § 159.] LEGAL NATURE OF ROLLING STOCK. 
 
 were other creditors of the corporation to a large amount, some of 
 whom loaned money to carry on the enterprise. And it would 
 be against the principles of equity to allow a single creditor to 
 destroy a fund to which other creditors had a right to look for 
 payment, and equally against the principles of equity to permit 
 him to destroy the value of the property of the stockholders, by 
 dissevering from the franchise property which was essential to its 
 useful existence." 
 
 159. In Pennsylvania the policy of the law with reference 
 to the levying of executions upon a railroad or its appurte- 
 nances has been declared in several cases to be, that any property 
 of the corporation necessary to the exercise of the franchises 
 granted to it cannot be levied on and sold under an execution on 
 a judgment against the corporation. 1 
 
 In one case, in which a levy upon loose rails and chairs in- 
 tended for use in repairing a railroad was called in question, it 
 was held that even if the rails and chairs be not regarded as affixed 
 to the realty, but as standing to the road in the same relation as 
 the rolling stock, — personalty by nature, but appurtenant by use, 
 and necessary to operate the road, — considerations of public pol- 
 icy forbid the levy and sale on execution of such articles. In- 
 dependently of the public purpose for which they are used, doubt- 
 less such property is liable to seizure. This view of the subject 
 was forcibly presented in the Court of Common Pleas of Penn- 
 sylvania by Mr. Justice Agnew, afterwards of the supreme 
 bench of that state : 2 "A railroad corporation is but a servant 
 of the state, and, while it has its private ends, it must obtain 
 them through a faithful discharge of its obligation to the public, 
 for whose benefit its powers are conferred. Its charter is not 
 only the grant of its own privileges, but it is the evidence of 
 their consideration arising in the public benefit, and of 'its con- 
 tract to subserve this purpose. For this, and this alone, the state 
 imparts a portion of its sovereign power, and invests it with high 
 privileges. So completely subservient is it to the public good, so 
 clearly a trustee for a general purpose, its own property may be 
 
 i Youngman v. Elmira & Williamsport & Western R. R. Co. v. Parker, 9 Ga. 
 
 R. R. Co. 65 Pa. St. 278; Shamokin Val- 377. 
 
 ley R- R- Co. v. Livermore, 47 Pa. St. 2 Covey v. Pittsburg, Fort Wayne & 
 
 465 ; Susquehanna Canal Co. v. Bonham, Chicago R. R. Co. 3 Phila. Rep. 173. 
 9 Watts & S. (Pa.) 27. See, also, Macon 
 
 141
 
 REGARDED AS FIXTURES. [§ 160. 
 
 taken and used to fulfil a higher public use. So much is the no- 
 tion of a public trust involved in every such charter that every 
 doubt in its interpretation is resolved in favor of the public, and 
 against the private interest. If, besides their rails and their sup- 
 porting chairs actually imbedded in the track, the company may 
 not maintain deposits of others, at convenient intervals, for im- 
 mediate repair, and if, because they thus lie in piles they may be 
 seized all along the route by successive writs, the usefulness of the 
 railway as a public work must cease. If it may be dismantled 
 by attacking it in detail and seizing those things most easily re- 
 moved, though essential to its preservation, it would be but a step 
 to the end ; when stripped of all but its road-bed and fixtures, it 
 would be powerless to serve the public or benefit itself. 
 
 " The purpose of a railroad, the nature of its property, the 
 necessity of possession to accomplish its purpose, and the powers 
 conferred in the charter, leave no room to doubt the validity of a 
 mortgage, without delivery of possession of those chattels which 
 are necessary to carry out the object of incorporation. Though 
 the body is private, the object is public ; and it is clothed with a 
 portion of the sovereign power to accomplish this. But the right 
 of highway and of eminent domain to take private property for 
 its use cannot alone build a railway. The means to pay for labor, 
 machinery, equipment, &c, is essential, and power to borrow 
 money and pledge property is openly conferred in the same char- 
 ter to which those who assail the mortgage must look for the 
 power to contract with them. Rails for repairs, rolling stock, &c, 
 are as essential to the operation of the road and its public design 
 as the road-bed and fixtures themselves. Having conferred the 
 power to borrow money and mortgage the property, to carry out 
 an object of great public utility, it would be absurd to suppose 
 the legislature meant, in the teeth of its purpose, to require a 
 delivery of the property necessary for this purpose, in order to 
 make the mortgage effectual, while the mortgagees are under no 
 duty to operate the road." : 
 
 160. Consistent, perhaps, with the foregoing are late cases 
 in that state, in which it was held that, although ears, horses, har- 
 i j, and other personal property of a passenger railway oom- 
 
 1 Per Agnew, P. J., in Core; v. Pittsburg, Port Wayne & Chicago R. B. Co. 
 tupra. 
 
 io L45
 
 § 161.] LEGAL NATURE OF ROLLING STOCK. 
 
 pany, cannot be seized on execution as against a mortgagee of the 
 property, or as against the general creditors of the company after 
 its insolvency, yet in such cases the equity which would restrain a 
 sale at law springs from the fact of insolvency, or from the trusts 
 created by the mortgage. Mr. Justice Woodward, of the Supreme 
 Court of Pennsylvania, in a nisi prius case, 1 said : " Where, how- 
 ever, the question is presented independently both of insolvency 
 and mortgage trusts, — where the exemption from levy and sale is 
 claimed on no other ground than that of accession to the corporate 
 franchise, — I cannot agree that rolling stock and equipments are 
 as much exempt as the rails of the road. I know of no reason 
 why a railway company's horses and carriages may not be seized 
 on execution by a judgment creditor in the same manner as 
 the horses and carriages of any other debtor ; no reason, I mean, 
 that is intrinsic and self-existent in the economy of the corpora- 
 tion. Reasons may arise out of the equities created in favor of 
 other parties by a state of insolvency, or the fact of a mortgage ; 
 but apart from these considerations — considering a railroad com- 
 pany with reference only to its judgment and execution creditors 
 — I suppose it holds its personal property, as all other debtors do, 
 subject to levy and sale for debts. It is attempted to apply the 
 doctrine of fixtures, and to treat everything as part of the com- 
 pany's freehold which is essential to the carrying on of its appro- 
 priate business. That doctrine has never been so applied any- 
 where, I believe, — certainly not here in Pennsylvania." In the 
 case before the court, there being a question whether the com- 
 pany had power to mortgage, the court, without deciding this, 
 enjoined the levying of the execution until further order, but di- 
 rected that the lien should continue in the mean time. 
 
 161. In Kentucky also personal property essential to the 
 operating of a railroad is held not to be subject to execution. 
 Such seizures and sales are thought to lead to results too mischiev- 
 ous to be tolerated. In the case of Phillips v. Winslow 2 the court 
 say : " If executions can be levied upon one car, they can be lev- 
 ied upon all the cars upon the road. If they can be levied upon 
 part of the fuel, they can be levied upon all of it, and thus the 
 
 i Loudenschlager v. Benton, 3 Grant, 2 18 B. Mod. (Ivy.) 431, 44S ; and see 
 384; 4 Phila. Rep. 420; Brill v. West Douglass v. Cline, 12 Bush (Ky.), 608, 
 End P. Iiv. Co. 4 W. Notes of Cases, 139. 630. 
 
 146
 
 REGARDED AS FIXTURES. [§§ 162, 163. 
 
 business of the road may be entirely suspended. Such a result 
 would not only produce great injury to the plaintiff (the mort- 
 gagee), but great inconvenience to the public. It would prevent 
 all travel upon the road, and effectually destroy its business and 
 its usefulness. If the property was subject to execution, the plain- 
 tiff would have no right to complain, let the consequences be what 
 they might ; but, not being subject to execution, he has a clear 
 right to apply to the chancellor for an injunction to prevent an act 
 which might be productive of so great an injury ; the right to re- 
 deem the property, being a right that belongs to the corporation, 
 is liable for its debts ; but the defendants were not attempting 
 to sell this equity of redemption, but the property itself, which 
 they had no right to do." 
 
 In a later case in this state the court of appeals held that the 
 cars of a railway company are not subject to seizure and sale by a 
 ministerial officer, even for taxes. They are treated as fixtures 
 of its road. The collection of these taxes can be enforced only 
 under the supervision of a court of equitable jurisdiction, in the 
 same manner as the claims of creditors of the company are en- 
 forced." 1 
 
 162. In Tennessee it has been held that under a mortgage of 
 the main line of a railroad situated in the State of Arkansas and 
 covering all rolling stock, appurtenances, and income, cars from 
 the main line, found in Tennessee, were not subject to attachment, 
 but were protected as subject to the lien of the mortgage. 2 
 
 163. In New Jersey this question has been very fully dis- 
 cussed, and the arguments upon the question — whether rolling 
 stock is personal property or fixtures to the realty — most ably pre- 
 sented upon both sides in the different decisions rendered in the 
 case of Williamson v. The New Jersey Southern Railroad Company? 
 The Lackawanna Iron and Coal Company recovered a judgment 
 against this company in 1874, upon which execution was issued, 
 and levies were made in every county of the stale through which 
 the road was extended, upon the cars, engines, and rolling stock 
 
 1 Elizabethtown & Paducab B. It. Co. a 28 N. J. Eq. 277 ; S. C. 26 N. J. Eq. 
 v. Elizabethtown, 12 Bosh (Ky.), 233. 398; and finally, in the Couri of Errors 
 
 2 Buck v. Memphis & Little Bock B. and Appeals, March term, 1878,29 N. J. 
 
 R. Co. 4 C. I>. J. 4-iO. See § 104. Eq. 311. 
 
 147
 
 § 163. J LEGAL NATURE OF ROLLING STOCK. 
 
 of the company. In 1869 the company had executed a mortgage 
 to Williamson, in trust, to secure bonds to the amount of $2,000,- 
 000. This deed covered all the railways, branches, rights of way, 
 depots, station-houses, and the company's franchises then held or 
 thereafter to be acquired, including its rolling stock, fixtures, tools, 
 and machinery, and all real estate of every kind, unci all personal 
 property of every nature, then held or thereafter to be acquired. 
 A covenant for further assurance provided that the company 
 would hold all after-acquired franchises and property, real and 
 personal, in trust for the mortgagee, and would make conveyance 
 thereof accordingly from time to time, as the same might be ac- 
 quired. This mortgage was duly recorded as a mortgage of real 
 estate soon after it was executed and delivered, and long before 
 this judgment was recovered ; but it was not filed in compliance 
 with the act concerning chattel mortgages. The chancellor, in 
 an able opinion, held that the. rolling stock mortgaged with a 
 railroad is a part of the realty ; or, if it be considered personalty, 
 the provisions of the act concerning chattel mortgages had no ap- 
 plication. 1 " The railway and the cars, with the engines by which 
 they are drawn, together constitute a means by which the power 
 of steam is applied to the purpose of transportation of passengers 
 and freight. The superstructure of the road-bed and the track, 
 with the engines and cars specially adapted thereto, and fitted to 
 roll upon it, together constitute but one machine for those pur- 
 poses. The track, though merely laid upon the ground, is, by 
 common consent, regarded as real estate. The engines and cars 
 provided by the owners of the road to run thereon, and without 
 which the track is a valueless part of the machine, are not only in- 
 dispensable to it, but must be regarded as part and parcel of it, 
 and therefore partaking of its character. That railroad cars in- 
 tended for and placed upon a railroad may be used on any other 
 road of the same gauge does not militate against this proposi- 
 tion. If it did, the fact that a bell in a factory may be used 
 elsewhere ; that the stones in a mill may be used in any other mill 
 of the like character ; that the doors and shutters of a house may 
 be used in the construction of any other house ; and that fixtures 
 in a factory may be made available in many other factories, even 
 of a different character, would have been sufficient to have led the 
 courts to a different conclusion from that at which they have ar- 
 i Williamson v. N. Jersey Southern R. R. Co. 28 N. J. Eq. 277. 
 
 148
 
 REGARDED AS FIXTURES. [§ 163. 
 
 rived as to the character of such articles in connection with real 
 property. ' That which is parcel, or of the essence of the thing,' 
 says Sheppard, ' although at the time of the grant it be actually 
 severed from it, cloth pass by the grant of the thing itself ; and, 
 therefore, by the grant of a mill the mill-stone doth pass, albeit 
 at the time of the grant it be actually severed from the mill ; 
 so, by the grant of a house the doors, windows, locks, and keys 
 do pass as parcels thereof, albeit at the time of the grant they 
 be actually severed from it.' 1 
 
 " There is, obviously, no force in the argument that there is 
 no necessary connection between railroads and the engines and 
 cars used thereon, seeing that there are railroad companies which 
 own railroads, but no engines or cars, and whose railroads are 
 used by the engines and cars of other companies only. The rela- 
 tion of the cars to the track, their special adaptation to it, and 
 the intention of their owners — where they are also the owners 
 of the track — that they shall be used upon it, are considerations 
 which outweigh the suggestion that a railroad car and a locomo- 
 tive engine, by themselves considered, are, of course, personal 
 property. So are the stationary engine or the machine in the 
 machine-shop or place of sale, and the belting in the store where 
 it is sold. Property which would otherwise be chattels becomes 
 real estate merely by attachment, by annexation, actual or con- 
 structive, for use in connection with the real property to which 
 it is attached. In no other way is its character changed. If, as 
 in the case before me, the owners of a railroad, intending to use 
 it themselves for the purposes for which it was designed, shall 
 themselves supply it with engines and cars necessary for — and, 
 therefore, adapted to — such use, with the intention of using those 
 engines and cars thereon, accordingly the engines and cars may 
 well, under such circumstances as this case presents, be regarded 
 
 as part and parcel of the railroad If the engines and 
 
 cars were designed to slide upon the rails, there would probably 
 be no question raised as to their character; it would be conceded 
 that they are a part of the realty. The fact that, instead of slic- 
 ing, they are designed to move on wheels attached to the plat 
 forms on which they rest, and which constitute pari of them, can 
 make no dilTerence in the principle. En either case they are at 
 tached to the track, and adapted thereto to be moved thereon. 
 
 1 Touchst. 90. 
 
 1 19
 
 § 164.] LEGAL NATURE OF ROLLING STOCK. 
 
 The flanges of the wheels confine the cars and engines to the 
 track on which they must run, unci which they are not to leave. 
 If they leave it, they usually do so to their destruction. Of the 
 intention in this case to annex (using the term in a technical 
 sense) the cars and engines to the track, there is the most abun- 
 dant evidence. The mortgage shows it ; it is obvious, too, from 
 the character of the property and its relation to the railroad. 
 These latter considerations are of great importance in that con- 
 nection." 
 
 III. Rolling Stock regarded as Personal Property. 
 
 164. In the last-mentioned case the Court of Errors and 
 Appeals reversed the chancellor's decision in regard to the 
 nature of rolling stock, and established the rule in New Jersey 
 that this kind of property must be regarded as personalty, and 
 that a mortgage of it, to be valid, must conform to the provisions 
 of the act relating to mortgages of property of that description. 1 
 Mr. Justice Depue delivered the able and learned decision of the 
 court, in the course of which he said : " The criterion of actual 
 connection of the freehold, as a rule for determining when chat- 
 tels become part of the realty, is as well settled in this state 
 as any other rule of property. Exceptions founded on fanciful 
 and groundless distinctions only tend to produce uncertainty and 
 confusion in the rules of property, which should be permanent 
 and uniform. ' The general importance of the rule,' says Cowen, 
 J., ' which goes upon corporeal annexations, is so great that more 
 evil will result from frittering it away by exceptions than can arise 
 from the hardships of adhering to it in particular cases.' 2 Tested 
 by the foregoing criterion, it is manifest that the rolling stock of 
 a railroad must be regarded as chattels which have not lost their 
 distinctive character as personalty by being affixed to and incor- 
 porated with the realty. It is true that engines and cars are 
 adapted to move on the track of the railroad, and are necessary 
 to transact the business for which the railroad was designed. But 
 
 1 Williamson v. N. J. Southern E. E. ages." Chief Justice Green declared that 
 
 Co. 29 N. J. Eq. 311. In the earlier case engines and cars are no more appendages 
 
 of The State Treasurer v. Somerville & of a railroad than wagons and carriages 
 
 Easton E. E. Co. (4 Dutch.) 28 N. J. L. 21, are appendages of a highway, 
 rolling stock had been regarded as per- 2 Walker v. Sherman, 20 Wend. (N. Y.) 
 
 sonal property, and not included under a 656. See, also, McMillan v. N. Y. Water 
 
 statute taxing a " road with its append- Proof Paper Co. 29 N. J. Eq. 610. 
 
 150
 
 REGARDED AS PERSONAL PROPERTY. [§ 164. 
 
 unattached machinery in a factory, the implements of husbandry 
 on a farm, and furniture in a hotel, are similarly adapted for use 
 in the factory, on the farm, in the hotel, and are equally essential 
 to the profitable prosecution of the business in which they are 
 employed. When regard is had to the fundamental and necessary 
 condition under which the law permits chattels to become part of 
 the realty, engines and cars of the rolling stock of a railroad ut- 
 terly fail to answer the requirements of the law. Cars which left 
 Jersey City this morning, before the close of the succeeding week 
 will be found scattered over all the West, or on the Pacific coast, 
 — their places of transportation through this state being supplied 
 by cars gathered from the railroads of other companies, many of 
 which are located in other states. The suggestion that each one 
 of these cars carries with it the attributes of realty in its journey 
 through other states, or even over other railroads in this state, 
 will show the incongruity of denominating that a fixture which, 
 in its ordinary use, travels over other railroads, and is connected 
 with the railroad of its owner in no other way than in its useful 
 employment in the business in which the company is engaged. 
 
 " Having reached the conclusion that the rolling stock of a rail- 
 road is personal property, the next inquiry will be, whether a 
 mortgage of such property is within the provisions of the statute 
 requiring such mortgages to be filed. In this state the legislative 
 policy is to require the registry or filing of mortgages of all prop- 
 erty which is visible and tangible, and to postpone the lien of 
 every mortgage, not registered or filed as prescribed by law, to 
 the claims of third persons — the creditors of the mortgagor and 
 subsequent bond fide purchasers or mortgagees. This is apparent 
 from ;iu inspection of the statute." 1 Referring to the language 
 of the statute, the learned judge goes on to say that, giving the 
 words their primary and legal signification, — which is the car- 
 dinal rule for the construction of statutes, — it must be construed 
 to apply to all mortgages of property, such as is comprised under 
 the description of "goods ami chattels," as distinguished from 
 lands; and that the court cannot interpolate any qualification of 
 the plain language of the statute upon any supposed inconven- 
 
 1 Rev. 705-709. This .statute applies immediate delivery and followed by an 
 
 to "every mortgage or conveyance in- actual ami continued change of posses- 
 
 tended t" operate as a mortgage of goods sion." 
 and chattels, — not accompanied by an 
 
 151
 
 § 1G4.] LEGAL NATURE OF ROLLING STOCK. 
 
 ience arising from its application to any particular class of prop- 
 erty which is within the operative words of the act. 
 
 Pending this suit the State of New Jersey passed a statute in 
 reference to the registration of mortgages given by certain cor- 
 porations, providing that nothing in any of the laws of the state 
 shall be held to require the filing of record of any mortgage given 
 by any such corporation conveying the franchises, and including 
 chattels then or thereafter to be possessed and acquired, if such 
 mortgage shall be duly lodged for registry as a conveyance of real 
 estate. 1 But the court regarded the rights of the judgment cred- 
 itor as fixed and vested in 1874, when the levy was made under 
 the executions, which no subsequent legislation could take away. 
 The Act of 1876 does not necessarily require a retrospective con- 
 struction, and, therefore, the court would not allow it that effect ; 
 and, if the language used required such a construction, it could 
 not be effective to deprive a party of prior vested rights acquired 
 under the levy. 
 
 Another point made on the argument was that, even if the roll- 
 ing stock be goods and chattels, and a mortgage thereof be re- 
 quired to be registered or filed by the Chattel Mortgage Act, the 
 mortgagee having taken actual possession of such property before 
 the judgment was recovered, the complainant's mortgage is enti- 
 tled to priority over the judgment. The mortgage was made on 
 September 14, 1869, and possession was not taken of the rolling 
 stock by the mortgagee until January 1, 1874. The mortgage 
 was not accompanied by an immediate delivery of the property 
 mortgaged, but possession was taken before the judgment was 
 recovered. But, while a subsequent purchaser or mortgagee, in 
 order to avoid a prior mortgage for neglect to file the same, or to 
 take possession, must have taken his title under the mortgagor in 
 good faith, and without notice of the existence of the antecedent 
 mortgage, a creditor may avoid it, although he has such notice. 
 Consequently, possession taken of the mortgaged property under 
 a prior chattel mortgage, however long postponed, will give it 
 priority over a subsequent purchase or mortgage, if possession be 
 taken in fact before such subsequent sale or mortgage was made. 
 But a creditor is entitled to the benefit of the statute, whether his 
 rights accrued before or after the mortgage ; and, since his knowl- 
 edge of the existence of the mortgage does not preclude him from 
 
 1 Acts of 1876, p. 308, § 4. 
 
 152
 
 REGARDED AS PERSONAL PROPERTY. [§ 165. 
 
 availing himself of the objection that the mortgage is void, be- 
 cause it was not accompanied by immediate delivery of the things 
 mortgaged, followed by an actual and continued change of posses- 
 sion, a subsequent taking possession by the mortgagee of the chat- 
 tels mortgaged will not give validity to the mortgage as against 
 such creditor. He is entitled to the benefit of the statute in all 
 cases ; and the mortgage is not valid against him unless it is 
 filed according to the statute, or there was an immediate delivery 
 and continued change of possession of the things mortgaged. 1 
 
 165. In New York it has finally come to be the settled 
 doctrine of the courts that the rolling stock of a railroad is 
 personal property, and not part of the realty, and that a mort- 
 gage is not effectual to give a lien upon such rolling stock as 
 against creditors of the company unless it be recorded as a chat- 
 tel mortgage. This question was first passed upon in this state 
 in the year 1857, by the Supreme Court, which held that rolling 
 stock is to be deemed constructively annexed to the road, and 
 that a mortgage of a road and its equipment is effectual against 
 judgment creditors without being filed as a personal property 
 mortgage. 2 In the following year other justices of the same court 
 held that rolling stock should be regarded as personalty, and that 
 a mortgage of it was ineffectual unless it was filed under the act 
 relating to mortgages of personal property. 3 This decision was 
 followed in the year 1859, by another rendered in the same court, 
 which sustained the same view. 4 For several years there seems 
 to have been a general acquiescence in these decisions. But in 
 1867 the matter was again brought in question in the Supreme 
 Court, at special term, before Mr. Justice Sutherland, who, while 
 holding that rolling stock does not become part of the realty, 
 also held that a mortgage of the franchises and property of a 
 railway, so far as the personal property covered by it is con- 
 cerned, should not be deemed to be subject to the Chattel Mort- 
 gage Act. 6 At general term this decision was affirmed; 6 and 
 
 " Williamson v. N. J. Southern K. Ii. 4 Beardsley v. Ontario Bank, 31 Barb. 
 Co., |" r Depne, J. supra ; and see Stevens (N. Y.) 619. 
 
 v. Buffalo^ New York City R. R. Co. 31 6 Be'ment v. Pittsburgh & Montreal K. 
 Barb. IS. Y.) 590; Thompson v. Van R Co. 47 Barb. (N. Y.) 104, 109. 
 7echten,27 N. 1 '' Hoyle v. Plattsburgh & Montreal R. 
 
 - Farmers' Loan & Trust Co. v. Hen- R. Co. 51 Barb. (N. Y.) 45. 
 drickson, 25 Barb. (N. Y.) 484. 
 
 ■■ Stevens v. Buffalo & New York City 
 R. R, Co. 31 Barb. (X. Y.j 590. 
 
 153
 
 § 165.] LEGAL NATURE OF ROLLING STOCK. 
 
 Mr. Justice In graham, delivering the only opinion, declared that 
 he was not prepared to accede to the opinion that rolling stock 
 is in all cases to be considered as personal property, but that, 
 when the intent of the parties is manifest that the rolling stock 
 should pass as part of the realty, such a construction should be 
 given to the transaction. He held that the Chattel Mortgage Act 
 did not apply to a mortgage executed by a railroad company of 
 its corporate property and franchises, for such a mortgage is in- 
 tended both by the legislature which authorized it, and by the 
 parties to it, to be treated as a mortgage of the road and its ac- 
 cessories. Upon appeal to the Court of Appeals it was held that 
 the rolling stock of a railway does not pass by a mortgage as part 
 and parcel of the realty ; and, also, that the law requires a mort- 
 gage of such property to be filed as a chattel mortgage when no 
 change of possession takes place. 1 Upon the first point the court 
 say : " Looking now at the rolling stock of a railroad, it is orig- 
 inally personal in its character; it is subservient to a mere per- 
 sonal trade — the transportation of freight and passengers. The 
 track exists for the use of the cars rather than the cars for the 
 use of the track. There is no annexation, no immobility from 
 weight ; there is no localization in use. The only element on 
 which an argument can be based to support the character of 
 realty is adaptation to use, with and upon the track. At the 
 present time, independent companies exist owning no tracks, 
 whose trains run through state after state on the railroad track of 
 other companies. It is no uncommon sight to see the cars of half 
 a dozen companies formed into a single train, and running from 
 New York to Illinois and Missouri. It is impossible to deal with 
 such property as part of the realty without introducing anoma- 
 lies and uncertainties of the gravest character. Call cars and en- 
 gines part of the realty — where shall they be taxed ? Real es- 
 tate is to be taxed at its site. What is the site of a railroad train 
 running from New York to Buffalo in a day ? Shall it be taxed 
 in each town where the assessors catch sight of it rushing by at 
 thirty miles an hour? 2 Or, if a judgment be docketed in one 
 
 i Hoyle v. Pittsburgh & Montreal R. - To recur to the old example, — doves 
 
 R. Co. 54 N. Y. 314; S. C. 7 Am. Ry. in a dove-cote are constructively annexed 
 
 Rep. 283. In Randall v. Elwell, 52 N. Y. to the realty. But do they not fly through 
 
 521, it is decided that rolling stock is per- the air at the rate of thirty miles an hour, 
 
 sonal property, and, as such, is liable to and temporarily leave the real estate to 
 
 be seized and sold for taxes. which they are annexed 1 
 
 154
 
 REGARDED AS PERSONAL PROPERTY. [§ 166. 
 
 county on the line, will its lien attach on each car as it is whirled 
 past?" 
 
 In regard to the difficulties and embarrassments thus presented 
 by the learned judge who delivered the opinion of the court, it 
 may be remarked that, because rolling stock is considered to be 
 a part cf the realty as between the mortgagees and creditors 
 claiming liens upon it as personal property, it is not necessary 
 that it should be considered realty for the purpose of taxation ; 
 or that it should be considered realty in any other relation than 
 that existing between the railroad company and those claiming 
 under it on the one hand, and the mortgagees on the other. It 
 is admitted this view is well adapted and accommodated to this 
 relation, at least so far as the mortgagor and mortgagee are 
 concerned. Because a railway track annexed to the realty by a 
 mortgagor becomes part and parcel of it as to the mortgagee, it 
 does not follow that if the track were built by a tenant for use 
 in his trade, upon leased lands, that it would become a part of 
 the realty as to him. The right of the mortgagee to hold it as 
 realty in the one case, and the right of the tenant to remove it 
 in the other, would be beyond question. 
 
 166. Upon the point whether a mortgage of rolling stock, 
 when not considered a part of the realty, is within the stat- 
 ute relating to the filing of personal property mortgages, the 
 court well say that, if this case is to be excepted, it must be 
 either on account of the character of the mortgage or of the prop- 
 erty mortgaged, or on account of some provision of the statute 
 law taking away the necessity of filing. "A railroad corpora- 
 tion does not differ from any other corporation, nor from any 
 natural person, in respect to the general obligation to obey the 
 laws. It is just as likely to get fraudulent credit as any other 
 corporation, and can claim no special immunity. No distinction 
 can be drawn to exclude ;i railroad corporation from tin' provi- 
 sions of I liis statute which would not equally exclude every trading 
 
 corporation In respect to the character of the property 
 
 mortgaged, no exemption from obedience to the law can be sus- 
 tained. A railroad and rolling stock may be Owned by a private 
 individual by purchase, or may be constructed l>\ a private indi- 
 vidual on his own land, and he may lake fare for its use such a 
 he pleases to charge; unless lie wants the public power of emi- 
 
 L55
 
 § 167.] LEGAL NATURE OF ROLLING STOCK. 
 
 nent domain, or the use of public property or easements, he has 
 no occasion to consult anything but his own will, and his own 
 purse about constructing or running a railroad. The character of 
 the property itself cannot, therefore, furnish any exemption from 
 obedience to the law." 1 
 
 Whether such a mortgage is to be filed only in the town in 
 which the corporation has its principal place of business, or in 
 every town through which the line of the road passes, is a question 
 which the court, in this case, do not decide — the law requiring 
 the filing of the mortgage in the town where the mortgagor re- 
 sides, or where the property mortgaged is at the time. For many 
 purposes, they say, a corporation is to be deemed resident where 
 its place of business or chief office is situated, and at most it could 
 only be deemed resident in all the towns in which any part of its 
 line is located. But, as elsewhere noticed, the recording of mort- 
 gages of rolling stock is now regulated by statute. 
 
 167. In Ohio rolling stock is regarded as personal property. 
 In one case 2 the court drew a broad line of distinction between 
 the real and personal property of a railway company, including in 
 the former the road as constructed and prepared for use, with its 
 fixtures of timber and iron for the track, of stone and timber for 
 bridges and culverts, its depots and structures for supplying wa- 
 ter ; and in the latter those things requisite for operating the road 
 — locomotives, cars, and other articles and materials, some of 
 which are consumed in the use, and require to be renewed from 
 time to time. The line is broadly drawn between the interest in 
 real estate and the franchises connected therewith, and the mova- 
 ble things employed in the use of the franchise. " The distinc- 
 tion," says Mr. Justice Gholson, " appears to us to be as plain 
 as that between a farm and the implements and stock which the 
 proper use of the farm necessarily requires. There are instances 
 which may be put still more analogous. Take, for example, a 
 ferry franchise. It is connected with real estate ; it is itself an in- 
 corporeal hereditament, and, therefore, real estate. The use of this 
 franchise requires boats and other movable appliances. But these, 
 when employed in the use of the ferry franchise, do not thereby be- 
 
 1 Per Johnson, Com'r, in Hoyle v. 2 Coe v. Columbus, Piqua & Indiana R. 
 Plattsburgh & Montreal R. R. Co. 54 N R. Co. 10 Ohio St. 372. 
 Y. 314. 
 
 156
 
 REGARDED AS PERSONAL PROPERTY. [§ 168. 
 
 come a part of the real estate ; they are the personal property of 
 the owner of the ferry franchise — or, it may be, of some person 
 to whom the ferry franchise has been demised for a term of years. 
 Considerations of public policy and convenience have been pressed 
 upon our attention in connection with the question under exami- 
 nation. It may be true that a railway corporation holds its prop- 
 erty, in a certain sense, as a public trust — to answer the purpose 
 of a public highway, the transportation of persons and property. 
 But it is consistent with that public trust to contract obligations. 
 Indeed, the very exercise of the trust necessarily involves obliga- 
 tions to individuals ; and, to meet those obligations, the property 
 of the corporation must in some form be liable. The question is, 
 In what form ? Shall it be in the ordinary legal form applicable 
 to the property of individuals, or shall peculiar rules be introduced, 
 which may have the effect to delay creditors and operate as a shield 
 to protect property from their just demands?''' In conclusion, 
 the court say that the interest of the owners of the road must be 
 the reliance for its continued operation ; that it is not the policy 
 of the state, nor would it be just to individuals, that the power of 
 the court should be invoked to enable an insolvent corporation 
 to operate a railroad by protecting its property from the claims of 
 creditors — those, it may be, who have performed for it labor, or 
 have suffered losses or sustained injuries by the misconduct of its 
 agents. 
 
 168. In New Hampshire l the rolling stock of railroads, like 
 other personal property, is held liable to attachment and levy 
 when not in actual use. It was argued by counsel for a railroad 
 company whose property was attached, that, such property being 
 necessary to enable the corporation to discharge its public duties, 
 it vested in the corporation in trust for the public ; that the fran- 
 chise of the corporation is the principal thing, to which the track, 
 depots, engines, cars, and tin; like, are mere incidents, and that all 
 these constitute one entire thing, so connected that the cars and 
 engines cannot be severed from their connection by an attachment 
 
 i Boston, Concord & Montreal R. B. in its relations t<> the public, which pre- 
 
 Co. >•. Gilmore, .'S7 N. II. 410. In tin- vented it from making a valid mortgage 
 
 earlier case of Pierce v. Emery, 32 N. II. of its personal property nol affixed to the 
 
 484, the Supreme Court of this Btate had road, though used in operating it. See 
 
 held thai there was nothing in tin- nature § 125. 
 of the business of a railroad company, or 
 
 L57
 
 § 169.] LEGAL NATURE OF ROLLING STOCK. 
 
 or seizure on execution, and held as security or sold and applied 
 as personal property ordinarily may be, for the payment of the 
 corporate debts. But the court say the idea that property, either 
 real or personal, may become a mere incident to a franchise, so 
 that the franchise and property shall constitute an entire thing, is 
 not found in any of the books of the common law. A ferry is 
 mentioned as an instance of a franchise, for the use of which, and 
 for the discharge of its public duties in the transportation of pas- 
 sengers and goods, its boats are wholly indispensable ; yet no case 
 is found where it has been claimed that such boats are exempt 
 from seizure in discharge of the owner's debts. " Considering, 
 then, that it is not necessary for the discharge of the public duties 
 of railroad corporations that they should be the owners of cars or 
 engines — many such roads being operated with the cars of other 
 corporations ; that it is a matter of great uncertainty what articles 
 of the personal property of such corporations are necessary for the 
 discharge of their public duties ; that no means exist by which it 
 can be determined what is necessary or otherwise ; that it must 
 be very difficult for courts to lay down any definite rule by which 
 officers can be guided, who, in all such cases, must decide at their 
 peril, — it seems to be neither judicious nor expedient to establish 
 an exemption of this kind, unless it is done by the direct action of 
 the legislature, who can provide the proper rules and safeguards 
 for the safety of officers as well as of parties." 
 
 169. In Massachusetts it has been held that under a mortgage 
 of a railroad its locomotives and cars, together " with all improve- 
 ments made upon such property, and all additions thereto, by add- 
 ing new locomotives, cars, and other things," cars subsequently 
 purchased by the corporation are included, although the mort- 
 gagees had not taken possession for foreclosure ; but the decision 
 was based in part upon the fact that the mortgage was confirmed 
 and ratified by legislative act, and thus effect was given to all 
 parts of it, including the provision as to after-acquired machinery 
 and cars. This mortgage was duly recorded, and thus, say the 
 court, by means of the record and the statute, the lien thereby 
 created was duly notified to all persons having dealings with the 
 corporation ; and therefore a creditor of the corporation could not 
 make a valid attachment of cars subsequently purchased. 1 
 1 Howe v. Freeman, 14 Gray (Mass.), 566 
 
 158
 
 CONSTITUTIONAL AND STATUTORY PROVISIONS. [§§ 170, 171. 
 
 170. In conclusion, upon this part of the subject it may be 
 said that, while there are many and strong arguments for holding 
 that rolling stock is part of the realty, — and this view seems to 
 have the support of the United States courts, — the weight of 
 authority in the state courts seems to be against that position. 
 There is, however, no hope that any uniform and settled rule upon 
 this subject will soon be arrived at by the courts without the aid 
 of legislative enactments. It is of the highest importance that the 
 validity of mortgages intended to embrace the rolling stock and 
 other personal property of a railroad should not be left to the un- 
 certain decision of the courts ; for in the present state of the law, it 
 must at least be regarded as uncertain how the question would be 
 determined by any court not bound by a precedent or by statute, 
 
 IV. Constitutional and Statutory Provisions regarding Rolling 
 
 Stock. 
 
 171. In several states there is now a constitutional pro- 
 vision " that rolling stock and all other movable property be- 
 longing to any l'ailroad company or corporation shall be considered 
 personal property, and shall be liable to execution and sale in the 
 same manner as personal property of individuals, and the general 
 assembly shall pass no law exempting any such property from ex- 
 ecution and sale." This provision was first made a part of the 
 fundamental law of Illinois 1 in 1870, where the courts had pre- 
 viously declared rolling stock to be fixtures. This provision has 
 since then been adopted in the same words in Missouri, 2 Arkan- 
 sas, 3 Nebraska, 4 Texas, 5 and West Virginia. 6 
 
 Tin' general purpose of this constitutional provision is, undoubt- 
 edly, to enable general creditors of railroad corporations, whose 
 claims may be small, to find property out of which their claims may 
 be satisfied. When the franchise and property of a railway com- 
 pany, and perhaps its tolls as well, are all covered by mortgage, 
 the general creditors are practically left without remedy against 
 it; for, even if there be any value in Hie property above the mort- 
 gage, it is extremely difficult for a general ere. linn- to reach and 
 apply the surplus to the payment of his claim, while the ex- 
 penses of the proceedings for this purpose are verj Large. 
 
 1 Const. 1870, art. xi. § 10. c Const, lsrc, art. x. § I. See, also, 
 
 - Const. 1875, art. xii. § 10. General Railroad Acl 1876, ch. 97, § 24. 
 
 - ' onst. i-:i, art xvii. § 11. o Const. 1872, art. xi. 
 1 Const. 1875, art. xi. § 2.
 
 § 171.] LEGAL NATURE OF ROLLING STOCK. 
 
 This provision, however, would not prevent the mortgaging of 
 rolling stock as personal property ; and a railroad mortgage re- 
 corded in accordance with the law regulating the recording of 
 chattel mortgages would effectually cover such property. More- 
 over, as already noticed, this provision does not change the rule 
 that a mortgage may be made to cover after-acquired rolling 
 stock. 1 
 
 As already intimated, it seems to be a matter of the highest 
 importance to mortgage bondholders that the different states 
 should, by statute, make it certain where a mortgage of a rail- 
 road, including its equipment, should be recorded in order to make 
 the lien effectual as to the rolling stock and other like property. 
 In those states in which the laws require that mortgages of per- 
 sonalty shall be filed for record in the office of the clerk of the 
 city or town in which the mortgagor resides, it may be sufficient 
 to record a railroad mortgage only in the city or town where the 
 railroad corporation has its principal office or place of business. 2 
 That, for most purposes, is regarded as the place of residence of 
 the corporation. 3 It would be an extreme inconvenience to the 
 mortgagee, and a source of great danger of loss, if he is in such 
 cases required to record his mortgage in several hundred towns, 
 it may be, through which the mortgaged road may pass. The 
 supposition that a railroad corporation is a resident of the place 
 where its principal office is located, rather than a resident of all 
 the towns through which its line of road passes, has been acted 
 upon frequently in the matter of recording railroad mortgages ; 
 but without positive legislation upon the subject, or legal decision 
 of this point, there is just enough uncertainty about it to make 
 the position of a mortgagee, who looks to the rolling stock and 
 other personal property embraced in his mortgage as a material 
 part of his security, quite uncomfortable. The legislation that is 
 demanded upon this subject is that which has been adopted in 
 several states, namely, the making of the record required for the 
 protection of the real estate included in the mortgage, effectual 
 also as a record of the personal. 
 
 i Scott v. Clinton & Springfield R. R. the situs of its personalty. Cooley on 
 
 Co. 6 Biss. 529. Tax. 273, and eases cited ; City of Da- 
 
 2 So provided by statute in Maine (Rev. buque v. Illinois Central R. R. Co 39 
 Stat. 1871, eh. 91, § 1)- Iowa, 5G ; State v. Severance, 55 Mo. 
 
 3 As, generally, for taxation, the place 378; Pacific It. R. Co. v. Cass County, 
 of business of the corporation is considered 53 Mo 17 ; Dillon Munie. Corp. § 629. 
 
 160
 
 CONSTITUTIONAL AND STATUTORY PROVISIONS. [§§ 172-174. 
 
 Of course, when a subsequent incumbrancer has actual notice 
 of a prior mortgage, and of the fact that its terms embrace roll- 
 ing stock, he cannot object that it was not filed as a chattel mort- 
 gage, because the notice is equivalent to such filing. 1 
 
 172. In California 2 locomotives, engines, and other rolling 
 stock of a railroad, are enumerated among the articles of per- 
 sonal property of which a mortgage may be made. But mortgages 
 of personal property are recorded in the office of the county re- 
 corder, in which mortgages of real property are also recorded ; 
 only they must be recorded in books kept for personal mortgages 
 exclusively, and must be recorded in the county in which the 
 mortgagor resides, and also in that in which the property is sit- 
 uated, or to which it may be removed. Personal property used 
 in conducting the business of a common carrier is to be taken as 
 situated in the county in which the principal office or place of 
 business of the carrier is located. 
 
 173. In Connecticut 3 it is provided by statute that, whenever 
 any railroad company has mortgaged its railroad, pursuant to law, 
 to secure its bonds, and has included in said mortgage all or any 
 part of its rolling stock, locomotives, and cars, whether those owned 
 by it at the date of said mortgage or those thereafter to be ac- 
 quired by it for use upon said railroad, or both, such mortgage 
 shall be deemed valid and effectual as respects all the property 
 therein included as aforesaid; and may be foreclosed in the same 
 manner as ordinary mortgages of real estate ; and the record 
 thereof in the office of the secretary of state shall be a sufficient 
 record and notice to protect the title under the mortgage, not- 
 withstanding such company may remain in possession of all or 
 any [cut of the mortgaged property. 
 
 174. In Dakota Territory 4 it is provided that any mortgage 
 or deed of trust made upon the lands, road, or other property of 
 a railroad corporation shall bind and be a valid lien upon all the 
 property mentioned in such deed or mortgage, including rolling 
 stork ; and tin; purchaser under foreclosure of such mortgage or 
 
 1 Benjamin v. Elmira, Jefferson & Can- » Public Acta 1*77, cli. 38. 
 andaigua R. it. Co 54 X. V. 075. < Rev. Code 1877, p. 304. 
 
 2 Civil Code, §§ 2955, 2959, 2961. 
 
 " 101
 
 § 175.] LEGAL NATURE OF ROLLING STOCK. 
 
 trust deed shall have and enjoy all the rights of a purchaser on 
 execution sale. Such mortgages or deeds of trust may by their 
 terms include and cover, not only the property of the corpora- 
 tion making them at the time of their date, but property, both 
 real and personal, which may thereafter be acquired by them, 
 together with all the material and property necessary for the use 
 and operation of such roads, and are as valid and effectual as if 
 the property were in possession at the time of the execution 
 thereof. Such mortgages or deeds of trust must be recorded in 
 the office of the register of deeds of each organized county through 
 which such road mortgaged or deeded may run in this territory, 
 or wherever it may hold lands included in such mortgages or 
 deeds of trust, and are notice to all the world of the rights of all 
 parties under the same ; and for this purpose, and to secure the 
 rights of mortgagees or parties interested under deeds of trust so 
 executed and recorded, the rolling stock, personal property, and 
 material necessary for operating the same shall be deemed a part 
 of the road, and such mortgages and deeds so recorded have the 
 same effect, both as to notice and otherwise, as to the personalty, 
 that they have upon the real estate covered by them. 
 
 175. In Florida the general law of 1874, for the incorpora- 
 tion of railroads and canals, provides that a railroad company may 
 make such provisions in any trust deed or mortgage for trans- 
 ferring the railroad, the rolling stock, and other furniture and 
 appurtenances, in connection therewith, or which shall thereafter 
 belong to it as security for any bonds, debts, or sums of money 
 secured, as the company may deem proper. Such trust deed or 
 mortgage may, by the direction of the board of directors of 
 such company, be recorded in the office of the secretary of state, 
 in a book kept for that purpose, and when so recorded, it is 
 evidence and notice to all persons of its existence and lawful ex- 
 ecution without its being recorded elsewhere in the state ; and 
 when so recorded it has the same effect as if recorded in the sev- 
 eral counties through which the road may be built, and is notice 
 to the same extent and effect as if so recorded. 1 All rolling 
 stock used in connection with a railroad is declared to be fixtures, 
 and is subject to the lien of any mortgage of the roacL 2 
 
 1 Acts of 1874, ch. 1987, § 9, par. 10, 2 lb. § 31. 
 and § 31. 
 
 162
 
 CONSTITUTIONAL AND STATUTORY PROVISIONS. [§§ 176-178. 
 
 176. In Iowa 1 it is provided that any mortgage of the real 
 and personal property of a railroad company, whether then owned 
 by it or afterwards acquired, when duly executed and recorded in 
 the office of the recorder of each county through which the rail- 
 way of the corporation may run, or in which any property mort- 
 gaged may be situated, shall be notice to all the world of the 
 rights of all parties under the same ; and for this purpose, to se- 
 cure the rights of mortgagees or parties interested under deeds 
 of trust so executed and recorded, the rolling stock and personal 
 property of the company properly belonging to the road, and ap- 
 pertaining thereto, shall be deemed a part of the road, and such 
 mortgages and deeds so recorded shall have the same effect, both 
 as to notice and otherwise, as to the personalty, that they have 
 upon the real estate conveyed by them. 
 
 177. In Massachusetts 2 it is provided that any railroad com- 
 pany may issue bonds for any lawful purpose, and may mortgage 
 or pledge as security for the payment of such bonds any part, 
 or all of its road, equipment, or franchise, or any part, or all of 
 its property, real or personal. 
 
 It is provided that cars and engines in use upon railroads shall 
 not be attached upon mesne process in any suit within forty-eight 
 hours previous to their fixed time of departure, unless the officer 
 shall have first demanded other property equal in value to the 
 ad damnum in the writ upon which to make such attachment, 
 and such demand has been refused or neglected. 3 
 
 178. In Minnesota, 4 by a statute enacted in 1868, mortgages 
 or deeds of trust of railroad companies may, by their terms, include 
 and cover, not only the property of the companies making them 
 at the time of their date, but property, both real and personal, 
 which may thereafter be acquired by them, and they are as valid 
 and effectual for that purpose as if the property were in possession 
 at the time of the execution thereof. Such mortgages or deeds of 
 trust recorded in the office of the register of deeds of each county 
 
 1 Code 1873, §§ 1284, 1285. Yet the 3 Act 1875, ch. 144, § 1. 
 
 rolling stock seems to be regarded as per- 4 l St;it. at Large 1873, p. 431; Act 
 
 Bona! property. City of Dubuque '■. Illi- March 5, 1868. As to record in the office 
 
 uois Central K. II. Co. 89 Iowa, 56, 86, of the secretary of state having same effect, 
 
 per Beck, J. see Act March 6, 1867 ; I Stat, at Large, 
 
 2 Acts 1874, ch. .T72, § 49 ; 1875, ch. 58. 430. 
 
 1G3
 
 §§ 179-181.] LEGAL NATURE OF ROLLING STOCK. 
 
 through which the road mortgaged or deeded may run, or wher- 
 ever it may hold lands, will be notice to all the world of the rights 
 of all parties under the same ; and for this purpose, and to secure 
 the rights of mortgagees or parties interested under deeds of trust 
 so executed and recorded, the rolling stock and personal property 
 of the company properly belonging to the road and appertaining 
 thereto are deemed a part of the road, and such mortgages and 
 deeds so recorded have the same effect, both as to notice and other- 
 wise, as to the personalty, as upon the real estate covered by them. 
 
 179. In Montana Territory 1 it is provided that any railroad 
 corporation may mortgage its property and income ; and, if the 
 mortgage shall so provide, it shall be and remain a valid lien upon 
 all of the property of the company of whatever kind then exist- 
 ing, or that may thereafter be by it acquired, irrespective of the 
 law now in force relating to chattel mortgages, and the same shall 
 be taken, held, and enforced in the same manner as mortgages 
 upon real estate now are held and enforced. 
 
 180. In Nebraska 2 the general railroad law provides that mort- 
 gages and deeds of trust of railroad companies shall be recorded in 
 the office of the county clerk of each organized county through 
 which the mortgaged road may run, or in which it holds lands, 
 and shall be notice to all the world of the rights of all parties 
 under the same ; and for this purpose, and to secure the rights of 
 mortgagees or parties interested under deeds of trust, the rolling 
 stock, personal property, and material necessary for repairing the 
 road of the company, belonging to said road, or appertaining 
 thereto, shall be deemed a part of the road, and such mortgages 
 and deeds of trust so recorded shall have the same effect, both as 
 to notice and otherwise, as to the real estate covered by them. 
 
 181.- In New Jersey 3 a law passed in 1876 provided that noth- 
 ing in any of the laws of the state shall be held to require the fil- 
 ing of record in the clerk's office of any county of any mortgage 
 given by any such corporation, conveying the franchises thereof, 
 and whereby, also, any chattels then or thereafter to be possessed 
 and acquired by such corporation shall purport to be mortgaged ; 
 
 i Laws 1873, p. 102. 3 Laws 1876, p. 308, § 4 ; 2 Rev. 1877, 
 
 2 Gen. Stat. 1873, ch. 11, § 120. p. 924, § 82. 
 
 164
 
 CONSTITUTIONAL AND STATUTORY PROVISIONS. [§§ 182-184. 
 
 provided, that such mortgage shall be duly lodged for registry ac- 
 cording to the laws regulating the conveyance of real estate. 
 
 182. In New York 1 it was, in 1868, provided that it shall not 
 be necessary to file as a chattel mortgage any mortgage which 
 has been, or may be, executed by any railroad company upon its 
 real and personal property, and which has been, or shall be, re- 
 corded as a mortgage of real estate in each county in or through 
 which the railroad runs. 
 
 183. In Ohio 2 it is provided that in all cases where a mortgage 
 has been, or may hereafter be, executed upon any portion of the 
 personal and real property of any railroad company within the 
 state, by proper officers, to secure the payment of any loans of 
 money, or advances of material or labor made to said company, it 
 shall be a sufficient record of the same to have the same recorded 
 in the office of the recorder of deeds in each of the counties in 
 which said real or personal property may be situated or employed, 
 and said mortgage so recorded shall be held to be a good and sub- 
 stantial lien from the date of the record of the same in each county 
 where the same is recorded, as well upon the personal as the real 
 property of said company. 
 
 184. In Vermont 3 all mortgages of railroad franchises, furni- 
 ture, cars, engines, and rolling stock of any kind, when properly 
 executed and recorded, are effectual to vest in the mortgagee a 
 valid mortgage interest in, and lien upon, all such property, with- 
 out delivery or change of possession ; and, for the purpose of 
 mortgage, all such property is deemed part of the realty. Such 
 mortgage is recorded in the office of the county clerk of each 
 county through which the road passes, instead of the offices of the 
 town clerks; and when so recorded, it has the same effect as if 
 recorded in the several offices of the town clerks of the towns 
 through which such road passes. It is provided, however, that 
 such rolling stock may be attached by any person having a claim 
 against the company for an injury sustained on the road by reason 
 
 » Laws 1868, ch. 779, § 1 ; 3 Fay's Dig. * Gen. Stat. 1870, ch. 28, §§ 100-102; 
 
 of Laws, 236; 2 R. 8. 1875, p. 555, § 115. Act, 1851, No. :>7, § l, ami 1856, N<>. 
 
 2 l Rev Stat. 18G0, p. 822, passed Feb. t^'J, §§ 1,2. 
 9, 1853, 
 
 165
 
 §§ 185, 186.] LEGAL NATURE OF ROLLING STOCK. 
 
 of any neglect of the corporation, or for services rendered or ma- 
 terials furnished for the purpose of keeping the road in repair or 
 in running the same, or for any liabilities as common carriers, or 
 for the loss of any property while in the possession of the corpo- 
 ration. 
 
 185. In West Virginia 1 the rolling stock, and all other mova- 
 ble property belonging to any railroad company, is considered 
 personal property, and is liable to execution and sale in the same 
 manner as the personal property of individuals. Mortgages, how- 
 ever, of real property and mortgages of personal property are re- 
 corded in the same county registry and under the same laws. 3 
 
 186. The general railroad laws of Wisconsin 3 provide that 
 railway companies may, in mortgages or trust deeds, make such 
 provisions for pledging or transferring their property, including 
 rolling stock and appurtenances in connection with the railroads 
 or which shall thereafter belong to them, as security for any 
 bonds, debts, or sums of money secured, as such companies may 
 think proper. Any deed of trust or mortgage of any locomotives, 
 tenders, cars, or other property used or intended to be used as roll- 
 ing stock or equipment on any railroad, and any discharge thereof 
 acknowledged in such manner as would entitle a deed of real es- 
 tate to be recorded, is sufficiently recorded or filed by filing a copy 
 in the office of the secretary of state ; and a certificate of such fil- 
 ing indorsed thereon by the secretary of state is evidence thereof ; 
 and such deed of trust or mortgage is valid and effectual as against 
 the creditors of the company, or subsequent purchasers or mortga- 
 gees in good faith, without any further proceeding whatsoever. All 
 rolling stock used in connection with a railroad is declared to be 
 fixtures, and is subject to the same lien as is created by such trust 
 deed or mortgage upon the real property of such railroad com- 
 pany ; and every such deed of trust or mortgage recorded in the 
 office of the secretary of state, in a proper book kept for the pur- 
 pose, has the same effect as if recorded in the several counties 
 through which the road may be built ; and such record is notice of 
 the lien to all persons interested. But this statute makes rolling 
 
 1 Act April 3, 1873; ch. 88 of Acts 3 Laws 1872, ch. 119, §§ 39 & 40 ; 
 1872-1873. Laws 1877, ch. 144, § 1 ; and see Railroad 
 
 2 Code 1870, p. 74, §§ 5, 7. Co. v. James, 6 Wall. 750. 
 
 166
 
 CONSTITUTIONAL AND STATUTORY PROVISIONS. [§ 187. 
 
 stock a fixture only for the purpose of enabling railroad corpora- 
 tions the more readily to give valid liens and mortgages upon their 
 property. It does not contemplate that, in respect to all the legal 
 remedies of parties, a car or locomotive should be treated as real 
 estate ; and it is accordingly held that such property is liable to 
 seizure and sale for delinquent taxes as personal property. 1 
 
 187. In Great Britain the rolling stock and personal prop- 
 erty essential to the operating of railways are by statute 
 protected from levy by execution. 2 The act provides that the 
 engines, tenders, carriages, trucks, machinery, tools, fittings, ma- 
 terials, and effects, constituting the rolling stock and plant used 
 or provided by a company for the purposes of the traffic on their 
 railway, or of their stations or workshops, shall not, after their 
 railway or any part thereof is open for public traffic, be liable to 
 be taken in execution at law or in equity ; but the person who has 
 recovered any such judgment may obtain the appointment of a 
 receiver, and, if necessary, of a manager, of the undertaking of 
 the company, on application by petition in a summary way to 
 the Court of Chancery ; and all money received by such receiver 
 or manager shall, after due provision for the working expenses 
 of the railway and other proper outgoings in respect of the un- 
 dertaking, be applied and distributed, under the direction of the 
 court, in payment of the debts of the company, and otherwise, 
 according to the rights and priorities of the persons for the time 
 being interested therein ; and on the payment of the amount due 
 to every such judgment creditor as aforesaid the court may, if 
 it think fit, discharge such receiver or such receiver and manager. 
 
 If in any case where property of a company has been taken in 
 execution a question arises whether or not it is liable to be so 
 taken, notwithstanding this act the same may be heard and de- 
 termined on an application by either party, by summons in a sum- 
 mary way to the court out of which the execution issued, and 
 such determination is final and binding. 
 
 It is also provided that companies unable to meet their engage- 
 ments may file a " scheme of arrangement" in chancery, which, 
 
 i Chicago & Northwestern By. Co. v. Vict. ch. 126, as to Scotland. These acta 
 Borough of Ft. Howard, '.ii Wis. 44. made perpetual in 1875, 38 & 39 Vict. ch. 
 
 2 The Bailway Companies Act 1807, 31; and see 35 & 36 Vict. ch. 50. 
 30 & .'si Vict. ch. 127; and see 30 & 31 
 
 1G7
 
 § 187.] 
 
 LEGAL NATURE OF ROLLING STOCK. 
 
 when assented to by a certain proportion of the mortgagees and 
 shareholders, and confirmed by the court, is binding and effectual, 
 and has like effect as if it had been enacted by parliament. 
 
 Prior to the passing of this act, it was held that the mortgagee 
 of an undertaking could not have an injunction against judgment 
 creditors who were about to take under an elegit the lands of the 
 company ; l for a mortgage of the undertaking does not ordina- 
 rily, and unless the intention is apparent by the deed, pass the 
 land itself, or constitute any charge upon it. 2 
 
 1 Perkins v. Deptford Pier Co. 18 Sim. 
 277. 
 
 2 Wickham v. New Brunswick, &c. Ry. 
 Co. L. R. 1 P. C. 64 ; and see Hart v. East- 
 ern Union Ry. Co. 7 Exch. 246, 265; 
 Eastern Union Ry. Co. v. Hart, 8 Exeh. 
 116; Perkins v. Pritchard, 3 Railw. & 
 
 168 
 
 Canal Cas. 95. In Lower Canada, the roll- 
 ing stock of a railway is held to he a part 
 of the realty, and as such not liable to seiz- 
 ure under a writ of execution de bonis. 
 Grand Trunk Ry. Co. v. Eastern Town- 
 ships Bank, 10 Lower Can. Jur. 11 ; S. C. 
 16 lb. 173.
 
 CHAPTER VI. 
 
 MORTGAGE BONDS OF CORPORATIONS. 
 
 I. Formalities in making and issuing 
 bonds, 188-196. 
 
 II. Negotiability of corporate bonds, 197- 
 210. 
 
 III. Incomplete and altered bonds, 211- 
 216. 
 
 IV. Remedies upon corporate bonds, 217- 
 221. 
 
 I. Formalities in making and issuing Bonds. 
 
 188. General statement. — An ordinary money bond is an in- 
 strument under seal, which contains an acknowledgment of the 
 loan and an agreement to repay the same upon the terms stated. 
 Annexed to it, and forming a part of the bond originally, there 
 are usually interest coupons or warrants for each instalment of 
 interest accruing during the time the bond has to run. An or- 
 dinary bond does not itself create any charge or lien upon the 
 property of the company, or give the holder any priority over any 
 other creditor; but such a bond is usually secured by a mort- 
 gage or deed of trust, which creates a charge, and gives all the 
 holders of the bonds secured a priority over all who may sub- 
 sequently become creditors of the company. There are other 
 bonds not secured by mortgage, which are a charge upon property 
 by force of statutes ; of these something has already been said. 1 
 There are other bonds which are wholly unsecured ; and of these 
 and like securities something will be said in a subsequent chap- 
 ter. 2 
 
 189. A bond implies a seal. — A corporate seal may consist 
 merely of an impression of the seal of a corporation, indented 
 or stamped into the substance of the paper of a printed bond, 
 without the use of wax, wafer, or other adhesive substance. 8 A 
 
 i Sec §5 72-83. Mass. 444 ; Hendee >•. Pinkerton, 1 1 Allen 
 
 * Sec Chapter viii. (Ma Allen v. Sullivan K. K. Co. 
 
 : ' Royal Hank <>f Liverpool v. Grand 32 N. II. tic ; Chilton v. People, 66 111. 
 
 Junction II. R. & Depot Company, 100 r>oi ; Jones on Mortgages, § i^ s - 
 
 L69
 
 § 190.] MORTGAGE BONDS OF CORPORATIONS. 
 
 corporate seal so impressed by the printer, by direction of the 
 officers of the corporation, who adopt his act by signing and is- 
 suing the bond so prepared, makes the instrument valid as the 
 bond of the corporation. In states where the distinction between 
 sealed and unsealed instruments is inflexibly preserved, such a 
 sealing is unquestionably valid ; but in such states a fac-simile of 
 the corporate seal printed with ink on the paper is not a valid 
 seal. There is no definition of a seal, and none can be given, 
 which would make this a seal. The printed form of a seal is 
 nothing more than a scroll, and to adopt it as a seal would be to 
 do away with the distinction between a sealed and an unsealed 
 instrument. 1 
 
 A sealed instrument conclusively imports a consideration ; con- 
 sequently it is no defence to an action at law upon the bonds of a 
 railroad company that their delivery by the company was merely 
 gratuitous, and without the payment of value for them ; or that 
 the company delivered them as collateral security for the payment 
 of other bonds. The corporation can avail itself of the fact that 
 the bonds are held as collateral only by paying in full the amount 
 of its real indebtedness. 2 
 
 A corporate seal affixed to an instrument is also primd facie 
 evidence that it was placed there by proper authority ; or, in other 
 words, that the instrument is the act of the corporation. 3 
 
 The fact that such an instrument is issued under the seal of 
 the corporation is now regarded as of no consequence in respect 
 to its negotiability. This formality signifies that the corporation 
 has duly executed the instrument. A seal does not make such 
 an instrument a deed, or render it necessary that a transfer of it 
 should be by a sealed instrument ; but the holder may transfer it 
 by the customary parol transfer, just as if it belonged to the class 
 of simple contracts. 4 
 
 190. Corporations generally impose upon their officers cer- 
 tain formalities in the preparation and issue of their bonds 
 or other evidences of debt, and it becomes an important inquiry 
 
 i Bates v. Boston &N. Y. Central R. R. (Tenn.) 513 ; Levering v. Mayor, &c. 7 
 
 Co. 10 Allen (Mass.), 251. Humph. (Tenn.) 553. 
 
 2 Royal Bank of Liverpool v. Grand * Goodwin v. Robarts, L. R. 10 Ex. 337 ; 
 Junction R. R. & Depot Co. 100 Mass. General Estates Co. in re, L. R.3 Ch. 758; 
 444_ Imperial Land Co. of Marseilles in re, L. 
 
 3 City of Memphis v. Adams, 9 Heisk. R. 11 Eq. 478. 
 
 170
 
 FORMALITIES IN MAKING AND ISSUING. [§ 191. 
 
 how far these directions are binding upon persons who purchase 
 bonds issued in disregard of such requirements. In general, it 
 may be said that whenever the obligations issued purport to be 
 the obligations of the corporation, and are so in fact, the omission 
 of any preliminaries required by the articles of association, or by 
 the by-laws of the corporation, cannot affect a bond fide purchaser 
 without notice. Ordinarily the purchaser has no means of know- 
 ing what formalities are required as between the corporation and 
 its officers, and no means of knowing whether such requirements 
 have been fulfilled. A director or other officer of the corpora- 
 tion standing in such relation to the affairs of the corporation 
 that he would be presumed to know both what the requirements 
 are, and whether they have been observed, could not, of course, 
 take the obligations of the corporation, with all the rights of a 
 third person purchasing without notice. But a purchaser of a ne- 
 gotiable obligation from such officer for value, unacquainted with 
 the circumstances under which it was originally issued, would have 
 all the rights of a bond fide purchaser. 1 
 
 Again, while a purchaser of a corporate security is bound to 
 know whether the corporation had power to issue it at all, yet, 
 when such authority depends upon a statute, a requirement as to 
 the manner of exercising the power, as for instance that a vote 
 of the stockholders or a resolution of the directors shall first be 
 passed, may be presumed to have been complied with. lk Third 
 parties dealing with a corporation are bound to know the law ; 
 that is, they are bound to take notice of the extent of its powers, 
 but they have a right to assume, in the absence of anything sug- 
 gesting inquiry, that it has proceeded regularly in the execution 
 of its powers." 2 A requirement of statute that the act of a cor- 
 poration in issuing its obligations shall be authorized or rati lied 
 by a vote of its stockholders is a requirement for their protec- 
 tion, and relates to the mode and manner of executing the power 
 rather than to the existence of the power; and the purchaser has 
 the right to presume that the corporation has done its duty and 
 proceeded regularly in the execution of its power. 
 
 191. Formality of a stockholder's vote. — In a leading Eng- 
 
 1 Weff <-. ' !ommissionen <'f Heme Bay, Cleveland, Coluinbua & Cincinnati B. K. 
 L. R. :. Q. I*.. 642. Co. 41 Barb. (N. V.) :>. 
 
 2 Connecticut Mut. Life Ins. Co. v. 
 
 171
 
 § 191.] MORTGAGE BONDS OF CORPORATIONS. 
 
 lish case upon this subject, 1 it appeared that the directors of a 
 joint stock company were authorized by the deed of settlement 
 to borrow such sums of money, within a certain limit, as the com- 
 pany should authorize by a resolution passed at a general meet- 
 ing of the company. At such a meeting the company, instead of 
 authorizing a definite loan, authorized the directors to borrow at 
 their discretion. In suit upon a bond issued by the directors the 
 company was held liable, upon the ground that it was of no con- 
 sequence whether the resolution was or was not sufficient au- 
 thority to the directors to borrow, and of no consequence, even, 
 whether there was any resolution at all ; inasmuch as a person 
 dealing with the company has a right to presume that the com- 
 pany, which has put forward the directors as authorized to bor- 
 row, has taken every step requisite to empower it to borrow. 
 
 So in a case in Victoria, where a mining company was empow- 
 ered to borrow money and mortgage its property upon a vote of 
 the stockholders mid the directors, it was held that the company 
 was liable upon a loan obtained by the directors without such vote, 
 for the lender was justified in assuming that there had been a 
 meeting and vote of the shareholders in the manner directed. 2 
 
 Inasmuch as a purchaser is not concerned with a requirement 
 for the holding of corporate meetings to authorize the issuing of 
 corporate obligations, for a still stronger reason he is not concerned 
 with requirements respecting the preliminaries of such meetings, 
 such as the publication of notices, or with regulations as to the 
 manner of conducting such meetings. 3 
 
 Aside from the consideration, whether a requirement by statute 
 
 or by charter that the bonds of a corporation shall be issued only 
 
 upon a vote of the stockholders at a general meeting be regarded 
 
 as a directory formality or an imperative one, the corporation is 
 
 estopped by a waiver of such formality. Thus, where bonds issued 
 
 in disregard of such formality were treated by the company as 
 
 good, a stockholder who had attended meetings where the bonds 
 
 1 Royal British Bank v. Turquand, 6 E. Bl. & El. 183 ; Pickard v. Sears, 6 Ad. & 
 
 & B. 248, 827. See, also, Colonial Bank El 469 ; Freeman v. Cooke, 2 Ex. 654, 
 
 of Australasia v. Willan, L. R. 5 P. C. 417 ; 663 ; Eastern Counties Ry. Co. v. Hawkes, 
 
 Agarr. Athenauim Life Ins. Co. 3 C. B. N. 35 Eng. L. & Eq. 8 ; 5 H. L. 331. 
 
 S. 725 ; Lowe v. London & North Western 2 Tyson's Reef Co. in re, 3 W. W. & A. 
 
 Ry. Co. 18 Q. B. 632 ; London & North B. Cases at Law, 162. 
 
 Western Ry. Co. v. M'Michael, 5 Ex. 855; s Fountaine v. Carmarthen Ry. Co. L. 
 
 Prince of Wales, &c. Co. v. Harding, EL, R. 5 Eq. 316; Worcester Corn Exchange 
 
 Co. in re, 3 De G., M. & G. 180. 
 172
 
 FORMALITIES IN MAKING AND ISSUING. [§ 192-194. 
 
 were treated as good, upon subsequently filing a bill to restrain 
 the company from redeeming the bonds, was held to be estopped 
 from contesting their legality. 1 
 
 192. A special and unusual requirement in respect to the 
 execution of a corporate obligation, such for instance as that 
 it shall be signed or countersigned by a particular officer, is a di- 
 rectory formality which does not affect the right of one who has 
 purchased in good faith without knowledge of the informality. 2 
 
 193. In like manner requirements respecting the appoint- 
 ment or election of directors or other officers of the corporation 
 cannot affect the obligations of the company in the hands of bond 
 fide holders for value. 3 The directors and other officers of the 
 company who are found acting as such are presumed to be legally 
 appointed. 4 It is well settled that if a corporation holds out to 
 the world any one as a duly qualified officer, or acquiesces in his 
 assumption to be such officer, it is as much bound as if he had been 
 elected and qualified with every prescribed formality. The true 
 legal ground of the obligation is that of estoppel. 
 
 194. Knowledge of the irregularity. — Inasmuch as the rea- 
 son upon which this class of cases depends is that a person deal- 
 ing with a corporation does not know, and has no adequate means 
 of knowing, whether the preliminaries and formalities to the 
 proper execution of an instrument have been complied with, it 
 follows that when the irregularity is one which appears upon the 
 face of tin; instrument itself, the purchaser is bound to take notice 
 of it. This qualification is pointed out by Page- Wood, V. C, in 
 a leading chancery decision : 5 " There is no doubt an important 
 
 1 Zabriskic v. Cleveland, Columbus & Cincinnati R. R, Co 23 Eow. 381; Cor- 
 
 Cincinnati R. R. Co. '23 How. 381, 398. rugi v. Atlantic Fire Ins. Co. 40 ( la. 135 ; 
 
 - Briceon Ultra Vires, 2d Eng. ed.643; 2 Am. R. 507 ; Township of Brock r. To- 
 
 Prince of Wales Life Assurance Co. v. ronto & Nipissing Uy. Co. 17 Grant (Up- 
 
 Harding, E., 15. & E. 183; Land Credit per Canada Ch.), 425. 
 
 Co. of Ireland in re, L. R. 4 Ch. 460 ; Hill v. * Anderson v. Duke, &c. Gold Mining 
 
 Manchester W. Works Co.5 \'>.& A.. sen; Co. 1 Australian Jurist, nil ; Countj Life 
 
 Allen v . Sea Fire & Life [ns. Co. 9 C. B. Ass. Co. in re, L. R. 5 Ch.288. 
 
 574; Bargate v. Shortridge, 5 11. L.297; B Athense Life Assurance Soc. tn re, 
 
 Norwich Yarn Co. in re, 22 Beav. 143. i K.&J.549. See, also, North Hallenbea- 
 
 :; BankofU. S. u.Dandridge, 12 Wheat, gle Mining Co. in re, L. R. 2 Ch. 321; 
 
 64; Zabriskie v. Cleveland, Columbus & Fountaine v. Carmarthen lij Co. L. K. 
 
 it;;
 
 § 195.] MORTGAGE BONDS OF CORPORATIONS. 
 
 distinction to be drawn, and it is drawn, in the case of the Royal 
 British Bank v. Turquand, between that which on the face of 
 it is manifestly imperfect when tested by the requirements of 
 the deed of settlement of the company, and that which contains 
 nothing to indicate that those requirements have not been complied 
 with. Thus where the deed requires certain instruments to be 
 made under the common seal of the company, every person con- 
 tracting with the company can see at once whether that requisi- 
 tion is complied with, and he is bound to do so ; but where, as in 
 the case I have last referred to, the conditions required by the deed 
 consist of certain internal arrangements of the company, — for in- 
 stance resolutions of meetings and the like, — if the party contract- 
 ing with the directors finds the acts to be within the scope of their 
 power under the deed, he has a right to assume that all such con- 
 ditions have been complied with. In the case last supposed, he 
 is not bound to inquire whether the resolutions have been duly 
 passed or the like ; otherwise he would be bound to go back, and 
 to inquire whether the meetings have been duly summoned, and 
 so ascertain a variety of other matters into which, if it were nec- 
 essary to make inquiry, it would be impossible for the company 
 to carry on the business for which it is formed." 
 
 All that has been said upon this subject is premised of instru- 
 ments which on their face purport to be the obligations of the 
 corporation to be charged and to be duly executed ; for a corpora- 
 tion is not liable upon instruments which do not purport to be 
 made by it, even in the hands of a bond fide holder for value. 1 
 
 Moreover a distinction is to be observed between transactions 
 which are within the general scope of a corporation without the 
 aid of statutory authority, and those which depend altogether upon 
 such authority for their validity. Requirements in the case of the 
 former might be regarded as directory merely, which in the case 
 of the latter might be regarded as conditions precedent to the ex- 
 ercise of the authority, or imperative formalities. 
 
 195. The bonds of a railroad company are not rendered void 
 in consequence of being secured by an invalid mortgage, one 
 for instance which the company had no power to execute. A cor- 
 poration, like a natural person, has the right to carry on its legiti- 
 
 5 Eq. 316 ; Native Iron Ore Co. in re, L. 1 Scrrell v. Derbyshire, &c. Ry. Co. 9 
 R. 2 Ch. D. 345. C. B. 811 ; on Appeal, 10 C. B. 910. 
 
 174
 
 FORMALITIES IN MAKING AND ISSUING. [§ 196. 
 
 mate business by all legal and necessary means not prohibited by 
 law or by its charter. If it has the power to borrow money, it may 
 issue its bonds for the money borrowed. In an action upon such 
 contract obligation the mortgage securing it is of no consequence 
 in any way. A defect in a mortgage does not invalidate the mort- 
 gage debt, but only the security for it ; and a want of power to 
 make the mortgage does not affect the obligation of the bonds se- 
 cured. Having a right to issue the bonds, the company is liable 
 upon them without regard to the mortgage. A recital on the 
 bonds themselves that they were "issued by the company in ac- 
 cordance with its charter to the amount of $500,000, and that the 
 mortgage thereon receipted had been duly executed," does not 
 prevent a recovery upon the bonds, though the company had no 
 power to grant the mortgage. 1 
 
 A provision in a mortgage not contained in the bonds secured 
 by it, making the principal sum due after a default in the pay- 
 ment of interest for a certain time, does not enable a holder of the 
 bonds in a suit upon them to recover the principal upon such de- 
 fault. Such provision has reference only to making the principal 
 due in case of the foreclosure of the mortgage. 2 
 
 196. A certificate indorsed on a mortgage bond of a corpo- 
 ration, stating that such bond is included in the mortgage, is to be 
 construed with the mortgage and the bond as a part of the same 
 security. 3 
 
 A certificate on the face of mortgage bonds signed by the mort- 
 gage trustees, that the bonds are secured by a first mortgage to 
 them in trust for the bondholders, is a representation binding upon 
 the company when it has delivered the bonds in that state ; but it 
 does not of itself raise an absolute presumption that a purchaser 
 relied upon the certificate. Consequently, in an action upon a 
 note given to the company in part payment for such a bond, the 
 question should be submitted to the jury whether the purchaser 
 accepted the bonds relying to any extent upon the certificate. 
 The certificate is no part of the bond, and the representation con- 
 tained in it does not control the obligation of the bond. It is an 
 
 1 Philadelphia & Strabury B. B. Co. v. 3 Benjiimin v. Elmira, Jefferson & Can- 
 Lewis, .33 Va. St. 33. andaigua B. B. Co. 49 Barb. (N. V.) in. 
 
 2 Mallorj v. West Shore Hudson River 
 R. B. Co. 3 Jones &S. (N. Y.) 174. 
 
 175
 
 § 197.] MORTGAGE BONDS OF CORPORATIONS. 
 
 affirmation that the estate mortgaged is subject to no prior similar 
 incumbrance. This affirmation does not constitute a warranty 
 unless intended to have that effect. It is a representation in rela- 
 tion to a material fact which may have influenced the purchaser, 
 but whether it did so is to be determined by the jury upon all the 
 circumstances attending the transaction. 1 
 
 II. Negotiability of Corporate Bonds. 
 
 197. Railroad bonds are usually made payable to the trus- 
 tee named in the mortgage, or bearer, or to bearer generally, 
 and they pass by delivery from hand to hand. They are in fact 
 mere bills or notes, and as strictly negotiable as bank bills. 
 Though called bonds, the word does not, ex vi termini, imply a 
 contract under seal. As a matter of fact such bonds are not gen- 
 erally under seal. If executed under seal, it might become nec- 
 essary for the courts to disregard that incident, in order to give 
 them that legal operation which the unwritten law of commerce 
 has already given them. Therefore in an action upon such an 
 instrument, although it be described as a bond, it may be declared 
 upon the same as a bill of exchange or promissory note, as an in- 
 strument importing a consideration. 2 
 
 Debenture bonds in the form used in England when made pay- 
 able to bearer, are held to pass, like bills and notes, free from all 
 equities existing against the original holders. 3 If such bonds are 
 made payable to a person named or order, after indorsement by 
 the payee, they become negotiable like bonds payable to bearer. 4 
 The decisions are, however, conflicting ; and indeed until of late 
 years such bonds were regarded as primd facie non-negotiable, 
 and, therefore, subject to the equities existing between the corpo- 
 ration and the original holders. 5 The latest decisions favor the 
 proposition that such instruments are, in equity at least, negoti- 
 able, free from the equities primarily attached to them. 6 In the 
 
 1 Edwards v. Marcy, 2 Allen (Mass.), 4 General Estates Co. in re, L. R. 3 Ch. 
 486. 758. See, also, Agra & Masterman's Bank 
 
 2 Ide v. Passumpsic & Conn. River R. in re, L. R. 2 Ch. 391. 
 
 R. Co. 32 Vt. 297. 5 See Athenaeum Life Ass. Society v. 
 
 3 Imperial Land Co. of Marseilles in re, Pooley, 3 De G. & J. 294 ; Natal Invest- 
 11 Eq. 478; 4 Cox's Joint Stock Cas. ment Co. in re, L. R. 3 Ch. 355; Rhos 
 241 ; Blakely Ordnance Co. in re, L. R. 3 Hall Co. in re, 17 W. R. 343. 
 
 Ch. 159. ° Brice on Ultra Vires, 2d ed. 304. 
 
 176
 
 THEIR NEGOTIABILITY. [§ 198. 
 
 case of the Imperial Land Company of Marseilles, 1 which had is- 
 sued debenture bonds payable to bearer, and had sold them in 
 open market, upon the winding up of the company the question 
 arose whether equities which were admitted to exist in favor of the 
 company against the parties to whom they were originally issued 
 should be admitted as against the present holders. Vice Chancel- 
 lor Malins, after reviewing the authorities, said : " I am clearly of 
 opinion that, whether theA' were promissory notes, or bonds, or 
 debentures, it was within the powers conferred upon the directors 
 to issue them. Are they then promissory notes or debentures'? or 
 does it make any difference which they are in the result? My 
 opinion is that, whichever they are, the result is the same, be- 
 cause they in any case make a contract by which the company 
 have bound themselves to pay, not to any particular person, but 
 to any person who may be the bearer, the sum appearing to be 
 due upon their face." 
 
 Scrip certificates issued by a foreign government or by a corpo- 
 ration on negotiating a loan promising to bearer, after all instal- 
 ments have been duly paid, a bond for the amount paid, with in- 
 terest, are by custom of all the stock markets of Europe negotia- 
 ble instruments, and pass by mere delivery to a bond fide holder 
 for value. This is the English law. Any person taking such 
 scrip in good faith obtains a title to it independent of the title 
 of the person from whom he took it. 2 
 
 198. A bond, although a sealed instrument, when made 
 payable to bearer or holder, or order, is negotiable, with all 
 the ordinary properties of a negotiable instrument. 3 Mr. Justice 
 
 1 L. R. 11 Eq. 478, supra. & Mass. R. R. Co. 8 Gray (Mass. i. 575 ; 
 
 2 Goodwin v. Robarts, 1 App. Cas. 476 ; Langston v. S. Carolina R. R. Co. 2 S. C. 
 S. C. L. R. 10 Ex. 337; Rum ball v. Met- 218; Mercer County v. Hacket, 1 Wall, 
 ropolitan Hank, L. II. 2 Q. B. I). 194. 83, 95; Knox County v. Aspinwall, 21 
 
 '■'• White v. Vermont & Mass. R. R. Co. How. 589 ; Zabriskie v. Cleveland, Colum- 
 
 21 How. 575; Gelpcke v. City of Dubuque, bus & Cincinnati R. R. Co. 23 How. 381, 
 
 1 Wall. 17;.; Clark v. Iowa City, 20 Wall. 400; Hubbard v. N. Y. & Harlem R. R. 
 
 583; Haven v. Grand Junction R. R. & Co. 36 Barb. (N. V.) 286; Craig v. City 
 
 Depot Co. 109 Mass.88; Aurora City v. of Vicksburg, 31 Miss. 216; County of 
 
 : Wall. 82; Connecticut .Mutual Beaver v. Armstrong, 44 Pa. St. ( 
 
 Life Ins. Co. v. Cleveland, Columbus & Blake v. Livingston County, 61 Barb. (N. 
 
 Cincinnati R, R. Co. n Barb. (N. 5f.)9; V.) L49; Brainerd v. N. Y. & Harlem R. 
 
 Morris Canal & Banking Co. v. Fisher, 9 R. Co. 25 N. 5T.496; Dinsmore v. Dun. 
 
 N. J. Ch. (1 Stockl 667 699 ; Carr v. Le can, 57 N. .Y. 573 ; Welch v. Sage, 49 N. 
 
 Fcvre, 27 Pa. St. 413, 418 ; Chapin v. N't. Y. 143; Hodges v. Shuler, 22 N. Y. ni; 
 
 12 177
 
 § 198.] MORTGAGE BONDS OF CORPORATIONS. 
 
 Nelson, of the Supreme Court of the United States, pronouncing 
 the decision of that court to this effect, 1 said : "We think the usage 
 and practice of the companies themselves, and of the capitalists 
 and business men of the country dealing in them, as well as the 
 repeated decisions or recognition of the principle by courts and 
 judges of the highest respectability, have settled the question. 
 Indeed, without conceding to them the quality of negotiability, 
 much of the value of these securities in the market, and as a 
 means of furnishing the funds for the accomplishment of many 
 of the greatest and most useful enterprises of the day, would be 
 impaired. Within the last few years, large masses of them have 
 gone into general circulation, and in which capitalists have in- 
 vested their money ; and it is not too much to say, that a great 
 share of the confidence they have acquired, as a desirable secu- 
 rity for investment, is attributable to this negotiable quality, as 
 well on account of the facility of passing from hand to hand, as 
 the protection afforded to the bond fide holder." Such bonds 
 are not, like promissory notes and bills of exchange, negotiable 
 under the law merchant ; but being designed to be passed from 
 hand to hand by delivery, they have by common usage become as- 
 signable by delivery, so as to enable the holder to maintain an 
 action on them in his own name. 2 Though not exactly governed 
 by the law merchant, they are entitled to the privileges of com- 
 mercial paper. 3 " Usages of trade and commerce are acknowl- 
 edged by the courts as part of the common law, although they 
 have been unknown to Bracton or Blackstone. And this mallea- 
 bility to suit the necessities and usages of the mercantile and com- 
 mercial world is one of the most valuable characteristics of the 
 common law. When a corporation covenants to pay to bearer, 
 and gives a bond negotiable, with negotiable qualities, and by 
 this means obtains funds for the accomplishment of the useful 
 enterprises of the day, it cannot be allowed to evade the payment 
 
 Virginia v. Chesapeake & Ohio Canal Co. R. R. Co. 48 Me. 147 ; Myers v. York & 
 
 32 Md. 501 ; Wickes v. Adirondack Co. Cumberland R. R. Co. 43 Me. 232. 
 
 2 Hun (N. Y.), 112; City of Elizabeth v. 1 White v. Vt. & Mass. R. R. Co. 21 
 
 Force, 29 N. J. Eq. 587. Contra, but not to How. 575. 
 
 be regarded as authorities on this point, 2 Bunting v. Camden & Atlantic R. R. 
 
 Diamond v. Lawrence County, 37 Pa. Co. 81 Pa. St. 254 ; 15 Am. Ry. R. 570; 
 
 St. 353; Clarke v. City of Janesville, 1 Carr v. Le Fevre, 27 Pa. St. 413. 
 
 Biss. 98 ; Jackson v. York & Cumberland 3 Junction R. R. Co. v. Chneay, 13 Ind. 
 
 161. 
 
 178
 
 THEIR NEGOTIABILITY. [§ 199. 
 
 by parading some obsolete judicial decision, that a bond, for some 
 technical reason, cannot be made payable to bearer. That these 
 securities are treated as negotiable by the commercial usages of 
 the whole civilized world, and have received the sanctions of ju- 
 dicial recognition, not only in this court, but of nearly every state 
 in the Union, is well known and admitted." * 
 
 199. The fact that an unpaid coupon is attached to a bond 
 not yet due is not alone sufficient to affect the position of a pur- 
 chaser of the bond and the subsequently maturing coupons, as a 
 bond fide purchaser. This alone does not subject the bond to de- 
 fences which may be good against the original holder. " To hold 
 otherwise," said Field, J., speaking for the Supreme Court of the 
 United States, 2 " would throw discredit upon a large class of se- 
 curities issued by municipal and private corporations, having years 
 to run, with interest payable annually or semi-annually. Tem- 
 porary financial pressure, the falling off of expected revenues or 
 income, and many other causes having no connection with the 
 original validity of such instruments, have heretofore, in many 
 instances, prevented a punctual payment of every instalment of 
 interest on them as it matured ; and similar causes may be ex- 
 pected to prevent a punctual payment of interest in many in- 
 stances hereafter. To hold that a failure to meet the interest as 
 it matures renders them, though they may have years to run, and 
 all subsequent coupons, dishonored paper, subject to all defences 
 good against the original holders, would greatly impair the cur- 
 rencv and credit of such securities, and correspondingly diminish 
 their value." 
 
 But it has been held that the fact that coupons overdue and 
 unpaid for several years were attached to the bond at the time 
 of purchase was a circumstance of suspicion sufficient to put a 
 purchaser on guard. 3 The reasoning of the court in this case 
 would equally make a bond with a single coupon overdue and 
 unpaid dishonored paper; for they say the interest, equally with 
 ill.- principal, is a part of the debt secured, and it is immaterial 
 whether the whole or only a part of the debt is overdue. When 
 
 i Per Grier, J., in Mercer County v. :1 First Nat. Bank of St. Paul u. County 
 Backet, I Wall. 63, 95. Commissioners <>f s.-ott County, 1 1 Minn. 
 
 2 Cromwell v. County of Sac, 90 U. S. 77. 
 51, 58 ; National Bank of N. A. v. Kirby, 
 108 Mass. 407. ' ' ''
 
 § 200.] MORTGAGE BONDS OF CORPORATIONS. 
 
 due the plaintiff has a right of action for the recovery of the in- 
 terest, in the same way that he would have for the recovery of 
 any other instalment on the bond. In view of the authority and 
 reasoning of the Supreme Court of the United States, and of the 
 Supreme Court of Massachusetts on this subject, the above case 
 cannot be regarded as law. A purchaser in good faith of ordinary 
 coupon bonds is unaffected by want of title in the vendor. The 
 possession of such bonds carries the title with it to the holder. 
 Even suspicion on the purchaser's part of defect of title in the 
 seller, or knowledge on the purchaser's part of circumstances 
 which would excite such suspicion in the mind of a prudent man, 
 or gross negligence on the part of the purchaser in purchasing the 
 bonds, does not defeat his title. That is affected only by bad 
 faith on his part. On a question of such faith, the burden of 
 proof lies on the party who assails the possession. 1 But where the 
 defendant has shown strong circumstances of fraud in the origin 
 of the instrument, such evidence casts upon the holder of it the 
 necessity of showing that he gave value for it before maturity. 2 
 
 200. Although they contain an agreement for their con- 
 version into stock, the coupon bonds of a railroad company, 
 payable to a person named or bearer, are negotiable instruments, 
 with the privileges of such paper ; and so although the bonds con- 
 tain an agreement on the part of the company to make what is 
 termed " scrip preferred stock " in exchange therefor at any time 
 within ten days after any dividend should become payable on 
 such stock. 3 Such an agreement is independent of the pecuniary 
 obligation contained in the instrument, and does not change the 
 duty of the company with respect either to the principal or in- 
 terest stipulated. Whether the agreement to convert into pre- 
 ferred stock is of any value or not, it can in no way affect the 
 negotiable character of the instrument ; and therefore the title of 
 a bond fide holder is good, although the bonds may have been 
 stolen from the former owner. 
 
 Where it further appeared that to such bonds there was attached 
 
 1 Murray v. Lardner, 2 Wall. 110; ap- 2 Smith v. Sac County, 11 Wall. 139. 
 proving Goodman v. Harvey, 4 Ad. & El. 3 Hotchkissv. National Banks, 21 Wall. 
 870, and affirming Goodman v. Simonds, 354. 
 20 How. 343. See, also, Cromwell v. Coun- 
 ty of Sac, 96 U. S. 51. 
 180
 
 THEIR NEGOTIABILITY. [§§ 201, 202. 
 
 by a pin the certificate of such preferred stock, which stated that 
 the bondholder was entitled to a certain number of shares of such 
 stock, and that upon the surrender of the bonds he should be en- 
 titled to receive the stock, the bonds having been stolen and ne- 
 gotiated to one who took them without actual notice of any defect 
 in the title to them, the fact that the certificate originally at- 
 tached to the bonds had previously been detached was held not 
 to be a circumstance sufficient to put the person who took the 
 bonds upon inquiry as to the title of the previous holder. 1 The 
 title of a person who takes negotiable paper before due for a 
 valuable consideration can only be defeated by bad faith on his 
 part, which implies guilty knowledge or wilful ignorance of facts 
 impairing his title ; and the burden of proof lies on the assailant 
 of the title. 
 
 201. Bonds and debentures -which are not negotiable in- 
 struments are merely choses in action, not assignable at law, 
 and purchasers, though buying them in good faith, for value, 
 without notice, take them subject to the equities attached. There- 
 fore, if such debentures are issued by the chairman of the direc- 
 tors, in fraud of the company, the company may, upon the dis- 
 covery of the fraud, disclaim its liability. Although the transfer 
 be recorded upon the books of the company, and interest upon 
 the debenture be paid for a year or more, until an investigation 
 of the company's affairs by the stockholders revealed the fraud, 
 these acts will not have the effect of a confirmation of the title of 
 one who has purchased the debentures in the market in the ordi- 
 nary course of business. The stockholders not being bound by 
 the loan originally, are not bound by payments of interest or 
 other acts without their knowledge. 2 
 
 Of course, a purchaser of overdue bonds takes them subject 
 to the rights of antecedent holders to the same extent as other 
 paper bought after its maturity. 3 
 
 202. Written contracts are not necessarily negotiable be- 
 cause by their terms they enure to the benefit of tin- bearer. 
 
 i Hotchkiss u. National Banks, 21 Wall. n - AthensBum Life Assurance Soc. v. Poo- 
 .354; Murray v. Lardner, 'J Wall. 110; ley, 8 De G. & J. 294. 
 Welch v. Sage, 17 N. Y. i !.;. 8 Vermilye v. Adams Express Co. 21 
 
 Willi. 188. 
 
 1 SI
 
 § 203.] MORTGAGE BONDS OF CORPORATIONS. 
 
 Whether they are negotiable in the sense that innocent holders of 
 them are protected in their title to them depends in part upon 
 the subject matter of the contract. Hence, a certificate by which 
 a person acknowledges that he has received a certain number of 
 shares of stock in a corporation, entitling the bearer to so many 
 dollars in certain bonds to be issued, is not free, in the hands of 
 the transferee, from the equities which would have affected it in 
 the hands of the original holder. 1 Certificates of stock, though 
 they pass from hand to hand by delivery, do not partake of the 
 character of negotiable paper, and therefore the assignee has no 
 better title than the assignor. 2 
 
 A bond is rendered non-negotiable by inserting in it a provision 
 to do something else than pay money, as for instance to feed and 
 clothe a slave. 3 
 
 203. A purchaser of bonds which refer to the mortgage 
 securing them is bound by any statements contained in the 
 mortgage affecting the security. The mortgage referred to nec- 
 essarily becomes a part of the bonds in determining exactly what 
 they are represented to be. Thus the New York, Kingston, and 
 Syracuse Railroad Company, having a mortgage of 82,000,000 
 upon its road, executed another mortgage of the same and some 
 additional property to secure bonds to the amount of $4,000,000, 
 which were described on their face as first mortgage consolidated 
 bonds, and indorsed " consolidated first mortgage bonds." These 
 bonds referred to a mortgage from which it appeared that it was 
 intended to substitute a portion of the bonds for the first mort- 
 gage bonds already issued, and to devote the remainder to the 
 extension and completion of the road. In an action against the 
 company and its president and directors, grounded on fraud in 
 issuing the bonds, the plaintiffs alleged that they furnished certain 
 materials to the contractor engaged in building the extension of 
 the road, under an agreement with him to receive in payment 
 notes secured by first mortgage bonds of the defendant corpora- 
 tion ; and that they took the consolidated first mortgage bonds in 
 
 1 Railroad Co. v. Howard, 7 Wall. 392. Townsend, 109 Mass. 115; Shaw v. Spen- 
 
 - Weaver v. Barden, 49 N. Y. 2S6 ; 3 cer, 100 Mass. 382; 1 Am. R. 115. 
 
 Lans. 338 ; Dunn v. Commercial Bank of 3 Knight v. Wilmington & Manchester 
 
 Buffalo, 11 Barb. (N. Y.) 580; Leitch R. R. Co. 1 Jones L. (N. C.) 357. 
 v. Wells, 48 N. Y. 585 ; Salisbury Mills v. 
 
 182
 
 THEIR NEGOTIABILITY. [§ 204. 
 
 the belief that they were the first mortgage bonds of the company, 
 when in fact they were not. The Supreme Court of New York, 
 however, regarded the use of the word "consolidated" as sufficient 
 to put a purchaser upon his inquiry, even if it did not in itself 
 control and qualify the statement that the bonds were first mort- 
 gage bonds. 1 Moreover, the bonds referring to the mortgage, the 
 purchaser is affected with its contents; and that, on inspection, 
 would have disclosed the fact that the design was to substitute 
 these bonds for bonds previously issued and secured by mortgage, 
 and would have dictated the propriety, as a matter of security, of 
 ascertaining whether the holders of the old bonds were willing to 
 make the exchange or accept the new bonds. These bonds would 
 not all become first mortgage bonds without such change; but 
 there is no allegation or proof that the directors of the corporation 
 knew that the substitution would not be accomplished, or that 
 they increased the issue of bonds unlawfully, or for a fraudulent 
 purpose ; on the contrary, it must be inferred that the directors 
 believed in the success of the scheme, and that the contractor, 
 knowing the precise character of the bonds, must have had faith 
 in their ultimate value. " The case presented seems, therefore, to 
 be bald in several respects, namely: the absence of fraudulent de- 
 sign or purpose in issuing the bonds; the absence of any charge 
 connecting the defendants, the directors, with the delivery of fchem 
 to the plaintiffs ; the absence of allegation or charge showing the 
 plaintiffs to be bond fide holders for value, and the absence of any 
 representation by the defendants, the directors, aside from the 
 bonds themselves, which explained their design and purpose suf- 
 ficiently to notify the purchaser or person taking them of their 
 character, or that he should examine." In conclusion, the court 
 remark that it is not intended by the result to justify the proceed- 
 ing complained of; that fust mortgage bonds ought to mean first 
 mortgage bonds, and should not be issued until all the prelimina- 
 ries to make them such have been observed and performed. 
 
 204. A bond of a corporation for the payment of money, ne- 
 gotiable in form but delivered with the name of the payee in 
 blank, may he filled in with tin- name of the holder and sued in 
 his name. 2 In England the law has 1 a settled otherwise, upon 
 
 r. N. Y., Kingston & Syracuse - White v. Vi. S M B. B. Co. 21 
 
 R. k. Co. in Hun (X. X\),295. How. 575 ; Chapin >-. X \ B. B. 
 
 is:)
 
 § 205.] MORTGAGE BONDS OF CORPORATIONS. 
 
 the principle that the authority of an agent to make a deed for 
 another must be by deed, and that he cannot fill the blank, either 
 under an implied or express parol authority from the maker. 
 Baron Parke, in a case where a certificate of stock was issued and 
 filled up in this way, said : 1 " This is an attempt to make a deed 
 transferable and negotiable like a bill of exchange, or exchequer 
 bill, which the law does not permit." But in this country, so far 
 as corporate bonds for the payment of money are concerned, this 
 objection has no weight. On the contrary, the negotiable quality 
 of such instruments is regarded as one of their chief advantages, 
 and this quality has been established by long usage. When, 
 therefore, a corporation issues bonds in blank, it is plainly its in- 
 tention to become bound to every person by whom any of the 
 bonds may be h olden ; and the implication is unavoidable that 
 the corporation consents that any bond fide holder for value may 
 perfect the contract by inserting at his own pleasure his name 
 as obligee of the bond in the blank space which has been left for 
 that purpose. " In other words," says Mr. Justice Nelson, 2 " the 
 company intended, by the blank, to leave the holder his option as 
 to the form or character of negotiability, without restriction. If 
 the utmost latitude, in this respect, was not intended, why leave 
 the payee in blank when issuing the bonds, or why not fix the 
 limit of negotiability, or negative it altogether ? To adopt any 
 other conclusion would seem to us to be unjust to the company, 
 for then the blank would be wholly unmeaning ; or, if any, a 
 meaning calculated, if not intended, to embarrass the title of the 
 holder." 
 
 205. A condition indorsed upon debenture bonds that at 
 stated times a portion of the bonds should be drawn and paid 
 off was held to prevent their being negotiable at law, although in 
 terms made payable to bearer ; and moreover it was held that it 
 was not competent for corporations to attach the incident of ne- 
 gotiability to such instruments contrary to the general law ; and 
 that the custom to treat them as negotiable, being of recent origin, 
 
 Co. 8 Gray (Mass.), 575; Dutchess Co. Ins, W. 200; and see Enthoven v. Hoyle, 13 
 
 Co. v. Hachfield, 1 Hun (N. Y.), 675 ; 5. C C. B. 373. 
 
 47 How. Pr. (N.Y.) 330; and see Michigan 2 In White v. Vt. & Mass. R. R. Co. 
 
 Bank v. Eldred, 9 Wall. 544. supra. 
 1 Hibblewhite v. M'Morine, 6 Mees. & 
 
 184
 
 THEIR NEGOTIABILITY. [§ 205. 
 
 and not the law merchant, made no difference, as such a custom, 
 though general, could not attach an incident to a contract contrary 
 to the general law. 1 This decision was, however, questioned by 
 the Court of the Exchequer Chamber, 2 which, after observing 
 that no evidence was offered at the trial in that case as to whether 
 these or similar documents were in practice treated as negotiable, 
 and that no express admission was made as to the point, said : 
 " While we quite agree that the greater or less time during which 
 a custom has existed may be material in determining how far it 
 has generally prevailed, we cannot think that, if a usage is once 
 shown to be universal, it is the less entitled to prevail because it 
 may not have formed part of the law merchant as previously rec- 
 ognized and adopted by the courts. It is obvious that such rea- 
 soning would have been fatal to the negotiability of foreign bonds, 
 which are of comparatively modern origin, and yet, according to 
 Grorgier v. Mieville^ are to be treated as negotiable. We think 
 the judgment in Crouch v. The Credit Foncier may well be sup- 
 ported on the ground that in that case there was substantially no 
 proof whatever of general usage. We cannot concur in thinking 
 that if proof of general usage had been established it would have 
 been a sufficient ground for refusing to give effect to it that it did 
 not form part of what is called ' the ancient law merchant.' ' 
 
 The case in the Exchequer Chamber arose with reference to scrip 
 issued in England by the agent of a foreign government upon the 
 payment of the first instalment of a subscription to bonds after- 
 wards to be issued. The scrip was in terms payable to bearer, 
 and by the usage of bankers and dealers in public securities was 
 transferable by mere delivery : and the court decided that it passed 
 by such delivery to a bond fide holder for value. 4 
 
 This case must be regarded as deciding, after considerable. 
 conflict of authority, that instruments payable to " bearer," or 
 "holder," or "transferee," or "order," and the like, which by 
 usage are transferable by delivery, are inlaw fully negotiable. 
 
 1 Crouch v. Credit Foncier of England, pounds, being the first instalment oftwen- 
 
 L. R. 8Q B. 374. ty per cent, upon one hundred pounds 
 
 odwin v. Robarts, L. R. 10 Ex. stock; and on payment of the remaining 
 
 337. instalments at the period specified, the 
 
 3 3 B, & C. 45. bearer will be entitled to receive a defini- 
 
 4 The scrip was in the following terms: tive bond or bonds for one hundred pounds, 
 "Scrip for one hundred pounds stock, after receipt thereol from the imperial 
 No. . Received the sum of twenty government." 
 
 1 85
 
 §§ 206, 207.] MORTGAGE BONDS OF CORPORATIONS. 
 
 206. Bonds of a corporation payable to a person named 
 " or assigns " are assignable at law, so as to enable the holder 
 to maintain an action in his own name only by an indorsement in 
 writing by the obligee. 1 In equity they may be assigned by de- 
 livery merely ; but then an action upon them must be brought in 
 the name of the obligee. 
 
 Although the instrument be not strictly negotiable at law, yet 
 if it contains anything to show that the parties intended to re- 
 nounce the ordinary rule that the assignee of a chose in action 
 takes it subject to the equities between the original parties, or if 
 the company making it has held it out to the world as free from 
 such equities, the company is barred from subsequently setting up 
 such equities. Thus, where debentures payable to a person, " his 
 executors, administrators, and assigns," were issued to a share- 
 holder in the company who assigned them, it was held in a suit 
 against the company by the assignee that the company could not 
 set up in defence the claim that the original holder was indebted 
 for unpaid calls upon his shares, and that by the articles of asso- 
 ciation the company had a primary lien on the debentures of any 
 member who might be indebted to it. It was contemplated that 
 the original holder should assign the debentures if he saw fit, 
 and that he could not practically do if they were subject to the 
 equity claimed. 2 
 
 207. A purchaser of negotiable bonds before due, for a 
 valuable consideration, in good faith and without actual knowl- 
 edge or notice of any defect of title, holds them by a title valid as 
 against every other person. 3 Even gross negligence at the time 
 of purchase does not alone defeat the purchaser's title. A pur- 
 chaser may have had suspicion of a defect of title, or knowledge 
 of circumstances which would excite such suspicion in the mind 
 
 1 Bunting v. Camden & Atlantic R. R. fully examined ; Scybel v. National Cur- 
 Co. 81 Pa. St. 254; 15 Am. Railvv. R. rency Bank, 54 N. Y. 288 ; Dutchess Co. 
 570; Hubbard v. N. Y. & Harlem R. R. Ins. Co. v. Hachfield, 1 Hun (N. Y.), 075 ; 
 Co. 36 Barb. (N. Y.) 286. 47 How. Pr. (N. Y.) 330; Madison & In- 
 
 2 Higgs v. Northern Assam Tea Co. L. dianapolis R. R. Co. v. Norwich Saving 
 R. 4 Ex. 387, 396. See, also, Crouch v. Soc. 24 Iud. 457 ; New Orleans, Jackson 
 Credit Fonder of Eng. L. R. 8 Q. B. 385 ; & Great Northern R. R. Co. v. Mississippi 
 Goodwin v. Robarts, L. R. 10 Ex. 337. College, 47 Miss. 560 ; Belo v. Com'rs of 
 
 3 Imperial Land Co. of Marseilles in re, Forsythe Co. 76 N. C. 489. 
 11 Eq. 478, where the English cases are 
 
 186
 
 THEIR NEGOTIABILITY. [§ 208. 
 
 of a prudent man ; or he may have disregarded notices of stolen 
 bonds ; and yet if lie has purchased for value in good faith, his 
 title cannot be impeached. Such suspicion, or ground of suspi- 
 cion, or of knowledge on his part, may be evidence of bad faith ; 
 but before his title can be impeached his bad faith must be es- 
 tablished. It must be shown that he did not purchase honestly. 1 
 
 It is a presumption of law that the person presenting a nego- 
 tiable bond is a bond fide holder, and until evidence is introduced 
 tending to negative that presumption, he is under no obligation 
 of proving himself a bond fide holder. 2 If his good faith is de- 
 nied by the answer, he is entitled to show by affirmative evidence 
 that he is a bond fide holder. 3 
 
 A bond fide purchaser of stolen bonds who pays full value for 
 them in the regular course of business, before their maturity, ac- 
 quires good title to them, and to such of the coupons as were not 
 overdue at the date of his purchase. In a suit by the purchaser 
 upon such bonds, the burden of proof that he did not acquire 
 them in good faith is upon the defendant. 4 The fact that the 
 real owner gave immediate notice by publication of the fact that 
 the bonds had been stolen does not affect the title of a subsequent 
 purchaser for value. 5 It is usual for bankers and brokers upon 
 receiving notice of such thefts to retain the memorandum for the 
 purpose of identification of the bonds, should they be presented ; 
 but there is no legal obligation upon them to do so : and if they 
 keep such notices, the mere omission to look for them twelve 
 months after publication is no proof of bad faith. 6 
 
 208. A purchaser of negotiable securities before maturity- 
 can recover against the maker the full amount of them, 
 although In- may have paid less than their par value for them. 
 Whatever may have been their original infirmity, he is not lim- 
 
 i Murray <•. Gardner, 2 Wall. 110 ; Gal- Newport, 66 X Y. 14 ; Seybel v. Nat. Cur- 
 
 vestonR.R.Co.v. Cowdrey, 11 Wall. 459, rency Hank, 2 Daly (X. Y.), 383; S. C. 
 
 478. 54 X. Y. 288; Carpenter v. Rommel, 5 
 
 2 Kennicott v. Supervisors of Wayne Phila. (Pa.) 34; Consolidated Ass'n v. 
 
 County, 6 Biss. 138; Wickes v. Adiron- Numa Avegno, 28 La. Ann. 552; Cali- 
 
 0. 2 Hun !\. Y.j, 1 12. fornia v. Well , 15 Cal 
 
 unty of Mar. .11 ,-. Shores, tj. S. Su- B Seybel v. Nat. Currency Bank, supra ; 
 
 preme Ct. 17 Albany Law J. 35. Murray v. Lardner, 2 Wall. 1 10, 
 
 * Gilbough v. Norfolk Petersburg R. '■ Raphael v. Bank of Englund, 17 C.B. 
 
 R. Co. 1 Hughes, 410; Spoonerv. Holmes, 161; Vermilye v. Adam 1 
 
 102 Mass. 503 ; Evert on v. Nat. Hank of Wall. 
 
 is?
 
 § 208.] MORTGAGE BONDS OF CORPORATIONS. 
 
 ited in his recovery upon them to the amount lie paid his vendor, 
 unless he is personally chargeable with fraud in procuring them. 
 " We are aware," said Mr. Justice Field, speaking for the Su- 
 preme Court of the United States, 1 " of numerous instances in 
 conflict with this view of the law ; but we think the sounder rule, 
 and the one in consonance with the common understanding and 
 usage of commerce, is, that the purchaser, at whatever price, takes 
 the benefit of the entire obligation of the maker. Public securi- 
 ties, and those of private corporations, are constantly fluctuating 
 in price in the market, one day being above par and the next 
 below it, and often passing within short periods from one half of 
 their nominal to their full value. Indeed, all sales of such securi- 
 ties are made with reference to prices current in the market, and 
 not with reference to their par value. It would introduce, there 
 fore, inconceivable confusion if bond fide purchasers in the market 
 were restricted in their claims upon such securities to the sums 
 they had paid for them. This rule in no respect impinges upon 
 the doctrine that one who makes only a loan upon such paper, or 
 takes it as collateral security for a precedent debt, may be lim- 
 ited in his recovery to the amount advanced or secured." 
 
 Bond fide holders of negotiable bonds are presumed to hold 
 them for their full value, and their title can be impaired only by 
 specific allegations distinctly proved. 2 
 
 The fact that a merchant has taken bonds from a railroad com- 
 pany in payment for goods does not of itself prevent him from 
 being a bond fide holder. The goods may be as valuable to the 
 company as money. 3 To affect the good faith of the transaction, 
 there must be circumstances showing that the purchaser knew 
 there was a corrupt or fraudulent motive on the part of the offi- 
 cer of the company in transferring the bonds. The purchaser of 
 negotiable bonds has nothing to do with the application of the 
 proceeds of the purchase, if he has no knowledge of any intended 
 misapplication of them. 4 
 
 After bonds have passed from the hands of the person to whom 
 
 1 Cromwell v. County of Sac, 96 U. S. 2 Bronson v. La Crosse & Milwaukee B. 
 
 51,60; and see Chicopee Bank v. Chapin, B. Co. 2 Wall. 283; Wickes v. Adiron- 
 
 8 Met. (Mass.) 40 ; Stoddard v. Kimball, dack Co. 2 Hun (N. Y.), 112. 
 
 6 Cush. Mass.) 469; Williams v. Smith, 3 Kennicott v. Supervisors of Wayne 
 
 2 Hill (N. Y.), 301 ; Lay v. Wissman, 36 County, 6 Bi<s. 138. 
 
 Iowa, 305. Contra, Diamonds. Lawrence 4 Philadelphia & Sunbury B. B. Co. v. 
 
 County, 37 Pa. St. 353. Lewis, 33 Pa. St. 33. 
 188
 
 THEIR NEGOTIABILITY. [§§ 209, 210. 
 
 they were issued into the hands of bond fide holders, the corpora- 
 tion which issued them cannot set off against the bonds a claim 
 for damages against the original holder ; as for instance where 
 the bonds were issued to a contractor, damages for not finishing 
 the road in the time specified by contract cannot be set up as 
 against bond fide purchasers of the bonds. 1 
 
 209. A bona fide purchaser of bonds which a company has 
 pledged for a loan can hold them against the company for at 
 least the amount he has paid for them. Thus, the Grand Rap- 
 ids and Indiana Railroad Company, through its president, bor- 
 rowed money of its New York agents, and pledged with them 
 the bonds of the company to a large amount as security for the 
 loan of an inconsiderable amount. The agents, without author- 
 ity, sold the bonds or exchanged them for real estate, and the 
 first purchasers resold them. In an action by the company to 
 recover the bonds, it was held that the amount actually paid them 
 by the purchaser might be taken into consideration in determin- 
 ing his good faith. 2 At the time of the second sale there were 
 overdue coupons upon the bonds, which provided that after six 
 months' default the whole principal sum should immediately there- 
 after become due and payable. Whether this condition had the 
 effect to make the bonds overdue it was unnecessary to decide, 
 because the first purchaser, having bought them in good faith be- 
 fore maturity, he could give a good title to one purchasing from 
 him in good faith after maturity. The unpaid coupons did not 
 necessarily affect the purchaser with notice or knowledge of any 
 facts by which the validity of the bonds was made questionable. 
 The interest might well remain unpaid, not from any infirmity 
 in the bonds themselves, but through want of means in the com- 
 pany to pay them. Under the circumstances of the case, it was 
 determined that the last purchaser was entitled to hold the bonds 
 for the amount he paid for them, although this amount was in 
 excess of the sum originally borrowed by the company upon them ; 
 but that the company might recover them upon the payment of 
 this amount. 
 
 210. Purchasers of bonds are not put to their inquiry 
 
 i McElrath v. Pittsburg & Steubenville - Grand Rapids & [ndiana R. R. Co. 
 
 It. Ii. Co. 55 l J u. St. L89. v. Banders, 54 Bow. (N. V.) Pr 21 i 
 
 L89
 
 § 211.] MORTGAGE BONDS OF CORPORATIONS. 
 
 whether the bonds were issued simultaneously with the mort- 
 gage by which they are secured. The mortgage, when recorded, 
 is notice to all who may acquire liens upon it afterwards of the 
 debt secured. " The bonds are payable to bearer, and are in- 
 tended to be negotiated for the purpose of raising money to con- 
 struct the road. If the purchaser of a bond in New York, in 
 Amsterdam, or London, is bound to inquire whether the bond in 
 fact was executed by the company contemporaneous^ with the 
 execution of the mortgage, or whether before the signing or the 
 negotiating of the bonds liens of laborers or material-men may 
 not have attached to the road, it is apparent that the value of 
 these securities would be much depreciated, and all industries 
 which depend upon the raising of means through negotiation 
 would be paralyzed." 1 
 
 III. Incomplete and altered Bonds. 
 
 211. Bonds incomplete when put in circulation are not en- 
 titled to the privileges of negotiable paper. While, as a general 
 rule, bonds issued by a corporation, and payable to bearer, have 
 the qualities of negotiable instruments, and are good in the hands 
 of bond fide holders for value, the rule is predicated of bonds that 
 are duly executed, and are free from any defect by reason of any 
 uncertainty in any essential requisite of a negotiable instrument. 
 An uncertainty in the amount of the principal or interest of a 
 bond deprives it of the quality of a negotiable instrument. This 
 point is illustrated by the case of certain bonds of the Vicksburg, 
 Shreveport, and Texas Railroad Company, which were taken from 
 the office of the company at Monroe, in the State of Louisiana, 
 in April, 1864, at the time of a raid of the naval forces of the 
 United States upon that town, during the war against the seced- 
 ing states, and carried off by persons connected with the expe- 
 dition, without the consent of the officers of the company, and 
 afterwards put in circulation. The face of the bonds certified 
 that the company " is indebted to John Ray, or bearer, for value 
 received, in the sum of either two hundred and twenty-five pounds 
 sterling, or one thousand dollars lawful money of the United 
 States of America ; namely, two hundred and twenty-five pounds 
 sterling, if the principal and interest are payable in London, and 
 one thousand dollars lawful money of the United States of Amer- 
 1 Nelson v. Iowa Eastern R R Co. 8 Am. Railway Rep. 82, 88, per Day, J. 
 
 190
 
 INCOMPLETE AND ALTERED BONDS. [§ 212. 
 
 ica, if the principal and interest are payable in New York or 
 New Orleans." They further declared that the president of the 
 company is authorized to fix by his indorsement the place of pay- 
 ment of principal and interest of the bonds. On the back of 
 each of the bonds was an indorsement as follows : " I hereby 
 agree that the within bond and the interest coupons thereto at- 
 tached shall be payable in ," signed by the president. The 
 
 coupons declared that the company would pay nine pounds ster- 
 ling, if payable in London, or forty dollars, if payable in New 
 York or New Orleans. 
 
 Upon a bill in equity to sell the road under a mortgage secur- 
 ing the bonds, it was claimed that the uncertainty in the amount 
 of the bonds was cured by the signature of the president of the 
 road to the indorsement upon the bonds, although that left the 
 place of payment blank ; and that the indorsement in this form 
 authorized the holder to fill the blank, and thus render the amount 
 of the bond definite and certain. But the court held that what- 
 ever might have the effect of a delivery of the bonds in this form 
 by the company, the bonds having been stolen, they carried no 
 implied authority to a subsequent bond fide holder for value to 
 fill the blank, and thus perfect the bonds ; and consequently the 
 bonds were subject to all the infirmities which attached to the 
 title to them. 1 
 
 212. Ledwick v. McKim. 2 — In an action to recover the pur- 
 chase money of some of the same bonds, the Court of Appeals of 
 New York also held that they were incomplete instruments, and 
 therefore not within the rules which protect bond fide holders for 
 value of negotiable commercial paper. A negotiable instrument 
 must be complete and perfect when it is issued, or there must be 
 authority reposed in some one afterward to supply what is needed 
 to make it perfect. It was evident upon the face of these bends 
 that they were meant to have a specific place of payment, and 
 that tin; kind of national money in which they were to be paid, 
 and the amount thereof, were also to be specific, and that all of 
 this was yet to be specified when they came into and passed out 
 of the hands of the defendants. An exact place of payment, 
 when a place of payment la meant to be fixed, and an exact amount 
 
 1 Jackson v. Vicksburrr, Shreveporl & - 53 N. Y. 807. 
 Texas i;. i:. Co. -' Woods, 141. 
 
 19]
 
 § 212.] MORTGAGE BONDS OF CORPORATIONS. 
 
 to be paid, are essential parts of a negotiable instrument. These 
 bonds were not perfect when they passed from the possession of 
 the defendants to the plaintiff ; for it was not then determined 
 where they were to be paid, nor in what national money they 
 were to be paid. The corporation had given power to their pres- 
 ident to fill this blank, which power he had not exercised. The 
 defendants contended that they, or any holder of the bonds, were 
 authorized to fill the blank. Such authority must be either ex- 
 press or implied from an actual delivery for future use of the in- 
 strument, though still in its imperfect condition. "As to an 
 express authority," said Judge Folger, " there can be no question 
 or doubt. The implied authority is found in the fact of delivery 
 for use. For as it is not to be presumed that the delivery for use 
 was meant to be a nugatory and unavailing act, and as it is appar- 
 ent that it would be if the instrument may not be perfected be- 
 fore put to use, the law implies an intention, and hence an author- 
 ity, that he to whom it is thus delivered may supply all needs for 
 making it a perfect and binding negotiable instrument. But this 
 authority is implied from the fact alone that the paper is in hands 
 other than those of him who is to be bound ; but from that fact, 
 joined with this other fact, that it has been by him intrusted to 
 those hands for the purpose and with the intent that it shall go 
 into use and circulation. And an express authority, though it be 
 limited, if it be exceeded by the one in whom confidence has been 
 reposed, renders the party to the instrument liable to a bond fide 
 holder for value, on the principle that of two, one of whom must 
 suffer by the wrongful act of a third, it should be he who has 
 enabled the wrongful act to be done. But there cannot be an 
 enabling of the wrongful act unless there be assisting action of 
 the party to the instrument who is sought to be bound, and there 
 must be that in his conduct, in relation to the paper, which shows 
 a parting with the possession of it for use, or with a confidence in 
 him to whom it is delivered." But in this case, the bonds having 
 been stolen while still in the possession of the corporation, no 
 implication o£ authority to fill the blank could arise. 
 
 Thus, also, where bonds were stolen which were at the time 
 incomplete, being without the seal of the company, and the cer- 
 tificate of the Union Trust Company, which the mortgage made 
 requisite to their validity, and subsequently the seal and the cer- 
 tificate, were forged and affixed to the bonds, it was held that a 
 192
 
 INCOMPLETE AND ALTERED BONDS. [§ 213. 
 
 purchaser for value and in good faith could not recover from the 
 company thereon, or compel the issue of other bonds in their 
 
 place. 1 
 
 213. The effect of an over-issue of bonds under a mortgage 
 depends largely upon the condition of the equity of redemption. 
 If that has been incumbered by subsequent mortgages or liens, 
 which are entered of record, the prior mortgage is good against 
 them for only the amount that appears of record to be a lien. 
 The company itself may be estopped to claim that the bonds issued 
 in excess of the amount of the mortgage as recorded are not in 
 fact secured by it ; and others in privity with the company, and 
 not having any recorded lien, may be bound by the same estoppel. 
 The Covington and Lexington Railroad Company executed a 
 mortgage to secure four hundred of its bonds for $1,000 each. By 
 mistake, the company issued and sold four hundred and twenty 
 bonds, of which one hundred and sixty were six per cent, bonds, 
 and two hundred and sixty were seven per cent, bonds. Instead 
 of numbering them from 1 to 420, which would have made the 
 mistake manifest, the company numbered each class separately 
 from 1 to 1G0 and from 1 to 260. To each bond was attached a 
 certificate showing that it was secured by mortgage, and that the 
 amount of the bonds issued and to be issued was not to exceed 
 8100,000. The holders of the twenty extra bonds bought them 
 in ignorance of the over-issue. The company afterwards executed 
 other mortgages which were recorded, and also income bonds which 
 were not secured by any recorded instrument. The property of 
 the company having afterwards been sold, and the proceeds being 
 insufficient to pay all these debts, the question arose as to the 
 rights of the holders of these twenty bonds over-issued. It was 
 held that the company was estopped from denying that these 
 bonds were secured by the mortgage; and that this mortgage by 
 estoppel gave to the holders of these bonds an equitable lien, 
 which, i hough unrecorded, was superior to the lien ol the unre- 
 corded income bonds subsequently issued. In a contest between 
 equities, seniority prevails ; and it is immaterial that the holders 
 of the income bonds had no notice of the over-is ae and of the 
 pppel of tin- company .- 
 
 i Mass v. Mo., Kansas & Texas By. Co. "Stephens v. Benton, I Duv. 
 11 Bun (N. V.), 8. 112. 
 
 ia L93
 
 § 214.] MORTGAGE BONDS OF CORPORATIONS. 
 
 214. The numbering of bonds does not ordinarily give the 
 holders of the lower numbers any preference over the holders 
 of the higher, when there 1ms been an over-issue of bonds beyond 
 the amount provided for by the mortgage. All bond fide holders 
 for value stand upon the same footing. The Alabama and Chat- 
 tanooga-Railroad Company, a corporation of the State of Alabama, 
 was chartered to construct a road from Chattanooga, in the State 
 of Tennessee, across the States of Georgia and Alabama to Me- 
 ridian, in the State of Mississippi. An act of the legislature of 
 Alabama : required the governor of the state, whenever any rail- 
 road company of the state should have finished, equipped, and 
 completed twenty continuous miles of railroad, to indorse on the 
 part of the state the first mortgage bonds of the railroad com- 
 pany to the amount of sixteen thousand dollars per mile, for the 
 portion thus finished and completed, and to indorse the same 
 bonds at the rate of sixteen thousand dollars per mile for each 
 section of five miles subsequently completed and equipped. The 
 act also applied to railroads constructed beyond the limits of the 
 State of Alabama by any railroad company organized under the 
 laws of the state. The act further provided that the bonds should 
 not be indorsed by the governor until the president and chief 
 engineer of such company, upon oath, showed that the conditions 
 of the act had been complied with in all respects. Soon after the 
 passing of this act the above named company conveyed to trustees, 
 to secure its first mortgage bonds, its entire road, together with all 
 its other property, equipments, and franchises. The mortgage 
 recited that the bonds to be secured were to be issued at the rate 
 of sixteen thousand dollars per mile of its road. Bonds of $1,000 
 each, to the number of 5,220, purporting to be secured by this 
 mortgage, and all bearing the same date, were issued. Each bond 
 recited on its face that it was one of a series of numbered bonds 
 issued in accordance with the above mentioned statute, and se- 
 cured by an indorsement of the State of Alabama, and by a first 
 lien upon the entire road and property of the railroad company. 
 Each bond also bore the indorsement of the Governor of Alabama, 
 with the recital that the company had complied with the condi- 
 tions prescribed by law upon the performance of which the gov- 
 ernor was required to make such indorsement. Upon each bond 
 was also indoi'sed a certificate signed by the trustees named in 
 i Approved Sept. 22, 1868 ; Rev. Code of Ala. 1867, §§ 1417, 1422. 
 
 194
 
 INCOMPLETE AND ALTERED BONDS. [§ 214. 
 
 the mortgage, that the bond was one of the series of first mort- 
 gage bonds described in and secured by the mortgage deed. Upon 
 a subsequent default the mortgage was foreclosed, and at the sale 
 the property was bid in by the trustees for the benefit of the bond- 
 holders. 
 
 It appeared by evidence in the case, not disputed, that the 
 length -of the road from Chattanooga to Meridian was only two 
 hundred and ninety-five miles. At the rate of sixteen thousand 
 dollars per mile, the mortgage authorized the issue of 4,720 bonds 
 of $1,000 each, and the governor was authorized to indorse only 
 that number, — but in fact did indorse the whole number issued, 
 being five hundred more than was authorized. The holders of 
 the bonds bearing numbers higher than 4,720 applied to the court 
 for leave to file their bonds and become sharers in the title to the 
 property bought by the trustees. Their petition was resisted by 
 the holders of bonds bearing lower numbers, upon two grounds: 
 first, because the petitioners holding the high numbered bonds 
 were put on notice of the fact that their bonds were not secured 
 by the mortgage ; and, second, because by the very terms of the 
 mortgage these bonds were not secured by it. 
 
 To the first position the court replied : 1 " The power of the 
 railroad company to issue bonds was unlimited. It could issue 
 as many as it chose. The bonds are therefore binding upon the 
 rail load compan} r . Were the holders of the bonds put upon suf- 
 ficient notice of the facts that bonds held by them were not se- 
 cured by the mortgage ? The holders of the bonds were bound 
 to take notice of what was contained in or indorsed upon their 
 bonds : fchey were bound to take notice of what was contained in 
 feheir Ai^-ti of mortgage, and of the laws of the stale referred to in 
 
 the deed of mortgage It would seem that the very bonds 
 
 and mortgage which put the purchasers upon inquiry lulled and 
 satisfied inquiry. They had the right to presume that the gov- 
 ernor had not violated his duly; that, before he indorsed the 
 bonds, 1m; had on file the Oath of the president ami chief engineer 
 
 of the railroad company that a sufficient number of miles ot rail- 
 road had been completed to authorize the indorsement. lh-sides 
 
 this, they had the Btettenient of th^ presidenl and treasurer of the 
 railroad company on the face of the bond, and of the trustees for 
 
 " Stanton v. Alabama & Chattanooga K. R. Co. 2 Woods, 523, 528, per Woodi, 
 Circui - 1 ■■ 
 
 L95
 
 § 215.] MORTGAGE BONDS OF CORPORATIONS. 
 
 all the bondholders upon the back of the bond, that the bonds 
 
 were secured by the mortgage 
 
 " But suppose the purchaser of bonds had ascertained the length 
 of the road for himself by actual measurement, how would that 
 help him to know whether his bonds were outside or inside the 
 terms of the mortgage ? The bonds all bear the same date, and 
 fall due on the same day. Bond number one has, therefore, no 
 advantage over any other bond, and no presumptions are to be 
 indulged in its favor. There is no presumption of law that it was 
 issued first or sold first. On the contrary, the presumption is 
 that all were sold at the same time. Practically, we know that 
 where a large number of bonds are put upon the market, the high- 
 numbered bonds are just as likely to be sold first as the low-num- 
 bered bonds. So that if the purchaser should, before purchasing, 
 ascertain for himself the precise length of the road, he would have 
 no means of ascertaining whether his bonds were over-issue bonds 
 or not. The holders of the five hundred bonds highest in number 
 would have precisely the same ground to say that the first five 
 hundred are over-issues, as the holders of the first five hundred 
 have to say this of the last five hundred. I conclude, therefore, 
 that while it is true that the mortgage limits the number of bonds 
 to be secured thereby, and the holder of bonds might be required 
 to take notice of that limitation, there was nothing to put him 
 upon notice that the limit thus fixed had been exceeded ; on the 
 contrary, that all the presumptions and all the evidence was that 
 it had not ; nor, if he had ascertained that the limit had been 
 exceeded, was he bound to conclude from the fact that his bonds 
 bore the high numbers, that they were the over-issue bonds rather 
 than others." 
 
 215. All the bonds secured are presumed to have been is- 
 sued at the same time. — To the claim made in the case last con- 
 sidered, 1 that the mortgage was executed to secure sixteen bonds 
 of 81,000 each to the mile, and no more, that no larger number of 
 bonds could be secured by it than its terms authorized, and that 
 when the company had issued bonds to this extent it had no power 
 to issue a greater number to be secured by that mortgage, substan- 
 tially the same reply is made : there is no way of ascertaining 
 which are the bonds over-issued and not secured. The law pre- 
 1 Stanton v. Alabama & Chattanooga R. R. Co. supra. 
 
 1 ( J6
 
 INCOMPLETE AND ALTERED BONDS. [§ 216. 
 
 sumes they were all issued at the same time, and the purchaser 
 has the right to act on that presumption. The numbering is 
 merely a matter of convenience in their registration and identifi- 
 cation. " The case is this," says the Circuit Judge, Mr. Woods. 
 " A mortgage is made to trustees to secure a given number of 
 bonds, and, as a matter of security to the bondholders, the trus- 
 tees are required to place their certificate upon the bond to the 
 effect that it is described in and secured by the mortgage. The 
 common trustees of all the bondholders are unfaithful and certify 
 to a larger number of bonds than were intended to be secured by 
 the mortgage. The result is, that all must suffer from the unfaith- 
 fulness of the trustees. But no part of the bondholders can say 
 that the loss shall fall exclusively on others. It is a case for the 
 application of the rule that equality is equity. A second mort- 
 gage bondholder would have the right to insist that the first 
 mortgage should only secure bonds to the extent of $16,000 per 
 mile. But no first mortgage bondholder has the right to say that 
 he shall be paid in full to the exclusion of others whose bonds pur- 
 port to be secured b} r the same mortgage, and whose equities are 
 equal to his." Even if there were a second mortgage upon the 
 property, in case the foreclosure sale did not produce a sum more 
 than sufficient to pay the amount actually secured by the mort- 
 . no second mortgage bondholder is injured by allowing the 
 over-issue to share in the proceeds, and no first mortgage bond- 
 holder can exclude any other from sharing in the proceeds. In 
 case the proceeds of the foreclosure sale had exceeded the amount 
 secured by the mortgage, and there were no subsequent incum- 
 brance, all the bonds, being valid debts of the company, would be 
 paid in full, or pro rata so far as the proceeds would go; but if 
 there were a second mortgage, the amount for which the first 
 mortgage was a security by its terms would be distributed pro 
 rata among all tin; bondholders. 
 
 216. The alteration of the number of a negotiable bond not 
 required by law to be numbered, inasmuch as it does nut change 
 the tenor of the bond, is immaterial; and although made with 
 fraudulent intent, does not avoid il against a holder who takes it 
 afterwards in good faith, for value, without notice of the altera- 
 tion, Or reason tO SUSpect it. 1 .Marks of SUCh alteration, when 
 
 1 Commonwealth v. Emigrant Industrial Savings Bank, 98 Mass. 12; BirdsaU r. 
 
 L97
 
 § 217.] MORTGAGE BONDS OF CORPORATIONS. 
 
 slight only, will not discredit the bond in the market, or deprive 
 the holder of the protection of a bond fide holder. 1 A purchaser of 
 such bonds in open market is not bound to make a close and criti- 
 cal examination of it to escape the imputation of bad faith in the 
 purchase. Even his knowledge of suspicious circumstances is im- 
 material, unless amounting to proof of want of good faith. 2 " The 
 number of the bond," say the New Jersey Court of Errors and Ap- 
 peals, " is put upon it as a mark denoting, for the convenience and 
 protection of the maker, that it is one of a series ; but such mark 
 does not enter into or in anywise affect the agreement embodied 
 in it ; the purchaser has nothing to do with it and need give it no 
 heed. To lay down the broad doctrine that an alteration in such 
 an incidental and unnecessary characteristic as this, by a person 
 possessed of no legal title to the instrument, will have the effect of 
 annulling such an instrument in the hands of a bond fide holder 
 who has purchased and paid for it in the ordinary course of trade, • 
 would be to imperil all persons dealing in this species of property. 
 It is very clear that the true principle should be, that the holder 
 of a negotiable instrument should bear no risk arising from ante- 
 cedent alterations of it, except with respect to such as have been 
 made by a prior legal holder; and against the existence of any 
 such imperfections in his title he has a sufficient guaranty in that 
 common prudence that, for the most part, deters men from doing 
 an act destructive of their own rights ; whereas if he is to be held 
 answerable for the acts of persons having no legal interest in the 
 instrument, no safeguard whatever is provided in the nature of 
 the transaction." 3 
 
 IV. Remedies upon Corporate Bonds. 
 
 217. In an action upon a bond issued under the provisions of 
 a railroad act authorizing a company to borrow money and issue 
 bonds and mortgages for the purpose of completing, furnishing, 
 or operating its road, 4 it would seem that the plaintiff ought prop- 
 erly to allege that the money was borrowed for the purpose pro- 
 vided for, and that it was necessary for that purpose. 5 
 
 Russell, 29 N. Y. 220 ; City of Elizabeth 3 City of Elizabeth v. Force, 29 N. J. 
 
 v. Force, 29 N. J. Eq. 587. Eq. 587. 
 
 1 Birdsall v. Eussell, supra. i 2 R. S. N. Y. 1875, p. 532. 
 
 2 Spooner v. Holmes, 102 Mass. 503. 6 Miller v. N. Y. & Erie R. R- Co. 8 
 
 Abb. (N. Y.) Pr. 431 ; 18 How. Pr. 374. 
 
 198
 
 REMEDIES UPON CORPORATE BONDS. [§§ 218, 219. 
 
 An action may be maintained upon a bond payable at a fixed 
 time and place without allegation or proof of presentation at the 
 time and place mentioned. 1 This is the rule applicable to a suit 
 against the maker of a note, or the acceptor of a bill of exchange. 
 But if the maker or acceptor was at the place at the time desig- 
 nated, and was ready and offered to pay the money, it is matter 
 of defence to be pleaded and proved on his part. 2 
 
 No demand of payment at the place where the bonds are made 
 payable is necessary when the corporation is insolvent and has no 
 funds at the place designated. The law does not exact the per- 
 formance of such a fruitless act. 3 
 
 Where bonds are made payable at the company's office in a par- 
 ticular place, and at the maturity of the bonds the company has no 
 office at that place, a demand of payment elsewhere is sufficient. 4 
 
 218. Bonds illegally issued cannot be actively enforced either 
 in a court of law or a Court of Equity. Yet if a corporation 
 which has issued such bonds comes into a Court of Equity seek- 
 ing to set them aside, equitable terms may be imposed upon it ; 
 and if the corporation has had the benefit of the sums of money 
 for which these invalid bonds had been given, it may be charged 
 as a debtor to that extent. 5 But as already noticed, corporations 
 ma\ be estopped by their acts from claiming the invalidity of 
 their bonds ; and if the bonds be negotiable, purchasers for value 
 may not be affected by their irregular or illegal issue. 6 
 
 219. Relief may be had in equity for the loss or destruc- 
 tion of negotiable bonds and coupons. The, jurisdiction of the 
 court for this purpose, will be exercised and relief granted by 
 ordering the issue of other bonds in place of those lost, when- 
 ever I he loss or destruction of the instruments has happened 
 without the negligence; or fault of the parly applying, provided 
 such rdicf can be given without derogating from any positive! 
 
 1 Langston v. So. Carolina R. R. Co. 2 6 Cork & Youghal Ry. Co. in re, L. R. 4 
 
 8. ('. 248; First Nat. Hank of St. Paul v. Ch. 748; Durham County, &c, Building 
 
 County Coiin of Scott County, Sec in re, L. R. 12 Eq. . r »iil ; Grand Junc- 
 
 11 Minn. 77. tion liy. Co. v. Bickford, 23 Grant's Ch. 
 
 - Wallace v. M'Connell, 13 Pet 136. (Ontario) 302. 
 
 ■■ Shaw v. Bill, 95 II. S. 10. " Sec § 207. 
 
 4 Alexander v. Atlantic, Tenn. & Ohio 
 R. i;. Co. 67 x. C. L9S 
 
 L99
 
 § 220.] MORTGAGE BONDS OF CORPORATIONS. 
 
 agreement, or violating any equal or superior equit}^ in other par- 
 ties. Such relief was granted in the case of bonds stolen at the 
 time of the evacuation of Petersburg by the Confederate forces, 
 the bonds having been hidden in the ground for safety ; J and in 
 like manner in the case of bonds stolen from the vault of a bank- 
 ing company. 2 It has been insisted sometimes that there is no 
 relief in equity when the loss has occurred through theft. But 
 equity makes no distinction in this respect. 3 
 
 In case the lost bonds have considerable time yet to run before 
 maturity, it is believed to be within the power of a Court of Equity 
 to grant relief by decreeing a reissue of the bonds, upon the execu- 
 tion of a good and sufficient bond of indemnity to the company 
 against the claims of bond fide holders of the bonds alleged to 
 be lost. To enjoin the company from paying the bonds to any 
 bond fide holder is useless and erroneous. 4 
 
 One who has in good faith sold bonds of a private or munic- 
 ipal corporation which are for any reason void is not liable to 
 the purchaser for the price paid for them, unless he has warranted 
 their validity. 5 He is liable ex delicto for bad faith ; and ex con- 
 tractu there is an implied warranty on his part that they belong 
 to him, and that they are not forgeries. Where there is no ex- 
 press stipulation, there is no liability bej^ond this. If the buyer 
 desires special protection, he must take a guaranty. 6 
 
 220. A right of conversion into stock can be enforced 
 only by the holder of the bond. — When bonds of a railway 
 company, payable to the holder and assignable by delivery, are 
 made convertible into the capital stock of the company at the 
 pleasure of the holder, at par, the right of conversion goes with 
 the bonds and is inseparable from them. The right of conversion 
 is available to the holder only so long as he continues the holder, 
 when it passes by the transfer of the bonds to the new holders. 
 Upon the refusal of the company to make the conversion upon 
 the demand of a holder, he has several courses open to him at 
 his election. He may waive the right thus denied him, continue 
 
 1 Chesapeake & Ohio Canal Co. v. Blair, 4 New Orleans, Jackson & Great North- 
 45 Md. 102. See § 389. ern R. R. Co. v. Miss. College, 47 Miss. 560. 
 
 2 Force v. City of Elizabeth, 27 N. J. 5 Otis v. Cnllum, 92 D. S. 447. 
 
 Eq. 408. 6 Per Swayne, J., in Otis v. Cullum, 
 
 8 Force v. Citv of Elizabeth, supra. supra. 
 
 200
 
 REMEDIES UPON CORPORATE BONDS. [§ 221. 
 
 to draw his interest as it accrues, and demand the principal at 
 maturity ; or may at any time renew his demand ; or he may 
 divest himself of all interest in the subject matter, and invest 
 another party with all his rights, including the right of election 
 as to the mode of performing the contract, by a sale and trans- 
 fer of the bond ; or he may stand upon and abide by the election 
 and demand already made, and on his right to convert the bond 
 into capital stock ; and may by action recover, by way of dam- 
 ages for the breach of contract, the full market value of the stock 
 wrongfully withheld from him. Such recovery would be a bar 
 to any further suit on the bond, and the payment of the judg- 
 ment would place the company in the legal position they would 
 be in had they issued the stock on demand. 1 But in an action 
 for the refusal to convert the bonds into stock, it is clear that the 
 plaintiff must allege not only his ownership at the time of the 
 demand for conversion, and that he then offered to surrender the 
 bonds for cancellation, but also that he is still the owner and 
 holder of such bonds, and now brings them into court for cancel- 
 lation, upon his recovery of damages for breach of the stipula- 
 tion ; and an action without such allegations is fatally defective. 
 An option given in a railroad bond to convert it into stock 
 within a specified time must be exercised within that time or 
 it is forever gone, and can only be renewed, or the right to 
 exercise it revived, by a new contract. An agreement for the 
 extension of the time of payment of the bond cannot have that 
 effect. 2 
 
 221. Bonds issued by a railroad company in the hands of 
 a non-resident of a state are not subject to taxation by that 
 state. The bonds are property in the hands of the holders, 
 and when held by non-residents they are property beyond the ju- 
 risdiction of the "state. A statute requiring the treasurer of the 
 
 i Per Scott, C.J., in Denny v. Clcve- par, upon the surrender thereof, with the 
 
 land & Pitt burg Et. R. Co. 28 Ohio St. unpaid interest coupons, to the secretary 
 
 ins. The convertible clause in this case of the company. Bj order of the direc- 
 
 was indorsed upon the bonds, over thesig- tors." Dennj W.Cleveland & Pittsburg 11. 
 
 nature of the president of the company,in B. Co. supra. 
 
 the following terms: "The within bond, - Muhlenberg v. Phila. & Readini B R 
 
 convertible into the capital Btock of tlio Co. 47 Pa. St. 16. 
 company at the pleasure of the bolder, at 
 
 201
 
 § 221.] MORTGAGE BONDS OF CORPORATIONS. 
 
 company to retain a percentage of the interest due to the non- 
 resident bondholders is not, therefore, a legitimate exercise of the 
 taxing power. It is a law which interferes between the company 
 and the bondholder, and under the pretence of levying a tax com- 
 mands the company to withhold a portion of the stipulated in- 
 terest and pay it over to the state. It is a law which impairs 
 the obligation of the contract between the parties. The fact that 
 the bonds are secured by a mortgage of property situated in the 
 state does not confer any right to tax such bonds. The mort- 
 gage is a mere lien, and though in the form of a conveyance con- 
 fers no absolute ownership. The mortgagee has a chattel interest 
 which follows the person of the owner. 1 
 
 The constitutional provision against impairing the obligations 
 of contracts is a limitation upon the taxing power of a state as 
 well as upon other legislation ; and in fact this provision is more 
 frequently violated in exercise of the taxing power than in any 
 other mode. " No state," says Mr. Justice Strong, 2 " by virtue 
 of its taxing power, can say to a debtor, ; You need not pay to 
 your creditor all of what you have promised to him. You may 
 satisfy your duty to him by retaining a part for yourself, or for 
 some municipality, or for the state treasury.' Much less can a 
 city say, ' We will tax our debt to you, and in virtue of the tax 
 withhold a part for our own use.' ' No municipality of a state 
 can, by its own ordinances, under the guise of taxation, relieve 
 itself from performing to the letter all that it has expressly prom- 
 ised to its creditors. 3 
 
 A state has no power to tax the bonds of a railroad corporation 
 whose road lies partially in two or more states, when the bonds 
 are binding upon every part of the road. 4 If one state can tax 
 the bonds the other can also tax them ; and thus there would be 
 a double taxation of the same property ; or if the road extends 
 through five or six states, there might be a taxation of the same 
 property five or six times over. A state cannot properly impose 
 a tax upon property and interests lying beyond her jurisdiction. 
 
 1 Railroad Co. v. Pennsylvania : Case of peake & Ohio R. R. Co. 27 Gratt. (Va.) 
 
 the State Tax of Foreign held Bonds, 15 344. Contra, see Maltby v. Reading & 
 
 Wall. 300; Railroad Co. v. Jackson, 7 Columbia R. R. Co. 52 Pa. St. 140. 
 
 Wall. 262 ; Davenport v. Miss. & Mo. R. 2 Murray v. Charleston, 96 U. S. 432. 
 
 R. Co. 12 Iowa, 539; People v. Eastman, 3 Murray v. Charleston, supra. 
 
 25 Cal. 603 ; Commonwealth v. Chesa- 4 Railroad Co. v. Jackson, 7 Wall. 262. 
 202
 
 REMEDIES UPON CORPORATE BONDS. [§ 221. 
 
 Railroad charters sometimes contain an exemption from taxa- 
 tion either total or limited ; and in such case the exemption is ir- 
 repealable and inviolable. 1 
 
 1 Mobile & Ohio R, R. Co. v. Mosely, Hannibal & St. Jo. R. R. Co. 60 Mo. 
 62 Miss. 127. See Livingston Countv v. 516. 
 
 203
 
 CHAPTER VII. 
 
 MUNICIPAL BONDS IN AID OF RAILROAD AND OTHER CORPO- 
 RATIONS. 
 
 I. Power of municipalities to issue negoti- [ IV. Ratification of bonds irregularly is- 
 
 able bonds in aid of private corporations, 
 222-230. 
 
 II. Constitutional and statutory provi- 
 sions respecting municipal aid to corpo- 
 rations, 231-266. 
 
 III. Conditions precedent to granting 
 
 sued, and waiver of conditions, 278-282. 
 
 V. Negotiability of municipal securities, 
 283-286. 
 
 VI. Rights of bonajide holders of negoti- 
 ble bonds of municipalities, 287-299. 
 
 VII. Enforcement of municipal bonds, 
 
 municipal aid, 267-277. I 300-305. 
 
 I. Power of Municipalities to issue Negotiable Bonds in aid of 
 Private Corporations. 
 
 222. General statement. — Municipal corporations are created 
 solely for the purposes of local government. They are the creat- 
 ures of the state, which confers upon them a portion of its gov- 
 ernmental power, to be exercised for the specific purpose of their 
 existence. The legislature invests them with only such powers as 
 it deems essential to this end, and the powers conferred are at all 
 times subject to its control. They have no powers of their own, 
 except such as are incidental to their very existence. 1 The pur- 
 poses for which municipal corporations are formed being public 
 and governmental for the public benefit of the people within their 
 limits, while those for which private corporations exist are the 
 carrying on of private business for the private gain of their mem- 
 bers, a fundamental and wide difference arises between the powers 
 of these two classes of corporations. Thus it has been observed 2 
 that private corporations have the power, as incidental to their 
 existence, to borrow money and to execute negotiable or other 
 securities at their pleasure. But municipal corporations have no 
 
 1 United States v. Railroad Co. 17 Wall. 330 ; Carter v. City of Dubuque, 35 Iowa, 
 
 322; Mayor v. Ray, 19 Wall. 468, 475; 416. 
 
 Thomson v. Lee County, 3 Wall. 327, 2 See § 128. 
 204
 
 POWER OF MUNICIPALITIES TO ISSUE BONDS. [§ 223. 
 
 such powers. 1 A similar distinction, arising from their diverse 
 purposes, exists between the conferred powers of municipal and 
 private corporations ; those of the latter assimilating closely to 
 the powers of natural persons, while those of the former are pub- 
 lic, and only such as will enable them to fulfil their public func- 
 tions. The powers conferred upon corporations must be appro- 
 priate to the purposes for which they are created ; and, there- 
 fore, the legislature itself is limited in conferring powers upon 
 municipal corporations to such as may be exercised for public pur- 
 poses. 
 
 223. Municipal corporations cannot incur debts and issue 
 their securities for purposes not "within the proper scope of 
 such corporations, even though they have legislative sanction for 
 such transactions. It is a fundamental principle that tin' power 
 to levy taxes can only be used by municipal corporations for public 
 purposes : and it is equally fundamental that these public purposes 
 must be such as are contemplated in the creation and existence 
 of such corporations. As to what are public purposes for which 
 municipal corporations may be empowered to raise money by tax- 
 ation much diversity of opinion exists, and it is not possible to 
 reconcile all the decisions. In general, it may be said that "the 
 object, to be a public use, must either be: (1.) something which 
 ipso facto, by its mere existence and of necessity, produces souk; 
 great common good to all the inhabitants of a particular district, 
 such as sanitary measures for draining, water-supply, and the like ; 
 or (2.) it must be something in which the public at large — that 
 is, every individual, if he pleases — has a legal interest and right, 
 such as a highway, railroad, and the like ; or (3.) it must be some- 
 thing directly governmental, such as a fort, a statediouse, and the 
 like." 2 Accordingly the laying out and grading of streets/' the 
 locating and building of a school or university, 4 the con truction 
 of town halls, 5 of markets,'' of water-works, 7 and of gas works, 8 
 
 i Thomson v. Lee County, supra ; Mil- 4 Hensley Township v. People, 84 111. 
 
 ler v. Ray, supra. 54 t. 
 
 " Mr. Pomeroy's argument in Bloom- 6 Greeley v. People, 60 III. lit. 
 field, &c. Gas Light Co. v. Richardson, 63 « State v. City of Madi.-on, 7 fl 
 Barb. (N. V.) 437; People v. Common 7 Hale v. Houghton, 8 Mich. 458; Sala 
 
 Conncil of Detroit, 28 Mich. 228 ; 15 Am. y. City of New Orleans, 2 Wood I 
 
 H 202. Rome o. Cabot, 28 Ga, 50. 
 
 s Roeeratf. Burlington, 8 Wall. 054. ' Citj of Auroraw. West, 9 End. 74. 
 
 205
 
 § 224.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 the laying out of cemeteries and public parks, 1 and the providing 
 of fire-engines, 2 have been held to be proper objects of municipal 
 care, for which the legislature may authorize a municipality to 
 borrow money and issue negotiable securities. 
 
 But a statute authorizing the city of Boston to raise money by 
 the issue of bonds for the purpose of lending it to owners of prop- 
 erty destroyed by the great fire was declared unconstitutional. 3 
 In like manner a statute of the State of Kansas, whose object was 
 to provide the destitute with provisions, and with grain for seed, 
 was held to be unconstitutional. 4 A statute authorizing towns 
 to loan their credit to such persons as will engage in manufactur- 
 ing for their private emolument in such towns is unconstitutional. 5 
 The legislature cannot take the property of one man, or the prop- 
 erty of all tax-payers of a town, and hand it over, without con- 
 sideration and without pretence of any public obligation or duty, 
 to another, to be used by him in buying a farm, or building a 
 house, or setting himself up in business. It is too clear for dis- 
 cussion that this would be a taking of private property for a pri- 
 vate use, and would be beyond the limits of legislative power. 
 
 224. In illustration of these principles which determine the 
 limits of the power of municipal corporations to incur indebted- 
 ness there are numerous decisions, to a few of which only is it 
 practicable to refer in connection with the present subject. It is 
 premised that while the general rule, that the legitimate object of 
 raising money by taxation is for public purposes, and the proper 
 needs of government, general and local, state and municipal, is 
 not anywhere disputed, yet when the inquiry is made in any case, 
 what is a public purpose, the answer is not always ready, nor 
 easily to be found. In general it may be said that no pinched or 
 meagre sense may be put upon the words, and that if the purpose 
 designed by the legislature lies so near the border line as that it 
 may be doubtful on which side of the line such purpose is domi- 
 
 1 County Court of St. Louis County v. 5 Allen v. Inhabitants of Jay, 60 Me. 
 Griswold, 58 Mo. 175. 124 ; Commercial Bank v. City of Iola, 2 
 
 2 Robinson v. City of St. Louis, 28 Mo. Dill. 353 ; National Bank of Cleveland v. 
 488 ; Mills v. Gleason, 11 Wis. 470. City of Iola, U. S. Circuit Court, 9 Kans. 
 
 3 Lowell v. City of Boston, 111 Mass. 689; Ohio Valley Iron Works v. Town of 
 454. Moundsville, 1 1 W. Va. 1 . 
 
 4 State v. Osawkee Township, 14 Kans. 6 Perry v. Keene, 56 N. H. 514. 
 418. 
 
 206
 
 POWER OF MUNICIPALITIES TO ISSUE. [§ 224. 
 
 ciled, the courts may not set their judgment against that of the 
 law makers. 1 
 
 A statute which authorizes the issuing of bonds, to be paid by 
 taxation, to aid in establishing or carrying on ordinary manufact- 
 uring enterprise is void, because the purpose is not a public one, 
 although the enterprise might, in a collateral way, benefit the local 
 public. 2 " I think it would not be claimed," said Grover, J., in a 
 case before the Court of Appeals of New York, 3 " that a town 
 could be compelled to become a stockholder in a banking or 
 manufacturing corporation, although it appeared that tin; partic- 
 ular corporation would largely promote the public interest where 
 the business was conducted. Such legislation could only be sus- 
 tained by holding the power of the legislature supreme over mu- 
 nicipal corporations for private as well as public purposes. Upon 
 principle and authority, I think that it is not as to the former, 
 although it is as to the latter." Moreover, the legislature may not 
 empower a majority to compel a minority to enter into a private 
 business, whether the form of effecting the end be by a direct 
 statute or through the operation of taxation. 4 
 
 The principle is forcibly stated in a leading case before the Su- 
 preme Court of Pennsylvania by Black, C. J.: "The legislature 
 has no constitutional right to create a public debt, or to lay a tax, 
 or to authorize any municipal corporation to do it, in order to raise 
 funds for a mere private purpose. No such authority passed to 
 the assembly by the general grant of legislative power. This 
 would not be legislation. Taxation is a mode of raising revenue 
 for public purposes. When it is prostituted to objects in no way 
 connected with the public interests or welfare, it ceases to be tax- 
 ation, and becomes plunder. Transferring money from the own- 
 ers of it into the possession of those who have no title to it, though 
 
 i Wdsmcr v. Village of Douglas, C4 v. Village of Douglas, 13 Am. R. 480; S. 
 
 N.Y. 91, 99, substantially the language oi C. I Hun (N.Y.),201 ; S. C.64 \. Y.91, 
 
 r, J. which see for a full discussion of the sub- 
 
 2 Jarrott v. City of Moberly (U. S. C. ject; Curtis r. Whipple, 24 Wis. 350 j 
 
 C. W. D. Mo. April T. 1878), 5 Reporter, Whiting v. Sheboygan & Fond l>u Lac 
 
 683; Loan Association v. Topeka, 20 R. JR. Co. 25 Wis. L67; National Bank of 
 
 Wall. 655; Commercial National Bank of Cleveland v. [ola (U. S. C. C), 9 Kana. 
 
 land r. Lola, 2 Di L 35 • ; Citizens' 690. 
 
 A Bociation of Cleveland v. To- ;; People v. Batchellor, 58 X. V. 128, 
 
 peka, 3 Dill. 376 ; Allen v. Jay, 60 Me. L43. 
 
 124; Western Saving Fund Soc. of Phila. * Weismerw. Village of Douglas, 53 N. 
 
 v. City of Phila. 31 Pa. Si L85; Weismer X". 128, per Folger, J. 
 
 207
 
 § 225.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 it be done under the name and form of a tax, is unconstitutional 
 for all the reasons which forbid the legislature to usurp any other 
 power not granted to them." 1 
 
 225. In several states there are statutes authorizing mu- 
 nicipal aid to internal improvements, and the inquiry often 
 arises what improvements may be promoted under this authority. 
 The first essential characteristic of an improvement entitled to such 
 aid is, that its purpose shall be public. 2 Railroads, turnpikes, 
 bridges, ferries, public buildings, the reclaiming of swamps, and 
 the like, are no doubt authorized improvements. A bridge or a 
 turnpike which is a public thoroughfare is an internal improve- 
 ment, although tolls are charged for the use of it. 3 A county hav- 
 ing, under the authority of such a statute, voted aid for the con- 
 struction of a bridge, under the belief that it had the right to 
 exact tolls for its use, the want of power to demand tolls does 
 not affect the validity of the bonds issued therefor. The power 
 to aid in the construction of the bridge, and the power to stip- 
 ulate for tolls thereon, are two distinct things ; and whether the 
 power to exact tolls exists or not does not in any way concern the 
 purchaser of the bonds. 4 
 
 Under a statute of the State of Nebraska authorizing any 
 county or city to issue bonds to aid in the construction of any 
 railroad or other work of internal improvement, a bridge was 
 held to be an internal improvement within the meaning of the 
 act. 5 The fact that the bridge, in aid of the construction of 
 which the bonds were issued, was built as a toll-bridge, and 
 was used as such, does not affect their validity. All bridges in- 
 tended and used as thoroughfares are public highways, whether 
 subject to toll or not. Neither does the fact that the precinct 
 or the county commissioners had no right, without legislative au- 
 thority, to demand tolls for passing the bridge affect the valid- 
 
 1 Sharpless v. Mayor,&c.of Philadelphia, improvements of highways and channels 
 21 Pa. St. 147, 168. Quoted and approved of travel and commerce." 
 
 in Opinion of Judges, 58 Me. 590. 3 County Commissioners v. Chandler, 
 
 2 Mayor of Watumpka v. Newton, 23 Supreme Court of the U. S. 5 Reporter, 
 Ala. 660. " Where internal improvements 227 ; 96 U. S. 205. 
 
 under state authority are spoken of, it is 4 County Commissioners v. Chandler, 
 
 universally understood that works within supra. 
 
 the state by which the public are supposed 5 Union Pacific R. R. v. Colfax County, 
 
 to be benefited are intended ; such as the 4 Neb. 450. 
 
 208
 
 POWER OF MUNICIPALITIES TO ISSUE. [§ 226. 
 
 ity of the bonds. The bridge was an internal improvement, 
 which the precinct had the power to aid ; and whether it had the 
 power to collect tolls for the use of it is a distinct thing. 1 
 
 A statute of the State of Kansas authorized towns and coun- 
 ties to issue bonds " for the purpose of building bridges or to aid 
 in the construction of railroads, water-power, or other works of 
 internal improvement." 2 A previous statute declared all custom 
 grist-mills to be " public mills," and regulated their management. 3 
 A township issued bonds which purported to be authorized by the 
 act first named, to aid in the construction and equipment of a 
 steam grist-mill owned by an individual. The Supreme Court of 
 the United States declared the bonds authorized and valid, being 
 issued in aid of " works of internal improvement " within the 
 meaning of the act. 4 
 
 Under a special act of the legislature of the same state a 
 township was authorized to issue bonds for the purpose named in 
 a vote of the township, which was to aid in the improvement of 
 a water-power, and the putting in of a flouring-mill. The de- 
 cision 5 sustaining the validity of the bonds rested upon the recital 
 that they were issued " for the purpose of aiding internal im- 
 provements ; " but Judge Dillon remarked that the legislature of 
 the state authorized in favor of water-mills the exercise of the 
 power of eminent domain, and that the Supreme Court of the 
 state had declared that "no instance can be shown where the 
 government may aid a thing by the power of eminent domain, 
 where it cannot also aid it by taxation." 6 
 
 226. A municipal corporation cannot without legislative 
 authority issue bonds in aid of any extraneous object. Every 
 person dealing in them must at his peril take notice of the ex- 
 istence and terms of the law by which it is claimed the power to 
 issue th<^ bonds is conferred. 7 Therefore, if the act which it was 
 
 1 County Commissioners v. Chandler, 6 Leavenworth County. Mil Wt, 7 Kans 
 96 TL S. 205. And see Commissioners of 479,52.'). 
 
 Dodge County v. Chandler, U.'S. Supreme 'Thomson v. Lee County, S Wall. 
 
 Conn, 1878 5 Reporter, 227. 327; Pendleton County v. Amy, 13 Wall. 
 
 2 Stat. 1872, ch. 68, p. 110. 297; Kenicott v. Supervisors, 16 Wall. 
 » Stat. 1868, ch. 65, p. 57.'!. 452; St. Joseph Township v. Rogers, 16 
 « Township of Burlington v. Beasley, Wall. 644 ; Town of Col a v, Ea 
 
 94U. 8. 310. U. S.484; Town of So. Ottawa i>. Per 
 
 •'< Guernsey v. Burlington Township, 4 kins, mi 0.8.260; Police Jury v. Britton, 
 
 Dill, 372. 15 Wall. 566; Barnes v. Town oi Lacon, 
 
 14 209
 
 § 226.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 supposed authorized the issuing of the bonds was not actually 
 passed by the legislature, although it was published among the 
 printed statutes of the state as a law, and therefore primd facie 
 valid, the municipal corporation which has issued bonds by virtue 
 of the act is not estopped to deny the passage of it, although the 
 bonds are held by a purchaser in good faith, who relied upon the 
 published statute as valid. 1 
 
 The power to issue railroad-aid bonds is not one of the ordi- 
 nary powers of a municipality. Express authority for it is re- 
 quired, and thus authority must be exercised in conformity with 
 prescribed forms. 2 But, while nothing is taken by implication, 
 the statute is not construed with the strictness of the rules of 
 criminal law. The officers of the county have no authority to 
 waive any of the limitations or conditions of the statute author- 
 izing the aid, or of the subscription itself ; yet, if there be a 
 failure on the part of the railroad company to comply with the 
 conditions in some minor respect, such as the completion of a 
 specified number of miles of road within a given time, and the 
 county takes no objection, but pays the interest upon the bonds 
 for a series of years, the action of its officers is thereby ratified, 
 and the county prevented from recovering the bonds or their 
 value of the railroad company. 3 
 
 Inasmuch as municipal aid may be given to railroad companies, 
 it follows that such aid may be given for any integral or essential 
 part of a railroad, such for instance as the building of machine 
 shops ; 4 or the construction of depots and side-tracks of an ex- 
 
 84 111. 461 ; Town of Pana v. Lippincott, 47 Pa. St. 189; Fisk v. City of Kenosha, 
 
 10 Chicago Leg. News, 205 ; Delaware 26 Wis 23. 
 
 County v. McClintock, 51 Ind. 325 ; Clay 1 Town of South Ottawa v. Perkins, 94 
 
 W.Nicholas County Court, 4 Bush (Ky.), U. S. 260. 
 
 154; Williamson v. City of Keokuk, 44 2 Blake v. Mayor, &c. of Macon, 53 Ga. 
 
 Iowa, 88; Hawkins v. Carroll County, 50 172; Lewis v. Bourbon County, 12 Kans. 
 
 Miss. 735 ; Sykes v. Mayor, &c of Colum- 186 ; Barnes v. Town of Lacon, 84 111. 461 ; 
 
 bus, 5 Reporter, 501 ; Ranlett v. Leaven- Hopple v. Hippie, Sup. Ct. Cora, of Ohio, 
 
 worth, U. S. C. C, referred to in 1 Dill. 1878, 7 Cent. L. J. 75 ; M'Dermond v. 
 
 263 ; Reineman v. Covington, &c. R. R. Co. Kennedy, Bright. (Pa.) 332 ; Pennsylvania 
 
 7 Neb. 310; New Orleans, Mobile & Chat- R. R. Co. v. Philadelphia, 47 Pa. St. 189. 
 
 tanooga R. R. Co. v. Dunn, 51 Ala. 128; 3 Leavenworth, Lawrence & Galveston 
 
 Lafayette, Muncie & Bloomington R. R. R. Co. v. Douglas County, 18 Kans. 
 
 R. Co. v. Geiger, 34 Ind. 185; Pennsyl- 169; 15 Am. Railw. R. 256. 
 
 vania R. R. Co. v. City of Philadelphia, 4 Jarrott v. City of Moberly, 5 Reporter, 
 
 583, per Dillon, J. 
 210
 
 POWER OF MUNICIPALITIES TO ISSUE. 
 
 [§ 227. 
 
 isting railroad. 1 The cost of such constructions is always charge- 
 able to construction account, and not to repairs or expenses of 
 operation. 
 
 In like manner a municipality must have legislative authority 
 to subscribe to the capital stock of a bridge company, or of any 
 other private corporation, before it is bound by its bonds issued 
 therefor, even in the hands of bond fide purchasers. 2 
 
 227. It is well established that railroads are of such general 
 public advantage that municipal corporations maybe authorized 
 by legislation to aid in their construction or maintenance, except so 
 far as such legislation is prohibited or restrained by constitutional 
 provisions. 3 In view of the great abuse of this power by municipal 
 corporations whereby an unsupportable burden of debt has been 
 placed upon towns, cities, and counties, in portions of the country, 
 regrets have often been expressed by judges and legal writers that 
 the authority of legislatures to authorize the giving of aid to such 
 enterprises was ever recognized to be constitutional; 4 but in view 
 
 1 Township of Rock Creek v. Strong, 
 9G U. S. 271. 
 
 2 McClure v. Township of Oxford, 94 
 U. S. 423. 
 
 Ipeke v. City of Dubuque, 1 Wall. 
 175; .Mitchell v. Burlington, 4 Wall. 270; 
 Township of Pine Grove *:. Talcott, 19 
 Wall. 66 i ; Ri gers v. Bnrlington, 3 Wall. 
 654; Olcotl v. Supervisors, 1G Wall. 678; 
 Railroad Co. v. County of Otoe, 1G Wall. 
 667; I. otii Association v. Topeka, 20 
 Wall. 655; St. Joseph Township v. Rog- 
 ers, 16 Wall. ''. 1 1 ; Davidson v. Ramsey 
 County, 18 Minn. 482 ; Quincy, Missouri 
 & Pacific R. I: Co. v. Morris, 84 III. 410; 
 Perry v. Kcene, 56 X. H. 514; Reineman 
 ■ -. R. K. Co. 7 Neb. 310J 
 Harcourt '■• Good, -'J'.) Tex. 455, when: 
 many c n ferred to in the opinion 
 
 of Wa k ■: ■• •'. : ( Cincinnati, Wilm 
 & Zan ■ Hi R. R. Co, v. < 'linton < lounty, 
 1 Ohio St. 77; Bridgeport v. Housatonic 
 R. R.aCo. I 5 Conn. -1 7 . > ; ( ioddin v. 
 Crump, I I, 120; Nichol v. 
 
 I Nashville, 9 Humph. (Tenn.) 
 252 ; I. Nashville R. R. Co, v. 
 
 Count} "i I >a\ id on, i 8n< ed, 637 ; Leav- 
 enworth, Lawrenc ton R, II. I !o. 
 
 v. Douglas County, 18 Kans. 1G9 ; City 
 of San Antonio v. Lane, -32 Tex. 405 ; 
 Winn v. City of Macon, 21 Ga. 275 ; Peo- 
 ple v. Mitchell, 35 N. Y. 551 ; Common- 
 wealth v Pittsburg, 41 Pa. St. 278 ; Sharp- 
 less v. Mayor, &c. of Phila. 21 Pa. St. 147 ; 
 Commonwealth v. Perkins, 43 lb. 400; 
 Borough of North Lebanon v. Arnold, 47 
 lb. 489 ; Augusta Bank v. Augusta, 49 Me. 
 507; Society for Savings'^. City of New 
 London, 29 Conn. 174; City of Aurora v. 
 West, 9 Ind. 74 ; 22 lb. 88; Mar-hall v. 
 Silliman, 61 111. 218; Butler v. Dunham, 
 27 111. 474; Chicago, Rock Island & Pa- 
 cific li. R. Co. v. City of Jolict, 79 111. 25; 
 Com. of Leavenworth County v- Miller, 
 7 Kans. 479; 12 Am. R. 425 j Davidson 
 v. Ramsey County, 18 Minn. 482 . I ity 
 of St. Louis v. Alexander, 23 Mo. 185 ; 
 Chicago, Burlington & Qbincy R.R.Co. 
 v. County of Otoe, 2 Neb. 496 ; Lawson v. 
 Milwaukee & Northern liy. Co. 30 Wis. 
 597; Robinson v. Bidwell, 22 Cal. 379; 
 Stein v. Mayor, &c. of Mobile, 
 
 591 ; Slack v. Maysville & Lexing R. 
 
 R. Co. 13 B. Mon. (Ky.) 1 ; Hill 
 Bythe County, 67 N. C. 
 * " Look Dot thou upon the voting of 
 •J II
 
 § 227.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 of the general recognition of the propriety of such legislation it 
 is too late now to question the constitutional right of states to 
 authorize the granting of aid to such corporations. The only rem- 
 edy for the evil is by constitutional provisions restricting or pro- 
 hibiting such legislation ; and accordingly, within a few years, 
 provisions for this purpose have been placed in the constitutions 
 of several of the states. 
 
 Such legislation in aid of railroads is supported upon the ground 
 that the building of them is a public affair ; and that they are 
 public highways for the public benefit. " The public has an 
 interest in such a road, when it belongs to a corporation, as clearly 
 as they would have if it were free, or as if the tolls were payable 
 to the state, because travel and transportation are cheapened by 
 it to a degree far exceeding all the tolls and charges of every 
 kind, and this advantage the public has over and above those of 
 rapidity, comfort, convenience, increase of trade, opening of mar- 
 kets, and other means of rewarding labor and promoting wealth." J 
 Neither does the fact that the corporation has the right to exact 
 reasonable tolls from those who use the road make its main use a 
 private one. The company is private, but its functions are public. 
 The state itself may construct and maintain a railroad at the pub- 
 lic expense. It may aid a private corporation to do so by an ex- 
 ercise of the right of taxation, and of the right of eminent domain 
 as well ; and it has as clear a constitutional right to allow a par- 
 ticular portion of the people to tax themselves to promote the 
 building of a railroad in which they have an interest. 2 
 
 The fact that the railroad, in aid of which a city or county 
 makes a subscription, lies wholly in another state does not neces- 
 sarily make the subscription one any the less for a public pur- 
 pose. 3 Such a railroad may greatly promote the general pros- 
 perity and welfare of the county or city. Thus it was recently 
 held that the city of Quincy in Illinois, situated upon the eastern 
 bank of the Mississippi River, might properly aid in the construc- 
 
 railroad bonds when it is new, for at the 2 Sharpless v. Mayor, &c. of Phila. su- 
 
 last it biteth like a serpent, and stingeth pra. 
 
 like an adder." Per Brewer, J., Leaven- 3 Railroad Co. v. County of Otoe, 16 
 
 worth, Lawrence & Galveston It. R. Co. v. Wall. 667 ; Bell v. Railroad Co. 4 Wall. 
 
 Douglas County, 18 Kans. 169, 184. 598; Walker v. City of Cincinnati, 21 
 
 1 Per Black, C. J., in Sharpless v. Ohio St. 14 ; St. Joseph & Denver City 
 
 Mayor, &c. of Phila. 21 Pa. St. 147, 169. R. R. Co. v. Buchanan County Court, 39 
 
 Mo. 485. 
 
 212
 
 POWER OF MUNICIPALITEIS TO ISSUE. [§ 228. 
 
 tion of a railroad lying in the State of Missouri, running from a 
 point on the western bank of the river opposite the city of Quincy 
 to a point westward in Nebraska. 1 
 
 228. Public policy chiefly determines what is a public use, 
 for which the power of taxation may be exercised. This whole 
 subject was ably discussed in the recent case of Perry v. Keene, in 
 New Hampshire. 2 It was there declared that the rule by which 
 to determine whether an object is a public one for which the legis- 
 lature may properly authorize the levying of taxes is furnished 
 not so much by the law as by general considerations of public 
 policy and political economy ; and that, tested by this rule, a rail- 
 road is such a public object. Upon this part the of subject Mr. 
 Justice Ladd said : " No one doubts that the building and main- 
 taining of our common highways is a public purpose. Why ? 
 Certainly for no other reason than that they furnish facilities for 
 travel, the transmission of intelligence, and the transportation of 
 goods. But why should the state take this matter under its foster- 
 ing care, imposing upon the people a very great yearly burden in 
 the shape of taxes for their support, any more than many others 
 that might be mentioned, of equal and perhaps greater importance 
 to its citizens ? Is it of greater concern to the citizen that he should 
 have a road to travel on, when he desires to visit his neighbor in 
 the next town, or transport the products of his farm or of his fac- 
 tory to market and bring back the commodities for which they 
 may be exchanged, than that he should have a mill to grind his 
 com, a tanner, a shoemaker, and a tailor, to manufacture his raw 
 materia] into clothing, wherewith his body may be covered? 
 Doubtless highways are a great public benefit. Without them I 
 suppose the whole state would soon return to its primal condition 
 of a howling wilderness, fit only for the habitation of wild beasts 
 and savages. I low would it be if there were no mills for the manu- 
 facture of lumber, no joiners or masons to build houses, no manu- 
 facturers of cloth, no merchants or tradesmen to assist in the ex- 
 change of commodities? These suppositions may appear some- 
 what fanciful, hut they illustrate the inquiry, Why is the build- 
 ing of roads to be regarded as a public Bervice, while many other 
 
 i Qnincy, Mo. & Pacific B. R. Co. v. Weismer v. Village oJ I glas, 64 N. Y. 
 
 Morris, - I [II. HO. 91, 99. 
 
 a 56 N. II. 51 i. See, in this connection, 
 
 213
 
 § 228.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 things equally necessary for the upholding of life, the security of 
 property, the preservation of learning, morality, and religion, are 
 by common consent regarded as private, and so left to the private 
 enterprise of the citizens? The answer to this question, surely, is 
 not to be found in any abstract principle of law. It is essentially 
 a conclusion of fact and public policy, the result of an inquiry into 
 the individual necessities of every member of the community 
 (which in the aggregate show the character and urgency of the 
 public need), and the likelihood that these necessities will be sup- 
 plied without interference of the state. Obviously it bears a much 
 closer resemblance to the deduction of a politician than the appli- 
 cation of a legal principle by a judge. Should it be found by 
 experience that no person in the state would, voluntarily and un- 
 aided, establish and carry on any given trade or calling, necessary 
 and universally admitted to be necessary^ for the upholding of life, 
 the preservation of health, the maintenance of decency, order, and 
 civilization among the people, would not the carrying on of such 
 necessary trade or calling thereupon become a public purpose, for 
 which the legislature might lawfully impose a tax? 
 
 " Experience shows that highways would not be built, or, if 
 built, would not be located in the right places with reference to 
 convenient transit between distant points, nor kept in suitable 
 repair, but for the control assumed over the whole matter by the 
 state ; and so the state interferes, and establishes a system, and 
 imposes an enormous burden upon the people, in the shape of 
 taxes, compelling them to supply themselves with what they cer- 
 tainly need, but need no more than they need shoes or bread, — 
 and nobody ever complained that the interference was unauthor- 
 ized, or the purpose other than a public one." 
 
 To the objection that railroad corporations are private ; that 
 the roads are built and run for private gain ; that the public can 
 only enjoy the benefits offered them upon payment of a toll, the 
 answer conclusively made is, that the character of the agency em- 
 ployed does not determine the nature of the end to be secured ; 
 that if the purpose is public, it makes no difference that the agent 
 by whose hand it is attained is private. In conclusion it was said 
 that a railroad must be regarded as a public purpose for which 
 the power of taxation may be exercised, inasmuch as it is univer- 
 sally admitted that it is such a public use as affords just ground 
 for the taking of private property and appropriating it to that use. 
 214
 
 POWER OF MUNICIPALITIES TO ISSUE. 
 
 t§ 229 ' 
 
 229. There are a few decisions, however, which hold that 
 the construction of a railroad is not an object for which a 
 municipal corporation can exercise the power of taxation, and is 
 not an object for which the legislature can confer such power. 1 
 The power of taxation can be exercised only for a public purpose. 
 In determining what is a public purpose, it is said that the ur- 
 gency of the public need, or the extent of the public benefit which 
 is to follow, is not conclusive. It designates rather an object for 
 which, according to settled usage, the government may provide, 
 as distinguished from an object which, by like usage, is left to pri- 
 vate enterprise. Moreover, a public purpose of general interest 
 throughout the state is essential to the exercise of the power of 
 taxation by the state, while a public purpose of general interest 
 throughout a municipal subdivision of a state is essential to the 
 exercise of that power by such municipal subdivision. A railroad, 
 however, is regarded as a private enterprise ; and although an 
 incidental benefit may accrue to the public from such enterprise, 
 yet that benefit does not afford a ground for imposing burdens 
 upon the public by way of taxation in behalf of such enterprise. 
 
 1 Michigan seems to be the only state 
 in which the courts have persisted in hold- 
 ing that such legislation is incompetent 
 apd invalid ; and these decisions have been 
 set aside by the Supreme Court of the 
 United Stat,-. Sec § 246. 
 
 In New York the validity of enabling 
 acts, authorizing municipal corporations 
 to subscribe for stock, and ur issue bonds 
 in aid of railroads, was firsl considered by 
 the Court of Appeals in Bank of Rome v. 
 Village of Rome, 18 N. Y. 38, and the 
 constitutionality of such legislation was 
 there distinctly affirmed, although there 
 had been a decision against it by the Su- 
 premcCourt. Clark v. City of Rochester, 
 13 How. Pr. 204 ; S. C. reversed on 
 appeal, 2 1 Barb. IHi. When this case 
 came before the Court of Appeals, this 
 point, in view of the decision in Bank of 
 Borne v. Vi! age of Home, was not insisted 
 upon. 28 N- 5 l "... The validity of such 
 ; cquiesced in bj several 
 
 case* involving the regularity "i proceed 
 itij:, under enabling acts. In Pa 
 B llor, 53 N. V. L28, the Courl of Ap 
 
 peals held that a mandamus would not lie 
 to compel a town to issue bonds and sub- 
 scribe for stock in a railroad company un- 
 der a mandatory act of the legislature ; hut 
 the validity of the acts was not questioned. 
 In Williams v. Town of Duanesburgh, 06 
 N. Y. 129, a majority of the court was of 
 opinion that the case of People v. Batchel- 
 lor, had not in any way overruled the prior 
 decisions in favor of such legislation. 
 
 In Iowa some of the earlier decisions 
 were against the constitutionality of such 
 legislation. See, particularly, the able 
 opinion of Dillon, C.J., in Hanson r. Ver- 
 non, 27 Iowa, 28. But this and other de- 
 cisions to the sameeffeel were soon over- 
 ruled. See § 240. 
 
 I,, Township of Pine Grove v. Talcott, 
 l!i Willi. 666 (1878), Swayne, J., said that 
 legislation of this character had been had 
 in twenty-one Btatea ; and that, in all of 
 th em hut two the validity of it had been 
 sustained by the bighesl local courta 'The 
 exceptions are the Btatea of Michigan and 
 Iowa above mentioned. 
 
 215
 
 § 229.] ' MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 This view of the subject is very ably presented by Judge Cooley, 
 of Michigan : l " On the ground of local benefit, a small district of 
 the state is to be taxed to encourage a local enterprise, which it is 
 supposed will be of such peculiar local advantage that this district 
 rather than the state at large, or any greater or smaller portion 
 of the state, should contribute to its construction. The road, 
 when constructed, is nevertheless to be exclusively private prop- 
 erty, owned, controlled, and operated by a private corporation for 
 the benefit of its own members, and to be subject to the super- 
 vision and control of the state only as other private property is, 
 with such few exceptions as the state in granting the corporate 
 powers has stipulated for in order to secure impartiality in the 
 management of its business, and to prevent extortion. Primarily, 
 therefore, the money, when raised, is to benefit a private corpora- 
 tion ; to add to its funds and improve its property ; and the ben- 
 efit to the public is to be secondary and incidental, like that which 
 springs from the building of a grist-mill, the establishment of a 
 factory, the opening of a public inn, or from any other private 
 enterprise which accommodates a local want and tends to increase 
 local values. A railroad, however, it is said, is a public highway, 
 and as such its construction is a public purpose, which may be 
 accomplished through the instrumentality of the sovereign power 
 of eminent domain, even when individuals, and not the state, are. 
 to own and control it. This argument is supposed to possess 
 great force, and it therefore becomes our duty to examine it with 
 some care. It is true that a railroad in the hands of a private 
 corporation is often spoken of as a public highway, and that it 
 has been recognized as so far a public object as to justify the ap- 
 propriation of private property for its construction ; but this fact 
 does not conclusively determine the right to employ taxation in 
 aid of the road in the like case. Reasoning by analogy from one 
 of the sovereign powers of 'the government to another is exceed- 
 ingly liable to deceive and mislead. An object may be public in 
 one sense and for one purpose, when in a general sense and for 
 other purposes it would be idle and misleading to apply the same 
 term." 
 
 1 People v. Township of Salem, 20 ment of the Supreme Court of the United 
 
 Mich. 452, Graves, J., dissenting. In States setting aside this case, declared the 
 
 Township of Pine Grove v. Talcott, 19 dissenting opinion to be unanswered. See 
 
 Wall. 666, 677, Swayne, J., in the judg- § 246. 
 
 216
 
 POWER OF MUNICIPALITIES TO ISSUE. [§ 230. 
 
 In a subsequent case, 1 the same learned judge said : " Another 
 fatal objection to all this legislation upon which the majority of 
 the court were ilit'ii agreed was not fully developed, though re- 
 ferred to when our judgment was declared. As we then stated, 
 the power to impose such taxation, if existing at all, could not 
 come from, and was not aided by, the municipal votes. The legis- 
 lature would have exactly the same power to impose the taxation 
 without the assent of the municipalities that it would have to 
 permit it with their assent. If they were allowed to vote upon 
 that question, the permission would be of favor and not of right. 
 The authority must come from the plenary power of the legisla- 
 lature over the whole subject of taxation, which it would exercise 
 upon the municipalities in its discretion. It might seem fairer 
 to the people concerned to permit them to vote upon the question ; 
 but in some particulars the very permission would work an in- 
 justice. For it needs no argument to show that if a railroad 
 through many municipalities is a public object, which may be 
 aided by the taxation of all, there is no mode in which the aid 
 can be given consistent with any recognized theory of taxation, 
 without an apportionment of the burden by some rule or upon 
 some basis among them all. This might be clone if the legislature 
 prescribed the tax ; but it would be impossible under a system 
 under which one township might tax itself ten per cent, of its 
 valuation, another equally benefited by the same objeet refuse 
 to pay hut one, and a third decline altogether to bear any share 
 of the common burden. The result of legislation like this would 
 he, that the legislature would be requiring these several munic- 
 ipalities to tax themselves for an object common to them all, but 
 without even a pretence of an apportionment of the burden." 
 
 230. The want of power in a municipal corporation to 
 issue bonds is always open to inquiry whether the bonds be 
 in the hands of the party to whom they were issued, or have 
 ■ I into i he hands of bond fide purchasers.'- Every purchaser 
 of such bonds must take notice of all the provisions of the stat- 
 ute giving authority to issue the bonds, and of any constitu- 
 
 1 I', .. i i-v r. state Treasurer, s.; Mich, ware Countj v. McClintock, 51 l" 
 
 499, Barnes v. Tom a o\ I I ln - HJ1 I 
 
 a Dillon's Municip. Bond . l9;Town- Sykea u.Mayor,&c. of Columbus, Sup. 
 
 ship ofEasl Oakland - 94 U. B. Ct. of Miss. 
 
 : .:, .. I., nch, 68 III. 160 ; I" la- 
 
 ■JIT
 
 § 2-50-1 MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 tional provision affecting such authority." 1 Such, bonds being ab- 
 solutely void, no tax can be legally collected to pay them or the 
 interest accruing upon them ; and if the tax be actually collected, 
 any tax-payer may restrain the collector from paying over the 
 money arising from such illegal tax. 2 
 
 A charter of a railroad company whose route was limited to 
 the north side of the Missouri River provided that counties in 
 which a part of the route of the road might pass or be located 
 might subscribe for its stock. A county on the south side of the 
 river, in which no part of the road was constructed or located, 
 issued its bonds in aid of the road without other legislative au- 
 thority, and the bonds were held void in the hands of a bond fide 
 holder. 11 
 
 Authority given to a municipal corporation to subscribe for 
 stock in a railroad company "as fully as any individual," author- 
 izes the corporation to issue negotiable bonds in payment for the 
 stock.* 1 Authority given to a city " to borrow money for any 
 object in its discretion," 5 or authority to " borrow money for any 
 public purpose," 1 G authorizes it to subscribe for the stock of a rail- 
 road, and to borrow money on its negotiable bonds to pay for it 
 
 Authority to aid a railroad by subscriptions may be implied 
 from a statute which recognizes the power, though it does not ex- 
 press it in terms. 7 
 
 A distinction has been taken in some cases that while a mu- 
 nicipal corporation maybe empowered to subscribe for the stock 
 of a railroad company, it cannot be empowered to issue bonds 
 and give the proceeds to such company ; 8 but the better opinion 
 is, that as respects legislative power donations and subscriptions 
 fur stock stand on the same ground. 9 
 
 1 Williamson v. City of Keokuk, 44 and Field, Miller, and Grier,JJ., dissented, 
 
 Iowa, 88. on the ground that this was a loan of credit 
 
 - Newton v. Kerch, 9 Hun (N. Y.), 355. and not a borrowing of money. See Starin 
 
 3 Sherrard v. Lafayette County, 3 Dill. v. Town of Genoa, 23 N. Y. 439, 454. 
 
 236 ; State v. Saline County, 51 Mo. 350. * Gelpcke v. City of Dubuque, 1 Wall. 
 
 4 Commonwealth v. Pittsburg, 41 Pa. 175, 220. 
 
 St 27^ ; Seybert v. City of Pittsburg, 1 8 Whitney v. Sheboygan & Fond du 
 
 Wall. 272. Lac R. R, Co. 25 Wis. 167; Phillips v. 
 
 5 Meyer v. City of Muscatine, 1 Wall. Town of Albany, 28 Wis. 340 ; Sweet v. 
 384, 387. Hulbert, 51 Barb. (N. Y.) 312. 
 
 u Rogers v. Burlington, 3 Wall. 654. 9 Town of Queensbury v. Culver, 19 
 In this case the bonds were issued directly Wall. 83. 
 to the railroad company, and Chase, C. J., 
 
 218
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§§ 231, 232. 
 
 Authority to subscribe for stock of a railroad and issue bonds 
 therefor does not authorize the extending of aid to the railroad 
 company by indorsing its bonds. 1 
 
 II. Constitutional and Statutory Provisions respecting Municipal 
 Aid to Corporations. 
 
 231. General statement. — Great abuse of the power of mu- 
 nicipal corporations with legislative sanction to aid private corpo- 
 rations in constructing railroads and other public improvements 
 has led to the adoption, in most of the states, of constitutional pro- 
 visions against the granting of such aid. In some instances this 
 inhibition has been extended also to the state itself; while in 
 others the restriction is applied to the granting of aid by the 
 state, but the legislature is left free to authorize counties and 
 municipalities to give such aid. A restriction upon the legislative 
 power to authorize municipal divisions of the state to grant such 
 aid does not apply to such action by the state itself ; 2 and on the 
 other hand a restriction upon the state does not apply to counties 
 and municipalities of the state. 3 
 
 232. Alabama. 4 — The state shall not engage in works of in- 
 ternal improvement, nor lend money or its credit in aid of such ; 
 nor shall the state he interested in any private or corporate enter- 
 prise, or lend money or its credit to any individual, association, or 
 corporation. The general assembly shall have no power to author- 
 ize any count v. city, town, or other subdivision of this state, to 
 Lend its credit, or to grant public money or thing of value in aid 
 of, or to any individual, association, or corporation whatsoever, or 
 to become a stockholder in any such corporation, association, or 
 company, by issuing bonds or otherwise. 
 
 Under the former Constitution of the state a general law author- 
 izing counties, cities, and towns to subscribe for stock in railroad 
 companies, on a vote of tin; citizens at a special election held for 
 that purpose, was enacted, 5 and sustained by the courts. 6 
 
 i i; : or, &c. of Macon, 53 Ga. Mon. (Ky.) 1,16; Clark v. Janesville, 10 
 
 17 ., Wis. 136; Thompson u.Cityof Peru, 29 
 
 i i, oi on.Mun.Cor] I ooleyon End. 305; Patterson v. Supcrviso 13 
 
 Cal. 175. 
 Ipcke v. City of Dubnque, l WalL * Const. 1875, art '. 
 i::,, 204; I iv. Dillon, 2 Ohio St. 607; » Act of Dec. 31, i 
 Johnson w.Stark County, 24 III. 75; Slack • Ex parte Selm GulfR.R.C I 
 o. Maysville & Lexington B R. Co. 18 B. 21i>
 
 §§ 233, 234.] MUNICIPAL BONDS in aid of railroads. 
 
 233. Arkansas. 1 — No county, city, town, or other municipal 
 corporation shall become a stockholder in any company, associa- 
 tion, or corporation ; or obtain or appropriate money for, or loan 
 its credit to, any corporation, association, institution, or individual. 
 Under the former Constitution of the state municipal aid to rail- 
 road companies was allowed, and there were general laws authoriz- 
 ing such aid. 2 
 
 234. California. 3 — The Constitution of the state provides that 
 the credit of the state shall not in any manner be given or loaned 
 to or in aid of any individual, association, or corporation, nor shall 
 the state, directly or indirectly, become a stockholder in any asso- 
 ciation or corporation. 
 
 By statute 4 it is provided that the several counties, including 
 the city and county of San Francisco, shall be authorized to aid 
 in the construction of railroads by the issue of county bonds bear- 
 ing interest at the rate of not exceeding seven per cent, per 
 annum, and payable within twenty years from the date of their 
 issue, and to provide by taxation for the payment of the interest 
 and principal of said bonds ; provided, that the whole amount of 
 said bonds thereby authorized to be issued shall not exceed five 
 per cent, of the value of the taxable property of said county, or 
 city and county, according to its valuation on the assessment roll 
 last preceding the time of the issue of said bonds. 
 
 Before the granting of such aid, the board of supervisors of 
 the county, or city and county, proposing to grant such railroad 
 aid, shall submit to the qualified electors of said county, or city 
 and county, at an election, of which election at least thirty days' 
 notice shall be given by publication once a week in a newspaper 
 published in said county, the question whether such railroad aid 
 shall be granted, in which notice the day on which and the places 
 where such election is to be held shall be stated ; and the route 
 for which aid is proposed to be granted shall be definitely de- 
 scribed, and the amount of bonds to be issued shall be stated. 
 
 Ala. 696 ; Fielder v. Montgomery & Eu- 3 Const. 1849, art. xi. § 10. 
 
 faula R. R. Co. 51 Ala. 178. * Statutes 1870, ch. 5007, §§ 1, 2. On 
 
 1 Const. 1874, art. xii. § 5. construction of this statute sec Coleman v. 
 
 2 See Act passed July 21, 1868, which Board of Supervisors of County of Mar- 
 took effect ninety days from April 10, ion, 50 Cal. 493. 
 
 1869 ; State of Arkansas v. Little Rock, 
 
 Miss. River & Tex. Ry. Co. 31 Ark. 701. 
 
 220
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§§ 235-237. 
 
 All elections authorized under the act shall be conducted in 
 the same manner as elections for state and county officers. No 
 aid to railroads shall be granted unless a majority of the elect- 
 ors voting at such election shall cast their votes in favor of such 
 aid. 
 
 235. Colorado. 1 — Neither the state, nor any county, town, 
 township, or school-district shall make any donation or grant to, 
 or in aid of, or become a subscriber to, or shareholder in, any cor- 
 poration or company, or a joint-owner with any person, company, 
 or corporation, public or private, in or out of the state. The gen- 
 eral assembly shall pass no law for the benefit of a railroad or 
 other corporation, or any individual or association of individuals, 
 retrospective in its operation, or which imposes on the people of 
 any country or municipal subdivision of the state a new liability 
 in respect to transactions or considerations already past. 2 
 
 236. Florida. 3 — The credit of the state shall not be pledged 
 or loaned to any individual, company, corporation, or association ; 
 nor shall the state become a joint-owner or stockholder in any 
 company, association, or corporation. The legislature shall not 
 authorize any county, city, borough, township, or incorporated 
 district to become a stockholder in any company, association, or 
 corporation, or to obtain, or to appropriate money for, or to loan 
 its credit to, any corporation, association, institution, or individual. 
 
 Before the adoption of these provisions municipal aid to railroad 
 companies was authorized by statute, 4 and such acts were held to 
 be constitutional. 5 
 
 237. Georgia. — The credit of the state shall not be pledged 
 or loaned to any individual, company, corporation, or association, 
 and the state shall not become a joint-owner or stockholder in any 
 company, association, or corporation. The general assembly shall 
 not authorize any county, municipal corporation, or political divi- 
 
 1 Const. 1876, art. xi. § '2. By :i gen- land v. State of Florida,aa to construction 
 
 eral law subscriptions in aid «f railroads and application of these provisions, 
 
 were formerly allowed. R. S. 1867, 134. ' See [nternal Improvement Acl of 
 
 76, art. x'. January 6, 1855. 
 
 '■'■ Amend. Const. 1875, art. 8, § 7. Sic - County Comm i Columbia 
 
 , art. xii. ^; 8. S'-e Bol- County <■. King, 13 Fla 
 
 '• Const. isVT, art. 7. 
 
 22]
 
 §§ 238, 239.] MUNICIPAL BONDS in aid of railroads. 
 
 sion of this state to become a stockholder in any company, corpo- 
 ration, or association, or to appropriate money for, or to loan its 
 credit to, any corporation, company, association, institution, or 
 individual, except for purely charitable purposes. 
 
 The Constitution of 1868 provided that any town or city might 
 take stork in any railroad or work of public improvement, or con- 
 tribute to the aid thereof, after a majority of the qualified voters 
 of such (own or city, voting at an election held for the purpose, 
 had voted in favor of the same. 1 
 
 238. Illinois. 2 — The credit of the state shall not, in any man- 
 ner, be given to, or in aid of, any individual, association, or corpo- 
 ration. No county, city, town, township, or other municipality 
 shall ever become a subscriber to the capital stock of any railroad 
 or private corporation, or make donation to, or loan its credit in 
 aid of, such corporation. 
 
 Subscriptions by counties and towns in aid of railroads were 
 allowed under the previous Constitution, and there were general 
 laws authorizing such subscriptions. 3 
 
 239. Indiana. 4 — The Constitution of the state provides that 
 no county shall subscribe for stock in any incorporated company, 
 unless the same be paid at the time of such subscription ; nor shall 
 any county loan its credit to any incorporated company, nor bor- 
 row money for the purpose of taking stock in any such company ; 
 nor shall the general assembly ever, on behalf of the state, assume 
 the debts of any county, city, town, or township, nor of any cor- 
 poration whatever. 
 
 By statute 5 it is provided that whenever a petition shall be pre- 
 sented to the board of commissioners of any county, signed by 
 twenty-five freeholders of any township of such county, asking 
 such township to make an appropriation of money to aid a railroad 
 company, named in the petition, and then duly organized under 
 
 i Const. 1868, art. iii. § 6, pi. 4. cie & Bloomington It. R. Co. v. Gciger, 34 
 
 2 Const. 1870, art. iii. § 38; art. xiv. Ind. 185; Crawford County v. Louisville, 
 additional section. New Albany & St. Louis Air Line Ry. 
 
 3 Laws Nov. 1,1S49, and March, 1,1854; Co. 39 Ind. 192. As to construction of 
 It. S. 1809, pp. 552, 553. statute, see, also, State v. Wheadon, 39 
 
 4 Const. 1851, ait. x. § 6. Ind. 520; Bronenberg '•. Madison County, 
 
 5 Act March 12, 1809, provides for a 41 Ind. 502 ; Alvis v. Whitney, 43 Ind. 83 ; 
 legitimate exercise of the power of coun- Ciooke v. Daviess County, 36 Ind. 320. 
 ties to subscribe for stock. Lafayette, Mun- 
 
 000.
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 240. 
 
 the laws of the state, in constructing a railroad in or through such 
 township, by taking stock in, or donating money to, such company, 
 not exceeding two per centum upon the amount of taxable prop- 
 erty of such township on the tax duplicate of the county delivered 
 to the treasurer of the county for the preceding year, it shall be 
 the duty of such board of commissioners, after being satisfied 
 that such petition has been properly signed by the requisite num- 
 ber of freeholders of such township, to cause the same to be entered 
 at full length upon their records, and to order an election. If a 
 majority of the votes be in favor of such railroad appropriation, 
 the board of commissioners is required to levy a tax to meet 
 it. 1 
 
 It is to be observed that the constitutional restriction applies 
 to counties only. Accordingly it is provided by statute that any 
 incorporated city shall have power to borrow money for the pur- 
 pose of subscribing to the stock of any railroad running into or 
 through such city, and to make donations in money or bonds of 
 such city in aid of such roads, on petition of a majority of the resi- 
 dent freeholders, provided that such donations shall not be payable 
 until the roads are so far completed as to admit of the running of 
 trains. Provision is made for a tax to pay the interest, and to 
 create a sinking fund for the payment of the principal. 2 This 
 statute authorizes the giving of aid either by subscriptions to stock 
 or by donations. 3 
 
 240. Iowa.' 1 — The Constitution provides that tin: credit of the 
 state shall not in any manner be given, or loaned to, or in aid of, 
 any individual, association, or corporation ; and that the state shall 
 
 1 Act May 12, 1869, amended March 17, roads opposite such counties in other 
 
 1875; 1 It. S. L 876, pp. 736-739. By Act states; and cities and towns are author- 
 
 Dec. 17, 1872, a tax-payer who lias paid ized to issue bonds for subscriptions made 
 
 taxes levied under Act May 12, 1869, was in aid of such road-. 
 
 entitled to a certificate of the amount paid - 1 R. S. 1876, p. 298, § 60 ; A.CI March 
 
 by him, if demanded before January 1, 14, 1807. See, also, An Maj I I 
 
 1 874, and to stock from the railroad aided For construction, see Citj of Kokomo <•. 
 
 for the amount of the tax paid. I U.S. State, 57 [nd. i 52 : Noble v. Citj -1 Vin 
 
 1870, p. 740. See Lucas v. Tippecanoe cennes, 42 [nd. 125. The statute i- 
 
 County, 44 Ind. 524. Btitutional. City of Mount Vernon v. 
 
 1; Act Dec. ii,i^7l',i I:, s. 1-71;, p. Bovey, 52 Ind. 51 
 742, counties bordering on Btate lines, or :; Indiana North >^ South Ry. Co v. 
 
 river- forming Mate- boundaries, and town- City of A 1 lira, .".''. I ud. 170. 
 
 ships and cities in BUCh Counties, are ' Const. 1857, art. vii. § I; art. vni. 
 
 enabled to aid in the construction of rail- § 3. 
 
 228
 
 § 240.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 not become a stockholder in any corporation ; nor shall it assume 
 or pay the debt or liability of any corporation, unless incurred in 
 time of war for the benefit of the state. 
 
 In 1853 the Supreme Court of the state decided that a county 
 had the constitutional right to aid in the construction of a rail- 
 road, 1 as authorized by the Code of 1851. 2 In 1859 this court 
 overruled its former decisions on this subject, and held that a 
 county had no power to issue bonds in aid of railroads. 3 The 
 Supreme Court of the United States disregarded the latter deci- 
 sions, and affirmed the former. 4 
 
 Municipal corporations were, by statute passed in 1860, pro- 
 hibited from taking stock in any plank road, turnpike, or railroad 
 company, or in any way using their credit in aid of such corpora- 
 tions. 5 
 
 In 18G8 municipal corporations were authorized to aid in the 
 construction of railroads. 6 In the following year this act was 
 declared by the Supreme Court not to be a valid or legitimate 
 exercise of the taxing power. 7 In 18T0 the legislature of this state 
 reasserted its authority, and reenacted the law with some modifi- 
 cations ; 8 and the same year the Supreme Court sustained the act 
 as constitutional, overruling the decisions against the constitution- 
 ality of acts in aid of railroad companies. 9 
 
 By recent statutes, 10 any township, incorporated town, or city, 
 may aid in the construction of any projected railroad in this state. 
 
 Whenever a petition shall be presented to the council or trus- 
 tees of any incorporated town or city, or trustees of any township, 
 
 i Dubuque County v. Dubuque & Pa- 6 Act March 30, 1860; Rev.? 1860, § 
 
 cine R. R. Co. 4 Greene (Iowa), 1. Fol- 1345; Code 1873, p. 98, § 553. 
 
 lowed in State v. Bissell, lb. 328; Clapp 6 Laws 1868, ch. 48, p. 54. 
 
 v. County of Cedar, 5 Iowa, 15; McMil- ' Hanson v. Vernon, 27 Iowa, 28. Ch. 
 
 len v. Boyles, County Judge, 6 Iowa, 304. J. Dillon delivering the leading opinion, 
 
 2 § 114, Code 1851. and ably sustaining the view that rail- 
 
 8 Stokes v. County of Scott, 10 Iowa, roads are private corporations, and that 
 
 166. Followed in State v. County of Wa- their undertakings can no more be aided 
 
 pello, 13 Iowa, 388; Myers v. County by taxation than can the undertakings of 
 
 of Johnson, 14 Iowa, 47 ; McMillan v. any other private corporation, or of an 
 
 Boyles, 14 Iowa, 107 ; Ten Eyck v. Mayor individual, 
 
 of Keokuk, 15 Iowa, 486 ; Chamberlain 8 Laws 1870, April 12. 
 
 v. City of Burlington, 14 Iowa, 395 ; 9 Stewart v. Board of Supervisors of 
 
 McClure v. Owen, 26 Iowa, 243. Polk County, 30 Iowa, 9. Followed in 
 
 4 ,.Gelpcke v. City of Dubuque, 1 Wall. Bonnifield v. Bidwell, 32 Iowa, 149 ; Jef- 
 
 1 75. fries v. Lawrence, 42 Iowa, 498. 
 
 1° Laws 1876, ch. 123. 
 
 224
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 240. 
 
 signed by a majority of the resident freehold tax-payers of such 
 township, incorporated city or town, asking that the question of 
 aiding in the construction of any railroad be submitted to the 
 voters thereof, it shall be their duty to immediately give notice of 
 a special election, by publication in some newspaper published in 
 the county, if any be published therein, and also by posting said 
 notice in five public places of such township, incorporated city or 
 town, at least twenty days before said election, which notice shall 
 specify the time and place of holding said election, the line of 
 railroad proposed to be aided, the rate per centum of tax to be 
 levied, and whether the entire per centum voted is to be collected 
 in one year, or one half collected the first *year and one half the 
 following year ; and the amount of work upon said proposed rail- 
 road line required to be completed before said tax shall be paid 
 to the railroad company, and where the same shall be performed, 
 and to what point said road shall.be fully completed, and any 
 other conditions which shall be performed before such tax shall 
 become due, collectible, and payable ; and in no case shall such 
 tax become due, collectible, or payable until the road is fully com- 
 pleted to such point as mentioned in the notice. At such election 
 the question of taxation shall be submitted, and if a majority J of 
 the votes polled be "for taxation,'" then the recorder of the incor- 
 porated town, the city clerk, township clerk, or clerk of said elec- 
 tion, shall forthwith certify to the county auditor the rate per 
 centum of the tax thus voted by such township, incorporated town 
 or city, the year or years during which the same is to be collected, 
 and the time and terms upon which the same, when collected, is 
 to be paid to the railroad company, under the conditions and stip- 
 ulations in the said notice, together with an exact copy of the 
 notice under which such election was held; which said county 
 auditor shall at once cause to be recorded in the office of the re- 
 corder of deeds of the count v. When such certificate shall have 
 been made ami recorded, the board of supervisors of the county 
 shall, at the time of levying the ordinary taxes next following, 
 levy such taxes as are, voted miller the provisions of this acl 
 shown by said certificate, ami cause the same to be placed on tin- 
 tax lists of the proper township, incorporated city or town. Said 
 tuxes shall be collected at the time or times specified in said order 
 in the. same manner, ami be subject to the same penalties for non- 
 
 1 Laws 1878, cli. 157. 
 
 225
 
 § 211.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 payment after they are collectible as other taxes, or as may be 
 stated in the petition asking said election. The aggregate amount 
 of tax to be voted or levied under the provisions of this act in any 
 township, incorporated town or city, shall not exceed five per 
 centum of the assessed value of the property therein respectively. 
 It shall be the duy of the county treasurer when required, in ad- 
 dition to a tax receipt, to issue to each tax-payer, on his payment 
 of taxes voted in aid of a railroad company under the provisions 
 of this act, a certificate showing the amount of tax by him paid in 
 aid of said railroad company, and when the same was paid. Said 
 certificates are assignable, and when presented by any person hold- 
 ing the legal title thereto to the president, managing director, 
 treasurer, or secretary of the railroad company receiving the taxes 
 paid as shown by said certificate, in amount showing the sum of 
 one hundred dollars or more of taxes to have been paid for said 
 railroad company, it shall be and is hereby made the duty of said 
 railroad company to issue or cause to be issued to said person the 
 amount of stock covered by said certificate or certificates, and if 
 the taxes paid as shown by said certificate or certificates amount 
 in the aggregate to more or less than any certain number of shares 
 of said stock, then the holder aforesaid of such certificate or cer- 
 tificates shall be entitled to receive of said stock the number of 
 shares next greater than the amount covered by said certificates, 
 upon making up the deficiency in money or tendering the same 
 with the said certificates, the said stock to be estimated for the 
 purposes hereof at its par value. 
 
 First mortgage bonds may be issued and taken instead of 
 stock. 1 
 
 241. Kansas. 2 — It is provided by statute that whenever two 
 fifths of the resident tax-payers of any county, or two fifths of the 
 resident tax-payers of any municipal township, shall petition in 
 writing the board of county commissioners, or whenever two fifths 
 of the resident tax-payers of any incorporated city shall petition 
 the mayor and council of such city to submit to the qualified 
 voters of such county, township, or city a proposition to subscribe 
 to the capital stock of, or to loan the credit of such county, town- 
 
 1 Laws 1S78, ch. 173. to aid in constructing- narrow gauge rail- 
 
 - Laws 1877, ch. 142, § 1. See Laws roads. Also Laws 1876, ch. 10(5. 
 1877, chs. 143, 144; also ch. 141, relating 
 
 22b'
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 242. 
 
 ship, or city to any railroad company constructing or proposing to 
 construct a railroad through or into such county, township, or city, 
 the county commissioners for such county or township, or the 
 mayor and council for such city, shall cause an election to be held 
 to determine whether such subscription or loan shall be made ; 
 but no county shall issue under the provisions of this act more 
 than one hundred thousand dollars and an additional five per cent, 
 indebtedness of the assessed value of such county ; and no town- 
 ship shall be allowed to issue more than fifteen thousand dollars 
 and five per cent, additional of the assessed value of such town- 
 ship ; and in no case shall the total amount of county, township, 
 and city aid to any railroad company exceed four thousand dollars 
 per mile for each mile of railroad constructed in said county. 
 
 It was in 1873 provided by statute that all bonds heretofore or 
 hereafter legally authorized and issued by a vote of its electors in 
 any county or township shall become a lien upon all the real 
 estate in such county or township for the payment of the princi- 
 pal and interest of such bonds. 1 
 
 242. Louisiana. 2 — It is provided by statute that it shall be 
 lawful for the police juries and municipal corporations of this 
 state to subscribe to the stock of corporations undertaking works 
 of internal improvement, under the laws of this state, on comply- 
 ing with the provisions hereinafter set forth. 
 
 All ordinances passed for such subscriptions shall contain the 
 following provisions, namely: a statement of the number and 
 amount of shaves proposed to be subscribed ; and also a levy 
 of a tax on the landed estate, situated in the parish or municipal 
 corporation, sufficient to pay tin- amount of the subscription, and 
 specifying tin- rate of taxation, and the time when it shall be 
 payable. 
 
 No ordinance shall be valid or take effect until it shall have 
 been approved and ratified by a majority of the voters on whose 
 property the tax is proposed to be levied, at an election to be 
 held specially for that purpose. The police jury or municipal 
 corporation shall prescribe the manner of holding such election, 
 and shall cause to be furnished to the commissioners a properly 
 
 l La* i 73,ch.l42j i Daasl ■!•'- StaL-. mayor of a city haa no power to act. 
 § 204. State of La. v. City of Bbreveport, 27 
 
 a K. s. l 70, §3 2455-2458. The La. Ann. 623. 
 
 227
 
 § 243.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 certified list of the authorized voters : and such election shall be 
 preceded by a notice for thirty clays, published in one or more 
 newspapers in the parish or municipal corporation where it shall 
 be held. If the ordinance be rejected by a majority of the voters, 
 it shall be lawful at any subsequent period, at intervals of not less 
 than six months, again to take the sense of the voters in the same 
 manner as at the first election. 
 
 The stock subscribed shall not belong to nor be administered 
 by the parish or municipal corporation by which the subscription 
 shall be made, but shall belong to the tax-payers, who shall have 
 paid therefor ; and the tax receipt of each tax-payer shall entitle 
 him to a certificate, transferable by delivery, from the corporation 
 to which subscription has been made, for an amount equal to the 
 amount of his tax paid. 
 
 243. Maine. — The Constitution provides that the credit of 
 the state shall not be directly or indirectly loaned in any case. 1 
 By statute 2 any city or town, by a two thirds vote, at any legal 
 meeting called for the purpose, may raise by tax or loan, from 
 time to time or all at once, a sum of money not exceeding in all 
 five per cent, on its regular valuation for the time being, and ap- 
 propriate it to aid in the construction of railroads in such manner 
 as it may deem proper ; and for such purpose may make contracts 
 with any person or railroad corporation. 
 
 A city or town raising money by loan as aforesaid shall raise 
 and pay, besides the interest, each year after the third, not less 
 than three per cent, of the principal unless it is satisfactorily pro- 
 vided for in some other way. Meetings for the purposes aforesaid 
 in cities shall be called by the municipal officers, on the order of 
 the common council, as meetings for the election of city officers 
 are called ; and said common council shall set forth in their order 
 the substance of the proposition to be inserted in the warrant. 
 At such meetings, the legal voters shall vote in wards by ballot, 
 those in favor of the proposition in the warrant voting " Yes," and 
 those opposed voting "No;" the ballots cast shall be sorted, 
 counted, and declared in open ward meeting, and recorded ; and 
 the clerks shall make returns thereof to the municipal officers, 
 who shall examine such returns ; and if two thirds of the ballots 
 
 1 Amend. 1848, art. vi. 2 R ev , g tat- i871,ch. 51, §§ 80, 82, 83 ; 
 
 Act 1867, ch. 119, §§ 1-4. 
 
 228
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§§ "244. 245. 
 
 cast are in favor of the proposition, said officers shall forthwith 
 proceed to cany the same into effect. 1 
 
 244. Maryland. 2 — No county of this state shall contract any 
 debt or obligation in the construction of any railroad, canal, or 
 other work of internal improvement, nor give or loan its credit to 
 or in aid of any association or corporation, unless authorized by 
 an act of the general assembly, which shall be published for two 
 months before the next election for members of the house of dele- 
 gates in the newspapers published in such county, and shall also 
 be approved by a majority of all the members elected to each 
 house of the general assembly at its next session after such elec- 
 tion. 
 
 245. Massachusetts. 3 — By statute any town and any city 
 having, by the census of the year eighteen hundred and seventy, 
 less than thirty thousand inhabitants, within which the road of 
 any railroad corporation hereafter organized, or the roads of any 
 existing railroad corporation not now constructed, shall be located 
 or terminate, may subscribe for and hold shares of the capital 
 stock or the securities of such railroad corporations, or either of 
 them, to an amount not exceeding, for the aggregate in all such 
 corporations, two per centum of the valuation of such town or 
 city for the year in which the subscription is made; and towns 
 having a valuation not exceeding three millions of dollars may 
 subscribe for and hold the securities of such corporation, or either 
 of them, to an amount not exceeding three per centum of the 
 valuation of such town, in the year in which such subscription is 
 made, in addition to the two per centum hereinbefore provided: 
 provided, that two thirds of the legal voters, present and voting 
 by ballot and using the check-list, at legal meetings called for the 
 purpose in such town or city, and held in like manner as the 
 meetings for the choice of municipal oll'icers are now held by law 
 in such town or city respectively, shall vote to subscribe tor such 
 shares or securities in such corporation. 
 
 Towns and cities subscribing Eor such stock or securities may 
 
 i On construction of this statute, see :; A.cta 1874, ch. 372, §35. For pre- 
 Portland lensburg R. R. Co. v. nous laws, see A.c1 1874, ch. 251; Acta 
 Blandish, 65 Mi 1870, ch. 
 
 - ( lonst, i 867, art. iii. \ 54. 
 
 22! I
 
 § 246.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 raise money to pay for the same by tax or loan, and may issue 
 their notes or bonds for such loan. 1 
 
 Any town or city owing debts incurred to obtain funds for one 
 or more subscriptions for the capital stock and securities of any 
 railroad corporation may, for the purpose of paying the same, es- 
 tablish a sinking fund, 2 and may contribute thereto any sums 
 which it may receive from the sale of such stock or securities, or 
 from any dividends or interest upon the same, or from taxes which 
 it may vote to raise for the payment of such indebtedness. Any 
 town or city owing such debts shall annually raise by taxation a 
 sum sufficient to pay the interest on the same, or, if there is any 
 income derived from the capital stock or securities owned by such 
 town or city as aforesaid, a sum sufficient to pay the excess of 
 such interest payable by said town or city over such income. 
 
 No town or city shall hereafter increase its indebtedness 3 for 
 the purpose of subscribing to the stock or securities of railroad 
 colorations, to an amount which, with the existing net indebted- 
 ness of such town or city incurred for any purpose, shall exceed 
 the limit of three per centum of the valuation of the taxable prop- 
 erty therein, to be ascertained by the last preceding town or city 
 valuation for the assessment of taxes; but the limitation of this 
 act shall not apply to temporary loans in anticipation of the taxes 
 of the year in Avhich such debts are incurred, and the year next 
 ensuing, and expressly made payable therefrom by vote of the said 
 town or city. 
 
 246. Michigan. 4 — The credit of the state shall not be granted 
 to, or in aid of, any person, association, or corporation. The state 
 shall not subscribe to, or be interested in, the stock of any com- 
 pany, association, or corporation. The state shall not be a party 
 to, or interested in, any work of internal improvement, nor en- 
 gaged in carrying on any such work, except in the expenditure of 
 grants to the state of lands or other property. 
 
 The Supreme Court of this state on May 26, 1870, rendered 
 a decision that the legislature could confer no authority upon a 
 municipal corporation to aid the construction of a railroad, and to 
 raise money therefore by taxation. 5 
 
 1 Acts 1874, ch. 372, § 39. 4 Const. 1850, art. xiv. §§ 6, 8, 9. 
 
 2 Acts 1876, ch. 133, §§1,3. 6 p e0 ple v. Township Board of Salem, 
 8 A cts 1876, ch. 175. 20 Mich. 452; 4 Am. R. 400. Followed 
 
 230
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 247. 
 
 By a statute enacted in 1875, counties, townships, cities, and 
 villages, which had issued bonds in aid of the construction of any 
 railroad prior to the 26th day of May, 1870, are authorized to pro- 
 vide for the payment of the principal and interest of the same by 
 a tax to be collected from the taxable property of the corporation ; 
 and are also authorized to substitute new bonds for such as are 
 outstanding. 1 
 
 This latter statute was doubtless passed in consequence of the 
 decision of the Supreme Court of the United States, 2 that the 
 legislation of this state authorizing municipal corporations to aid 
 in the construction of railroads was valid, and that the decisions 
 of the Supreme Court of the state to the contrary are not to be 
 respected, because not satisfactory in principle, and the subject 
 matter of the decisions is not local, but belongs to the domain of 
 general jurisprudence. " In this class of cases," said Swayne, J., 
 delivering the judgment of the Supreme Court of the United 
 States, " this court is not bound by the judgment of the courts of 
 the states where the cases arise. It must hear and determine for 
 itself. Here, commercial securities are involved. When the bonds 
 were issued, there had been no authoritative intimation from any 
 quarter that such statutes were invalid. The legislature affirmed 
 their validity in every act by an implication equivalent in effect 
 to an express declaration. And during the period covered by their 
 enactment, neither of the other departments of the government of 
 the state lifted its voice against them. The acquiescence was uni- 
 versal." 
 
 247. Minnesota. 3 — The credit of the state shall never be given 
 or loaned in aid of any individual association or corporation. Tic 
 legislature shall not authorize any county, township, city, or other 
 municipal corporation to issue bonds or to become indebted in any 
 manner to aid in the construction or equipment of any or all rail- 
 roads to any amount thai Bhall exceed ten per centum of the value 
 of the taxable property within such county, township, city, or 
 other municipal corporation. The amounl of such taxable prop- 
 in People >■. State Treasurer, 23 Mich. - Township of Pine Grove v. Talcott, 
 People v. State Treasurer, 24 Mich. 19 Wall. 666 (1873). 
 ■ Thomas u.Cit) of Porl Buron, -'7 ;; Const. 1857, art, ix. g LO; and Bee 
 Mich. 320. Graves, J. dissenting. See §229. Amendments, 1858 and I 
 
 i Laws i 375. p. 193. 
 
 231
 
 §§ 248, 249.] MUNICIPAL BONDS in aid of railroads. 
 
 erty is to be ascertained and determined by the last assessment of 
 said property made for the purpose of state and county taxation 
 previous to the incurring of such indebtedness. 1 
 
 Authority to aid the construction of railroads has frequently 
 been conferred upon cities and towns by special acts. 2 
 
 248. Mississippi. 3 — The credit of the state shall not be 
 pledged or loaned in aid of any person, association, or corpora- 
 tion : nor shall the state hereafter become a stockholder in any 
 corporation or association. The legislature shall not authorize 
 any county, city, or town, to become a stockholder in, or to loan 
 its credit to, any company, association, or corporation, unless two 
 thirds of the qualified voters of such county, city, or town, at a 
 special election or regular election to be held therein, shall assent 
 thereto. 4 
 
 249. Missouri. 5 — No county, township, city, or other munici- 
 pality si i all hereafter become a subscriber to the capital stock of 
 any railroad or other corporation or association, or make appro- 
 priation or donation, or loan its credit to or in aid of any such 
 corporation or association, or to or in aid of any college or institu- 
 tion of learning, or other institution, whether created for or to be 
 controlled by the state or others. All authority heretofore con- 
 ferred for any of the purposes aforesaid by the general assembly, 
 or by the charter of any corporation, is hereby repealed. The 
 general assembly shall have no power to give or to lend, or to 
 authorize the giving or lending of the credit of the state, 6 in aid of 
 or to any person, association, or corporation, whether municipal or 
 other, or to pledge the credit of the state in any manner whatso- 
 ever for the payment of the liabilities, present or prospective, of 
 any individual, association of individuals, municipal or other cor- 
 poration whatsoever. The general assembly shall have no power 
 to make any grant, or to authorize the making of any grant, of 
 public money or thing of value to any individual, association of 
 
 1 Amendment to Const, adopted Nov. 3 Const. 1868, art. xii. §§ 5, 14. 
 
 5, 1S72. This provision has reference 4 As to construction of this require- 
 only to future legislation. State v. Town ment of a two thirds vote, see City of 
 of Clark, 23 Minn. 422. Vicksburg v. Lombard, 51 Miss. Ill, 126. 
 
 2 As for instance Spec. Laws 1869, 6 Const. 1875, art. ix. § 6. 
 
 ■chs. 34, 35, 44; Spec. Laws 1868, chs. 20, 6 Const. 1875, art. iv. §§ 45, 46, 47, 49. 
 24 ; Spec. Laws 1870, ch. 49. 
 
 232
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 249. 
 
 individuals, municipal or other corporation whatsoever. The 
 general assembly shall have no power to authorize any county, 
 city, town, or township, or other political corporation or subdi- 
 vision of the state now existing, or that may be hereafter estab- 
 lished, to lend its credit, or to grant public money or thing of 
 value, in aid of "or to any individual, association, or corporation 
 whatsoever, or to become a stockholder in such corporation, asso- 
 ciation, or company. The general assembly shall have no power 
 hereafter to subscribe, or authorize the subscription of stock on 
 behalf of the state, in any corporation or association, except for 
 the purpose of securing loans heretofore extended to certain rail- 
 road corporations by the state. The general assembly shall pass 
 no law for the benefit of a railroad or other corporation, or any 
 individual or association of individuals, retrospective in its opera- 
 tion, or which imposes on the people of any county or municipal 
 subdivision of the state a new liability in respect to transactions 
 or considerations already past. 1 
 
 The former Constitution of Missouri 2 provided that " the gen- 
 eral assembly shall not authorize any county, city, or town to be- 
 come a stockholder in, or to loan its credit to, any company, asso- 
 ciation, or corporation, unless two thirds of the qualified voters of 
 such county, city, or town, at a regular or special election to lie 
 held therein, shall assent thereto." This prohibition extended to 
 townships which were not incorporated municipal bodies, although 
 not named in the constitutional provision. 3 
 
 A statute 4 authorizing such aid when sanctioned by lk two thirds 
 of the qualified voters of the township voting at the election " was 
 at first regarded as in conflict with the Constitution, 5 but this deci- 
 sion was afterwards overruled; 6 and though the Supreme Court 
 of Missouri afterwards held the act unconstitutional, 7 the federal 
 court.-, disregarded the stale decision. 8 
 
 Under this Constitution tin- legislature could not authorize a 
 count v to issue its bonds to secure the establishment of a. school oi 
 
 i Const. 1-75, art. xii. § 10. 3C0 ; County of Cass /•. Jordan, 95 I , S. 
 
 - m i -';:., g 14, art. xi. 373. 
 
 • I; i man v. Bates County, 92 U. S. : State Brassfield, referred t<> in 
 569 ; Jordan v. Cass County, 8 Dill. 185. Foot< v. Johnson Count 
 
 * Approved March 23, 18i Westermann v. Cape Girardeau 
 
 rshman v. inty, supra, < lountj . I . S l C. foi Mfo. 7 Cent I J 
 
 gee §206 I; Foote v. Johnson < lountj , 6 < < nt 
 
 I ' isst>. Johnston, '.).') I'. S. 1.. J. 345.
 
 § 250.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 mines within its limits, except in compliance with the requirement 
 that the proposition be assented to by a vote of two thirds of the 
 voters of the county. 1 
 
 In conflict with this constitutional provision was also an act 2 
 authorizing certain municipalities to purchase lands and donate, 
 lease, or sell the same to a railroad company as a means of induc- 
 ing it to locate and build its machine-shops on the lands, and of 
 assisting it to do so, and for this purpose to issue its bonds, to be 
 paid b}^ taxation, on the sanction of a majority vote. It is a " loan 
 of credit" within the meaning of the Constitution for a munici- 
 pality to purchase lands, pay the price in its bonds, and give the 
 lands to a railroad company. 3 " If the bonds in suit," said Judge 
 Dillon, "had been executed and delivered directly to the railroad 
 company as the consideration for its agreement to locate its ma- 
 chine-shops within the town, then, on the only assumption on 
 which the bonds can be sustained, viz., that such shops are part 
 of the railroad, or necessary for its use, would not the execution 
 and delivery of such bonds to the railway company be the loaning 
 by the town of its credit to the company ? It is not different in 
 essence, and particularly in view of the object of the Constitution, 
 viz., to prevent taxing the people without the required consent, 
 that the town sells its own bonds and gives to the company the 
 proceeds, instead of the bonds themselves. The bonds in question, 
 if valid, create a debt against the defendant city for the benefit 
 of a railroad corporation, and are thus within the mischief or evil 
 which the Constitution aimed to remedy. Why, then, should not 
 the constitutional provision be held applicable to these bonds ? It 
 cannot be maintained, on solid grounds, that the barrier of a two 
 thirds vote, weak and ineffectual as it has proved to be, can be 
 evaded by a mere change of the form of the aid, that is, by giv- 
 ing the aid in the shape of a donation of the proceeds of credit, in- 
 stead of a subscription for stock, or, instead, giving the bonds 
 directly to the company which the municipality desires to assist." 
 
 250. Nebraska. 4 — No city, county, town, precinct, municipal- 
 ity, or other subdivision of the state shall ever become a subscriber 
 
 1 State v. Curators State University, C. C. W. D. Mo. April T. 1S78), 5 Re- 
 57 Mo. 178. porter, 583. 
 
 2 Of March 18, 1870. 4 Const. 1875, art. xi. Municipal Cor- 
 
 3 Jarrott v. City of Moberly (U. S. porations. 
 
 234
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 251. 
 
 to the capital stock, or owner of such stock, or any portion or in- 
 terest therein, of any railroad or private corporation, or associa- 
 tion. No city, county, town, precinct, municipality, or other 
 subdivision of the state, shall ever make donations to any railroad. 
 or other works of internal improvement, unless a proposition to do 
 so shall have been first submitted to the qualified electors thereof 
 at an election by authority of law ; provided, that such donations 
 of a comity with the donations of such subdivisions in the aggre- 
 gate shall not exceed ten per cent, of the assessed valuation of 
 such county ; provided, further, that any city or county may, by 
 a two thirds vote, increase such indebtedness five per cent, in ad- 
 dition to such ten per cent., and no bonds or evidences of indebt- 
 edness so issued shall be valid unless the same shall have indorsed 
 thereon a certificate signed by the secretary and auditor of state, 
 showing that the same is issued pursuant to law. 
 
 The credit of the state shall never be given or loaned in aid of 
 any individual association or corporation. 1 
 
 At the time of the adoption of this constitutional provision 
 there was a statute in force 2 enabling counties, cities, and pre- 
 cincts to issue bonds to aid works of internal improvement not 
 exceeding ten per cent, of the assessed value of the taxable prop- 
 erty, upon a two thirds vote in favor of such aid. This law not 
 being in conflict with the Constitution continued in force after its 
 adoption. The Constitution itself, of its own force, did not invest 
 cm: uties with any inherent power to grant aid independently of 
 legislative authority, and, therefore, without such authority the 
 limit of ten per cent, could not be extended by an additional live 
 per cent. The Constitution was restrictive merely upon the Legis- 
 lative discretion; it fixed a boundary beyond which the legislature 
 could n.»t go. Within the. boundary set the whole matter was 
 lefl to legislative authority. A vote of a donation to the amount 
 of fifteen per cent, of the taxable property, being a vol.- in exc< 9S 
 of the statutory limit, was held void, and the issue of bonds under 
 it enjoined. 8 
 
 251. Nevada. 4 — The state shall not donate or loan money or 
 
 i ( , Brt< rij. §§ 2,::. ' : Reineman v. Covington, Columbus ft 
 
 ■z An. of Feb. 15, I imended Black Hill- R R ' 
 
 March 3, 1870, and Feb. it, 1875; Gen. l Coi I I 64, art. viii. §§ 9, 10. 
 
 . -1 I- ; I.:i\\s I B75, D, 
 
 285
 
 §§ 252-255.] MUNICIPAL BONDS in aid of railroads. 
 
 its credit, subscribe to or be interested in the stock of any com- 
 pany, association, or corporation, except corporations formed for 
 educational or charitable purposes. No county, city, town, or 
 other municipal corporation, shall become a stockholder in any 
 joint stock company, corporation, or association whatever, or loan 
 its credit in aid of any such company, corporation, or association, 
 except railroad corporations, companies, or associations. 
 
 252. New Hampshire. — In this state towns were at one 
 time 1 authorized upon a two thirds vote to raise money by tax or 
 loan to aid the construction of any railroad in the state to an 
 amount not exceeding five per cent, of its valuation for that year. 
 The act giving this authority was repealed in 1877 by a statute 
 which provided that no town or city shall thereafter directly or 
 indirectly loan or give its money or credit, in any form, for the 
 benefit of any corporation having for its object a dividend of prof- 
 its, nor in any way aid the same by taking the stock, bonds, or 
 other obligations of such corporation. 2 This provision was made 
 a part of the Constitution of the state by an amendment adopted 
 the same year. 3 
 
 254. New Jersey. 4 — The credit of the state shall not be di- 
 rectly or indirectly loaned in any case. 
 
 Municipal subscriptions have been authorized by the legislature 
 in favor of particular roads. 5 
 
 255. New York. 6 — Neither the credit nor the money of the 
 state shall be given or loaned to or in aid of any association, cor- 
 poration, or private undertaking. No county, city, town, or 
 village shall hereafter give any money or property, or loan its 
 money or credit, to or in aid of any individual, association, or cor- 
 poration, or become directly or indirectly the owner of stock or of 
 bonds of any association or corporation, nor shall any such county, 
 city, town, or village be allowed to incur any indebtedness, ex- 
 cept for county, city, town, or village purposes. This section shall 
 
 1 Act 1864, p. 2890; G. S. 1867, ch. 34, 5 As for instance in favor of the Pas- 
 §§ 16-20. This law declared constitu- saic Valley & Peapack E. R. Co. Act 
 tional. Perry i'. Keene, 56 N. H. 514. April 9, 1868.; Lane v. Schomp, 20 N.J. 
 
 2 July 19, 1877 ; Laws 1877, ch. 69. Eq. 82. 
 
 3 Amendment 1877; ratified March 13. 6 Const. Amendment 1874, art. viii. 
 
 4 Const. 1876, art. iv. § 6, pi. 3. § 10, went into effect Jan. 1, 1875. 
 
 236
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 256. 
 
 not prevent such county, city, town, or village from making such 
 provision for the aid or support of its poor as may be authorized 
 by law. 1 
 
 This amendment was adopted in view of the disastrous conse- 
 quences of legislation inaugurated in 1869, 2 whereby towns and 
 other municipal corporation swere authorized to loan their credit 
 in various ways to aid in the construction of railroads. This 
 authority was obtained by a petition of a majority of the tax- 
 payers of the town or corporation, representing a majority of the 
 taxable property, to the county judge, who was authorized to 
 determine whether such majority had petitioned, and to appoint 
 commissioners to issue bonds not exceeding twenty per cent, of 
 the taxable property of the corporation. 
 
 On the first clay of January, 1875, when the amendment went 
 into effect, all action on the part of any town to issue its bonds 
 in aid of a railroad not then completed at once became nugatory, 
 unless by operation of law, or by some valid agreement, there had 
 been created prior to that time a right to have such action per- 
 fected by the issuing of bonds. 3 
 
 256. North Carolina. 4 — No county, town, or other municipal 
 corporation shall contract any debt, pledge its faith, or loan its 
 credit, nor shall any tax be levied or collected by any ofiicers of 
 the same, except for the necessary expenses thereof, unless by a 
 vote of a majority of the qualified voters therein. 
 
 It is provided by statute 6 that the county commissioners <>i' the 
 
 several counties in this state shall have power to subscribe stock 
 
 to any railroad company or companies, when necessary to aid in 
 
 the completion of any railroad in which the citizens of the county 
 
 have an inte] 
 
 The commissioners of any county proposing to take stock in 
 any railroad company sliall meei and agree upon the amount to 
 be subscribed, and if a majority of the commissioners shall rote 
 for the proposition, this shall be entered of record, which shall 
 show the amount proposed to be subscribed, to what company, 
 
 i Con-t. Amendment 1874, art »iii. :; Falconer v. Buffalo & Jamestown li. 
 
 § n. i;. Co. 69 x. v. r.H. 
 
 - Laws 1869, <■!,. 907; i^7o, <•!,*. 17::, ' Const. 1868, art. vii. § 7; Const 
 507, 789 ; 1-71, <■!,-. 64, 146, 260, 288, 1 C. 7. 
 
 i;. i isal i 378, ch. 99, §§ 66, ''7, 69; 
 .V I I 171, § I. 
 
 287
 
 § 257.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 and whether in bonds, money, or other property, and thereupon 
 the commissioners shall order an election, to be held on a notice 
 of not less than thirty days, for the purpose of voting for or 
 against the proposition to subscribe the amount of stock agreed 
 on by the county commissioners. And if a majority of the qual- 
 ified voters of the county shall vote in favor of the proposition, 
 the county commissioners, through their chairman, shall have 
 power to subscribe the amount of stock proposed by them, and 
 submitted to the people, subject to all the rules, regulations, and 
 restrictions of other stockholders in such company or companies. 
 
 In case the county shall subscribe the amount proposed in 
 bonds, the commissioners shall have power to fix the rate of in- 
 terest, not to exceed the rate of eight per cent., when the interest 
 on said bonds shall be payable, and at what place, and also to fix 
 the time and places of paying the interest, and to determine the 
 mode and maimer of the same ; and also shall have power to raise 
 by taxation, from year to year, the amount necessary to meet the 
 interest on said bonds. 
 
 The commissioners are authorized to make the subscription, if 
 a majority of the votes cast at the election be in favor of such sub- 
 scription, although a majority of all the voters of the town did 
 not vote. 1 
 
 257. Ohio. 2 — The credit of the state shall not in any man- 
 ner be given or loaned to, or in aid of, any individual, association, 
 or corporation whatever ; nor shall the state ever hereafter be- 
 come a joint-owner or stockholder in any company or association 
 in this state or elsewhere, formed for any purpose whatever. The 
 general assembly shall never authorize any county, city, town, or 
 township, by vote of its citizens or otherwise, to become a stock- 
 holder in any joint stock company, corporation, or association 
 whatever ; or to raise money for, or loan its credit to, or in aid 
 of, any such company, corporation, or association. 
 
 A statute which attempts to do indirectly what is thus pro- 
 hibited, as for instance to authorize municipalities to raise money 
 for building so much of a railroad as can be built for the amount 
 raised, is in contravention of these provisions of the Constitution ; 3 
 
 1 Reiger v. Commissioners of the Town 3 Taylor v. Commissioners of Ross 
 
 of Beaufort, 70 N. C. 319. County, 23 Ohio St. 22, in relation to Act 
 
 * Const. 1851, art. viii. §§ 4, 6. of April 23, 1872. 
 238
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§§ 258, 259. 
 
 though a statute authorizing a city to build an entire railroad as 
 a public work was sustained. 1 
 
 It was competent for the legislature, under the Constitution of 
 1802, to construct works of internal improvement on behalf of the 
 state, or to aid in their construction by subscribing to the capital 
 stock of corporations created for that purpose, and to levy taxes to 
 raise the means, and by an exercise of the same power to author- 
 ize a county or township to subscribe to a work of that character, 
 running through or into such county or township, and to levy a 
 tax to pay the subscription. 2 
 
 258. Oregon. 3 — The state shall not subscribe to, or be inter- 
 ested in, the stock of any company, association, or corporation. 
 No county, city, town, or other municipal corporation, by vote of 
 its citizens or otherwise, shall become a stockholder in any joint 
 stock company, corporation, or association whatever, or raise 
 money for, or loan its credit to, or in aid of any such company, 
 corporation, or association. 
 
 259. Pennsylvania. 4 — The credit of the commonwealth shall 
 not be pledged or loaned to any individual, company, corporation, 
 or association, nor shall the commonwealth become a joint-owner 
 or stockholder in any company, association, or corporation. The 
 general assembly shall not authorize any county, city, borough, 
 township, or incorporated district to become a stockholder in any 
 company, association, or corporation, or to obtain or appropriate 
 money lor, or to loan its credit to, any corporation, association, 
 institution, or individual. 
 
 It hail been decided in 1839 that municipal corporations could 
 not, without special legislation for the purpose, levy a tax in aid 
 of railroad companies. 6 Subsequently several statutes were passed 
 legalizing anil authorizing the granting of such aid, 1 ' the conse- 
 quences "I' which were so disastrous that the above constitutional 
 
 provision was adopted. 7 
 
 1 Walker v. City of Cincinnati, 21 * Const. 1873, art. ix. §§«'-."• ' 
 
 Ohio Si. l i. Dally adopted 1857. 
 
 - Cincinnati, Wilmington & Zanesville • Mt'Dermond v. Eenm ht. (Pa.) 
 R. R. (',,. r . Clinton County, l Ohio St. 
 
 77; State '-. Tru tees of Union Town- ,; See Act 27 March, 1848 j Act 15 May, 
 
 •hip, 8 Ohio St, 1850. 
 
 I ; ; 6, '.i. 7 Pennsylvania R. R. ' '<>. v. City of 
 
 Phila. it Pa. St. i 1 -'.'. 
 
 289
 
 §§ 260-263.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 260. Rhode Island. 1 — The Constitution provides that without 
 the express consent of the people the legislature shall not in any 
 case pledge the faith of the state for the payment of the obliga- 
 tions of others. 
 
 261. Tennessee. 2 — The credit of no county, city, or town 
 shall be given or loaned to or in aid of any person, company, asso- 
 ciation or corporation, except upon an election to be first held by 
 the qualified voters of such county, city, or town, and the assent 
 of three fourths of the votes cast at said election. Nor shall any 
 county, city, or town become a stockholder with others in any 
 company, association, or corporation, except upon a like election 
 and the assent of a like majority. 3 
 
 The credit of the state shall not be hereafter loaned or given 
 to or in aid of any person, association, company, corporation, or 
 municipality, nor shall the state become a stockholder with others 
 in any association, company, corporation, or municipality. 
 
 262. Texas. — The legislature shall have no power to author- 
 ize any county, city, town, or other political corporation, or sub- 
 division of the state, to lend its credit or to grant public money 
 or thing of value, in aid of or to any individual, association, or 
 corporation whatsoever ; or to become a stockholder in such cor- 
 poration, association, or company. 4 No county, city, or other 
 municipal corporation shall hereafter become a subscriber to the 
 capital of any private corporation or association, or make any ap- 
 propriation or donation to the same, or in any wise loan its credit ; 
 but this shall not be construed to in any way affect any obligation 
 heretofore undertaken pursuant to law. 5 
 
 Statutes authorizing municipal aid under the former Constitu- 
 tion were valid. 6 
 
 263. Vermont. 7 — By statute any town or city in this state 
 
 i Const. 1S42, art. iv. § 13. to any person, association, or corporation, 
 
 2 Const. 1S70, art. ii. §§ 29, 31. provided that this exception shall not be 
 
 3 Certain counties are excepted from enforced beyond the year 1880. 
 the operation of this provision, so far that 4 Const. 1876, art. iii. § 52. 
 the assent of a majority of the qualitied 5 Const. 1876, art. xi. § 3. 
 voters of either of said counties voting on 6 Harcourt v. Good, 39 Tex. 455. 
 
 the question shall be sufficient, when the 7 Laws 1872, p. 75, §§ 1, 2, 4 ; Laws 
 credit of such county is given or loaned 1874, p. 45, § 5. 
 240
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 263. 
 
 may aid in the construction of any railroad organized under the 
 provisions of the general railroad law, by issuing bonds to aid 
 such railroad, by taking capital stock therein, or in such other 
 manner as such town or city shall direct ; provided, that no town 
 or city shall assume liability for any such road exceeding eight 
 times the grand list of such town or city at the time such aid is 
 granted. 
 
 Such aid shall be given in the following manner. The select- 
 men of any town, and the mayor of any city, on the application 
 of ten or more legal voters of said town or city, shall, within ten 
 days after the receipt of said application, warn a meeting of legal 
 voters of such town or city to be held at the usual places of hold- 
 ing town or city meetings in said town or city, which notice shall 
 specify the time and place of the meeting, which shall not be 
 more than twenty nor less than twelve days from the time of 
 posting such notice ; and the warning shall be sufficient if it 
 states the business to be done at said meeting is to aid in the con- 
 struction of the railroad so organized, the name of which railroad 
 shall be stated in such warning ; and if a majority of the votes 
 given at said meeting shall be to aid said road, then the town or 
 city shall fix the amount of aid to be given, and the terms thereof, 
 and may appoint three commissioners, who shall be resident tax- 
 pavers of the town or city, and if no commissioners be appointed, 
 the selectmen of such town and aldermen of such city shall act 
 as commissioners until commissioners shall be appointed by said 
 town or city. Said commissioners, selectmen, or aldermen shall 
 be duly sworn, and shall as soon as may be prepare suitable books 
 in which said votes shall be set forth, in which the tax-payers of 
 said town or city may sign their names, assenting to said vote, 
 and the grand list of each person signing said assent shall be an- 
 nexed to his name; and when a majority of the tax-payers of said 
 town or city, both in number and amount of grand list, shall have 
 signed the same, the same shall he binding on the town or city: 
 provided, the signatures are procured within one year after the 
 
 first signature to the paper is made; and all persons and corpora- 
 tions Liable to pay taxes, and all persons who shall be owners of 
 real estate taxed ;it the time the assent is given, shall have a righi 
 ■ ■mi to »aid v ''i'-. 
 Such town or city maj i tie bonds, with coupons payable semi- 
 annually, at any rate of interest not exc ling ^■\>'\\ per cent., for 
 
 w 241
 
 § 2G-1.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 the purpose of aiding such road. The commissioners, selectmen, 
 or aldermen aforesaid, as soon as the assent is given and recorded 
 as aforesaid, shall proceed to carry into effect the vote of said 
 town or city, according to the terms and conditions thereof, and 
 shall have power to vote and act for said town or city on all 
 proper occasions to carry into effect the vote aforesaid, and their 
 votes and acts shall be binding on said town or city. 
 
 264. Virginia. 1 — The credit of the state shall not be granted 
 to, or in aid of, any person, association, or corporation. The state 
 shall not subscribe to, or become interested in, the stock of any 
 company, association, or corporation. The state shall not be a 
 party to, or become interested in, any work of internal improve- 
 ment, nor engage in carrying on any such work, otherwise than in 
 the expenditure of grants to the state of land or other property. 
 
 By statute, 2 the county court of any county, or the common 
 council, or board of trustees, of any city or town, or township 
 board of any township, in this commonwealth, may make an order 
 requiring the sheriff or sergeant, and commissioners of election, 
 at the next general election for state, city, town, or county, or 
 township officers, or at any other time, not less than thirty days 
 from the date of said order, which shall be designated therein, 
 to open a poll and take the sense of the qualified voters on the 
 question, whether the board of supervisors, council, or board of 
 trustees, or township board, shall subscribe to the stock of any in- 
 ternal improvement company, named in the order, which has been 
 incorporated by the general assembly. The said order shall state 
 the maximum amount proposed to be subscribed, which shall in 
 no case exceed one fifth of the total capital stock of said company, 
 or an amount, the interest upon which, at the rate authorized by 
 the council or board of trustees of any city or town, or board of 
 supervisors of any county, or township board of any township, 
 shall not require the imposition of an annual tax in excess of 
 twenty cents on the one hundred dollars ; provided, that the 
 bonds issued by any county, city, or town, or township, subscribed 
 
 1 Const. 1870, art. x. §§ 12, 14, 15. bonds in payment of subscriptions to the 
 
 2 Code 1873, ch. 61, § 62. By statute stock of any company, they shall levy and 
 of March 25, 1875, it is provided that collect a tax for a sinking fund, sufficient, 
 whenever the counties of Fairfax, Lou- in connection with the dividends received 
 doun, Clark, or Frederick, or any city or from the stock, to redeem the bonds at 
 town within these counties, shall issue maturity. Acts 1874-5, p. 261. 
 
 242
 
 PROVISIONS RESPECTING MUNICIPAL AID. [§ 265. 
 
 to any internal improvement company, shall be received by such 
 company at their par value. 
 
 265. West Virginia. 1 — The credit of the state shall not be 
 granted to or in aid of any county, city, township, corporation, or 
 person ; nor shall the state ever assume or become responsible for 
 the debts or liabilities of any county, city, town, township, corpo- 
 ration, or person : nor shall the state ever hereafter become a joint- 
 owner or stockholder in any company or association in this state 
 or elsewhere, formed for any purpose whatever. 
 
 It is provided by statute 2 that it shall be lawful for the county 
 court, or other court or tribunal established in lieu of a county 
 court, or the council or board of trustees of any county, city, or 
 town through, by, or near to which the railroad company shall 
 have been incorporated to construct a railroad and branches, and 
 likely to be benefited thereby, to make an order requiring the 
 sheriff or sergeant, and commissioners of election, at a time to be 
 designated in such order, not less than one month from the date 
 thereof, to open polls and take the sense of the legal voters of such 
 county or district thereof, city, or town, on the question whether 
 such county or district thereof, city, or town, shall subscribe to the 
 stock of said company incorporated to construct a railroad through, 
 by, or neyr such county, district, city, or town, and by the con- 
 struction of which such county, city, or town is likely to be ben- 
 efited. The said order shall state the amount proposed to be 
 subscribed, and in case such order be made by the county court, or 
 other court or tribunal established in lieu of a county court of 
 any such county, or the council or board of trustees of any such 
 city or town, the legal voters residing in any district of a county, 
 city, or town located in any such counties, as the case nia\ be, 
 shall be entitled to vote upon the question. If it shall appear 
 that three fifths of the votes cast at such election are in favor 
 of the subscription, such commissioners of elections at the court- 
 house, or council, or board of trustees, shall forthwith so declare, 
 and when so declared, it shall be the duty of the countj court, or 
 other c, ml or tribunal established in lieu of a countj courj of 
 the county, at the first meeting thereafter, or the members of the 
 
 1 Const. I -:_', art. x. §0. works of internal improvement ; Acta 
 
 73, ch. 88, §§ 27, 28. See prior L863 p. 70, §9; Code 1870, ch. 89, § 10. 
 act authorizing county anbacriptiona to 
 
 243
 
 § 2G6.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 council or board of trustees of any city or town, to meet on the 
 fifth day thereafter (Sunday excepted), to carry out the wishes 
 of said voters. The said subscription shall be paid in cash, or in 
 the coupon bonds of said county, district, city, or town, at par ; 
 the said bonds to be redeemed within thirty-four years, as such 
 county court, or other tribunal established in lieu of a county 
 court, councilmen, or trustee of any city or town may elect, and 
 shall bear interest, and the matured coupons shall be received by 
 the authorities of such county, city, or town, at par, in payment 
 of all taxes, fines, and other like obligations : provided, that no 
 county, district, city, or town within this state shall hereafter be 
 allowed to become indebted in any manner, or for any purpose, 
 to an amount, including existing indebtedness, in the aggregate, 
 exceeding five per centum on the value of the taxable property 
 therein, to be ascertained by the last assessment for state and 
 count}'' taxes, previous to the incurring of such indebtedness ; nor 
 without at the same time providing for the collection of a direct 
 annual tax, sufficient to pay, annually, the interest on such debt, 
 and the principal thereof, within and not exceeding thirty-four 
 years. But no debt shall be contracted under these provisions, 
 unless all questions connected with the same shall have been first 
 submitted to a vote of the people, and have received three fifths 
 of all the votes cast for and against the same. 
 
 266. Wisconsin. — The Supreme Court of the state has held 
 that municipal corporations have no power under legislative sanc- 
 tion to make donations of money, in aid of a railroad and to levy 
 a tax to pay for the same ; : but that they are liable upon bonds 
 issued in payment of subscriptions to the capital stock of a rail- 
 road company. 2 The Constitution of the state makes it the duty 
 of the legislature, in providing for the organization of cities and 
 incorporated villages, to restrict their power of loaning their credit, 
 so as to prevent abuses ; and consequently recognizes their power, 
 under some circumstances and for some purposes, to loan their 
 credit. 3 But the various statutes on the subject, taken together, 
 clearly establish a public policy to encourage municipalities to aid 
 
 1 Whiting v. Sheboygan & Fond du v. Wisconsin Cent. R. R. Co. 121 Mass. 
 Lac R. R. Co. 25 Wis. 167. 460. 
 
 2 Phillips v. Town of Albany, 28 Wis. 3 Rogan v. City of Watertown, 30 Wis. 
 340; Supervisors of County of Portage 259. 
 
 244
 
 CONDITIONS PRECEDENT TO GRANTING MUNICIPAL AID. [§ 267. 
 
 in the construction of railroads. 1 The right to subscribe stock in 
 aid of railroad companies has frequently been conferred upon 
 counties and towns in favor of particular railroad companies. 2 
 
 The present general statute authorizing municipal corporations 
 to aid in the construction of railroads is that enacted in 1872 as 
 amended in several subsequent statutes. 3 Any county, town, incor- 
 porated city, or incorporated village is authorized to grant such 
 aid by subscribing to the stock of any railroad company which 
 will promote the general prosperity and welfare of its tax-payers. 
 The corporation and the railroad company may agree upon the 
 terms upon which such aid shall be granted. Prior to the amend- 
 ment of 1875, 4 the municipality was authorized to issue bonds to 
 the railroad company to an amount not exceeding, with its exist- 
 ing indebtedness, ten per centum of its valuation ; but by that 
 amendment it was enacted that the agreement of the parties 
 should provide that the aid should consist in a tax, not exceeding 
 in amount five per centum of the taxable property. In case such 
 agreement is made an election is held, and if a majority of the 
 legal voters who vote at such election shall vote for the railroad 
 proposition, a tax to the amount of aid so voted shall be entered 
 upon the next assessment roll, and collected and paid over to 
 the company. The company is empowered to purchase at any 
 tax sale had for the collection of such tax; it being the intent of 
 the act that the company shall be entitled to the proceeds of such 
 tax voted and assessed, whether in money collected or certificates 
 of sale, to the amount of the bid so voted. 
 
 III. Conditions precedent to granting Municipal Aid. 
 
 267. Effect of non-compliance with conditions respecting 
 the issue of bonds. — When special authority is conferred upon 
 a municipal corporation to aid a private company by the issue of 
 its bonds, the legislature may properly direct the mode in which 
 
 1 Town of Platteville y. Galena S South- agreement and the holding of theelection. 
 
 era Wis. R. R. Co. 43 Wis. 493, 503. See Bound v. Wisconsin Cent. R. R. Co. 
 
 for instance statutes of March.9, Sup. Ct. of Wis., 1878, 6 Reporter, 704. 
 
 1869; March 1, 1871. * Laws 1875, ch. 168. Aid may be 
 
 '■'■ Laws L872, ch. 182, amended; Laws given to extend road or to build branches. 
 
 1874 ch. .".it ; Laws 1876, vol. i. ch. 66 ; or in aid of 
 
 LawB 1876, vol. i. ch. 128 PI statutes narrow-gauge railroads. Laws 1876, 
 
 provide al length for the making of tlic vol. i. ch. 29. 
 
 ■J!.".
 
 § 268.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 this power shall be exercised, and may constitute such agents as 
 it may choose to carry out the power so granted, although such 
 agents be not officers of the municipality or persons chosen by it. 1 
 Although irregularity, or even fraud, in the issue of such bonds 
 will not invalidate the bonds in the hands of a bond fide holder, 
 but only in the hands of those who have notice of the irregularity 
 or fraud, yet upon a proper application the issue of the bonds may 
 be enjoined, when the statute authorizing their issue has not been 
 complied with in matters of substance. Thus an injunction was 
 issued to restrain the issue of bonds authorized by a statute of the 
 State of Nebraska, which required the bonds to be paid in ten 
 years, whereas a county had voted to issue the bonds to run twenty 
 years. 2 
 
 But a statutory provision that bonds shall not run more than 
 thirty years from the date thereof is directory, and not of the 
 essence of the power to issue. Bonds dated September 10, pay- 
 able thirty years from October 15 in the same year, are of the 
 same legal effect as if they had been dated of the latter date, and 
 are not invalid as contravening the statute. 8 
 
 Under a statute authorizing municipal subscriptions and bonds 
 in aid of railroads upon conditions, and providing that these "shall 
 not be valid and binding until such conditions precedent have been 
 complied with," it is not essential to the validity of the subscrip- 
 tion or of the bonds that the conditions annexed shall have been 
 first performed, if they are performed after the making of the sub- 
 scription or even after the issue of the bonds. 4 
 
 268. The validity of the subscription in aid of the railroad 
 as between the immediate parties depends upon the result 
 and validity of the election held to authorize the subscription. 
 A Court of Chancery, upon a bill filed by a tax-payer, may in- 
 vestigate a vote of a municipal corporation to issue bonds in aid of 
 a railroad. Under a statute authorizing such issue upon the vote 
 of a majority of the legal voters, the contract of subscription is 
 not binding in favor of the railroad company except as authorized 
 
 1 Sheboygan County v. Parker, 3 Wall. 359 ; Cairo & St. Louis E. E. Co. v. City 
 93. of Sparta, 77 111. 505. 
 
 2 Union Pacific E. E. Co. v. Lincoln 3 Township of Eock Creek v. Strong, 
 County, 3 Dill. 300; and see Union Pa- 96 U. S. 271. 
 
 cific E*. E. Co. v. Merrick County, 3 Dill. 4 Town of Eagle v. Kohn, 84 111. 292. 
 216
 
 CONDITIONS PRECEDENT TO GRANTING MUNICIPAL AID. [§ 269. 
 
 by law, and entered into in pursuance of all the essential require- 
 ments of the statute. 1 If, upon inquiry, the subscription proves 
 not to have been duly authorized, the court may enjoin the issu- 
 ing of the bonds ; 2 or if the bonds have already been issued, it 
 may declare them void, and order their cancellation so far as the 
 railroad is concerned, though the title of bond fide purchasers of 
 the bonds for value may not be affected. 3 
 
 Formalities imposed by the legislature upon municipal corpora- 
 tions as conditions precedent to the exercise of a power of borrow- 
 ing which rests wholly upon legislative authority are regarded as 
 imperative as between the immediate parties. 4 Such for instance 
 is a requirement that the assent of the voters of a town or county 
 to the issuing of bonds in aid of a railroad or other private corpo- 
 ration shall first be obtained. 5 Bonds issued without such assent 
 have been held in exceptional cases void, even in the hands of bond 
 fide holders. 6 In like manner a condition imposed by the vote of 
 a township in favor of a subscription in aid of a railroad, that 
 the bonds shall be issued only when work equal in value to the 
 amount of the bonds shall be done in the township, is imperative, 
 and is not fulfilled by doing work elsewhere, even with the con- 
 sent of the officers of the township. Moreover, a condition once 
 imposed by a vote cannot be changed by a subsequent election 
 unless the first election was void. The power conferred upon the 
 township to vote such aid is exhausted when once acted upon, 
 unless authority be given it by statute to act again." 
 
 269. Meaning of two thirds of qualified voters. — A pro- 
 vision of the former Constitution of Missouri that "the general 
 
 1 Chambers County v. Clews, 21 Wall. 4 Essex County R. R. Co. w. Town of 
 
 317, .'J2l ; Winston v. Tenn. & Pacific R. Lunenburgh, 49 Vt. 143; McCoy v.Briant, 
 
 57 Tenn. 60; 15 Am. Railw. R. 1 1 Chicago Leg. N. 84. 
 
 237; Louisville & Nashville R. R. Co. v. & Leavenworth & DesMoines R. R. Co. 
 
 County Court of Davidson, i Sneed v. County Court of Platte County, 42 Mo. 
 
 (Tenn.), 637, 640. 171. 
 
 i preceding note, and Union G City v. Lamson, 9 Wall. 477 ; Steines 
 
 Pacific R.R. Co. w. Lincoln County, 3 Dill, v. Franklin County, 48 Mo. 167; S Am. 
 
 800; Same v. Merrick, lb. 859 ; Portland K. s7. 
 
 tral R. R. Co. v. Eartford, 7 Illinois Midland R. R. Co. v. Wayne* 
 
 rdi>. Jeffei on County, ville, Sup. Ct. of HI. 6 Reporter, 457 ; £ 
 
 ,-. ( lounty < '"Hi t of Davi I iountj . 6 I 
 
 B • I un'i of] oi ; '<«■ County, 76 Mo. 80. 
 N. C. 489 ; ' !he ter & Li noir R. K. Co. v. 
 Caldwell County, 72 N. C. 4( 6. 
 
 ■JIT
 
 § 270.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 assembly shall not authorize any county, city, or town, to become 
 a stockholder in, or to loan its credit to, any county, association, 
 or corporation, unless two thirds of the qualified voters of such 
 county, city, or town, at a regular or special election to be held 
 therein, shall assent thereto," was construed to authorize a law 
 allowing such subscription when it appears " that not less than 
 two thirds of the qualified voters of the township voting at such 
 election are in favor of such subscription." All qualified voters 
 who absent themselves from an election duly called are presumed 
 to assent to the expressed will of the majority of those voting, 
 unless the law providing for the election otherwise declares. Any 
 other rule would be productive of the greatest inconvenience, and 
 ought not to be adopted, unless the legislative will to that effect 
 be clearly expressed. 1 Although the Supreme Court of the state 
 subsequently pronounced this act unconstitutional, 2 the federal 
 courts declined to follow that decision, on the ground that they 
 are not bound by decisions of local courts invalidating negotiable 
 commercial securities negotiated before there was any decision 
 invalidating them. 3 
 
 270. Generally the effect of a popular vote, had in pursu- 
 ance of legislative authority to issue bonds in aid of a railroad 
 company, is simply to empower its proper agents to act in the 
 matter, and to bind the municipality by a formal subscription. 4 
 The vote alone does not generally constitute a subscription, or a 
 contract to subscribe, or preclude the repeal of the authority to 
 subscribe. 5 
 
 1 County of Cass v. Johnston, 95 U. S. County, U. S. C. C. for Mo. 7 Cent. L. J. 
 360, overruling Harshmanr. Bates County, 353. See articles on Township Bonds of 
 92 U. S. 569, so far as in conflict. See, Missouri, and the decisions of the U. S. 
 also, State v. Renick, Mayor of City of St. Supreme Court, 5 Cent. L. J. 499, 518. 
 Joseph, 37 Mo. 270; State v. Binder, 38 4 People v. Batchellor, 53 N. Y. 128; 
 Mo. 450 ; St. Joseph Township v. Rogers, Town of Duanesburgh v. Jenkins, 57 lb. 
 16 Wall. 644 ; Louisville & Nashville R. 177, 192; People v. County of Tazewell, 
 R. Co. v. County Court of Davidson, 1 22 111.147; Union Pacific Ry. Co. v. Com. 
 Sneed (Tenn.), 638; People v. Wiant, 48 of Davis County, 6 Kans. 256 ; Crawford 
 111. 263; People v. Garner, 47 111. 246; County v. Louisville, New Albany & St. 
 Taylor v. Taylor, 10 Minn. 107 ; Melvin Louis Air Line Ry. Co. 39 Ind. 192. 
 
 v. Lisenby, 5 Cent. L. J. 15. See § 249. 5 Aspinwall v. County of Daviess, 22 
 
 2 State v. Brassfield, referred to in Foote How. 364; Harshman v. Bates County, 3 
 v. Johnson County, infra. Dill. 150; affirmed, 92 U. S. 569; Union 
 
 3 Foote v. Johnson County, 6 Cent. L. Pacific Ry. Co. v. Davis County, 6 Kans. 
 J. 34 5; Westermann v. Cape Girardeau 256. 
 
 248
 
 CONDITIONS PRECEDENT TO GRANTING MUNICIPAL AID. [§§ 271, 272. 
 
 271. But an actual subscription on the books of the com- 
 pany, or one made in any formal manner, is unnecessary when 
 the law authorizing the subscription provides that the vote of the 
 municipality in favor of a subscription shall be deemed to be a 
 taking of the stock of the company. The statute in such case 
 makes the vote an equivalent to a subscription, and a substitute 
 for it. 1 Even without any such statute, a resolution of a board of 
 supervisors having authority to make a subscription, ordering a 
 subscription to be made, when recorded and afterwards acted 
 upon is a binding contract of subscription. The resolution to sub- 
 scribe is an immediate subscription. 2 In like manner, an order of 
 a county court subscribing on behalf of the county for stock of a 
 turnpike company, was regarded not as a mere pledge or oiler to 
 subscribe, but an actual taking or subscribing for the stock. 8 
 
 272. A municipal subscription in favor of a railroad com- 
 pany may be released by a subsequent alteration of the organ- 
 ization or purposes of the company, if the alteration be a funda- 
 mental one, not contemplated either by the charter of the company 
 or by the general statutes of the state. 4 But if a subscription be 
 made to a company which is at the time authorized to consolidate 
 with other companies, and accordingly a consolidation is after- 
 wards effected with a company having a connecting line, a delivery 
 of the bonds to the new company in payment of the original sub- 
 scription is warranted, or may be compelled. 5 
 
 But where the power to make a subscription depended upon a 
 precedent vote which was made in favor of a certain corporation, 
 
 i Town of Bast Lincoln v. Davenport, 4 Countyof Bates v. Winters, U. S. Sup. 
 
 94 U. S 301 ; Nugent v. Supervisors of Cfc. 1878, 17 Albany L. J. 291. 
 
 Putnam County, 19 Wall. 241 ; Countyof 5 Town of East Lincoln v. Davenport, 
 
 kingham Ten Cent Savings 94 U. S. 801; Nugent v. Supervisors of 
 
 Bank, 92 I - 631 ; Town of Concord i». Putnam County, 19 Wall. 241 : County 
 
 Portsmouth Savings Bank, 92 U. S. 625. of Callaway v. Foster, 93 I'. S. 
 
 inty of Moultrie v. Rockingham County of Scotland v. Thomas, 94 U.S. 
 
 Bank, 92 I .8. 631 ; 682; S. ' '. 3 Dill. 7 j Countyof Benry v. 
 
 \\ . ■ | - , i un.l Soc. of Phila. v. Nicolay, 95 U. S. 619; Philadelphia & 
 
 Philadelphia, 31 Pa. St. 175; City Wilmington R. R. Co. v. Maryland, l<> 
 
 imento v. Kirk, 7 Cal. 419. How. 376; Tomlinson v. Branch, 15 Wall, 
 
 of < larke County Court v. 160; < itj of Mount Vernon v Ho 
 
 Paria, Winchi i Kentucky River [nd. 563 ; Stati Qi en< County, 54 Mo. 
 
 Turnpike Co. 11 B. Mon. (Ky.) 143. See, 540; Lewis v. Cit) of Clarendon, I S. C 
 
 however, Wilson v. Qarroutte, Sup. ct. C. April T. 1878, 6 Reporter, 609. 
 Mo. April T. 1878, 7 Cent. L. J. 2'.'. 
 
 249
 
 § 272.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 and under a general law of the state this company was soon after- 
 wards consolidated with another company, and the subscription 
 by the county court was made in favor of the consolidated com- 
 pany without any new election, it was held that the subscription 
 was unauthorized, and the bonds issued in payment of it void, 
 even in the hands of a bond fide holder. 1 The authority given to 
 the county court by the electors to make the subscription was 
 regarded as revoked when the company in whose favor the vote 
 was had ceased to exist, by being absorbed in another company 
 by consolidation. The county court was regarded as the mere 
 agent of the township, having no discretion to act beyond the 
 precise terms of the power given. The authority to make the 
 subscription ceased with the extinction of the company in whose 
 favor the vote was had. 
 
 In the case of Nugent v. Supervisors 2 the subscription was made 
 before the consolidation, whereas in the foregoing case there was 
 only a bare vote before the consolidation, and the subscription was 
 made in favor of the consolidated company. 
 
 Moreover, the authority given a county to subscribe for the stock 
 of a railroad company, and the subscription when made, passes as 
 a right and privilege of the company to a new company formed by 
 the consolidation of the company to which the subscription was 
 made with another. 3 A subscription made to a specified com- 
 pany, which has at the time power to consolidate with another 
 company, may well be regarded as made in full view of the fact 
 that the consolidation may occur without invalidating the sub- 
 • scription. If a prior vote be required to authorize the subscrip- 
 tion, a vote in favor of one constituent company then having 
 the power to unite with another company may well be regarded 
 as authorizing a subscription in favor of the consolidated company. 4 
 At any rate, where a county court, or certain officers of a munic- 
 
 i Harshman v. Bates County, 92 U. S. Branch, 15 Wall. 460 ; Philadelphia & 
 
 569 ; 3 Dill. 150. Such existing legisla- Wilmington R. R. Co. v. Maryland, 10 
 
 tive authority to change the organization How. 376 ; Smith v. County of Clark, 54 
 
 of the company distinguishes this case Mo. 58 ; Hannibal & St. Jo. R. R. Co. v. 
 
 from Marsh v. Fulton County, 10 Wall. Marion County, 36 Mo. 294 ; Stater. Sul- 
 
 676. See, also, Wilson v. Garroutte, Sup. livan County, 57 Mo. 522 ; State v. Greene 
 
 Ct. Mo. April T. 1878, 7 Cent. L. J. 29. County, 54 Mo. 540; Hanna v. Cincinnati 
 
 2 19 Wall. 241. & Fort Wayne R. R. Co. 20 Ind. 30. 
 
 3 County of Scotland v. Thomas, 94 U- 4 Washburn v. Cass County, 3 Dill. 
 S. 682; 3 Dill. 7; Branch v. City of 251. And see First Nat. Bank of St. 
 Charleston, 92 U. S. 677; Tomlinson v. Johnsbury v. Town of Concord, 50 Vt. 257. 
 
 250
 
 CONDITIONS PRECEDENT TO GRANTING MUNICIPAL AID. [§ 273. 
 
 ipality, have the power to subscribe for the stock of a particular 
 company without a vote of the people, inasmuch as the authority 
 to issue the bonds is complete without a subscription, the bonds 
 may be delivered to a company formed by the consolidation of the 
 specified company with another. 1 
 
 273. The prior location of a railroad may be or may not 
 be a condition precedent to submitting the question of a sub- 
 scription in aid of it to a vote of the electors of a municipality. - 
 This depends upon the terms of the statute. When a previous 
 location is not required, it is not necessary to insert the name of 
 the company to be aided in the proposition submitted to the pop- 
 ular vote, but it is sufficient to describe the contemplated route in 
 general terms. 3 In like manner, whether the prior incorporation 
 of the railroad company to which aid is subscribed is requisite to 
 the validity of the subscription, and to the bonds issued in pay- 
 ment of the subscription, and not held by bond fide purchasers 
 without notice, may depend upon the terms of the statute. 4 Under 
 a statute of the State of Missouri, the Supreme Court of that state 
 held that township subscriptions could not be used to bring the 
 company into existence. 5 It is also competent for a municipal 
 corporation to make its subscription upon condition that the road 
 shall be completed within a certain time, or upon such other con- 
 dition as may be considered necessary or desirable to insure the 
 corporation against loss, and as between the parties such condition 
 will be enforced. A railroad company does not forfeit its right to 
 aid -ranted on condition of constructing a certain number of miles 
 of road by the Eacl that it pur. -liases and adopts as a part of its 
 line a section of a railroad already constructed on a portion of the 
 
 * Thomas v. County of Scotland, 3 Dil- R. K. Co. v. Miami County, 12 Kans. 234, 
 
 l or)) ;. are aol authorities on tliis point. 
 
 - Commissioners of Johnson County v. 4 County of Cass v. Johnston, 95 I 8. 
 
 Thayer, 94 (J. S. 631 ; County of Cass v. -'SCO. 
 
 Jordan, 95 U. 8.373; in r< Stratford & 5 Rubey v. Shain, 54 Mo 
 
 Huron Ry.Co. 38 Q. B. Upper Canada, '• Falconer v. Buffalo & Jamestown R. R. 
 
 I [2, Co. 69 N. V. 191 ; Portland & Oxford < lent. 
 
 mmis ioners or Johnson County v. R. R.Co. v. Hartford, 58 Me. P 
 
 Thayer, supra; County of Callaway v. v. Jefferson County, 2 Colo. 338 ; Califor- 
 
 | 93U.S.567. The cases of Lewis nia Northern R. R. Co v Butte County, 
 
 p. Commissioners of Bourbon County, 12 18 Oal. 671 ; Hodgman v. C 
 
 Kans 186; Mo. River, Ft. ulf Paul Ry. Co. 20 Minn. 18; 23 lb, 153. 
 
 25]
 
 § 274.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 route on which the proposed railroad was to be built. 1 Assurances 
 in writing by the officers of a railway company, that if a town 
 would vote in favor of a subscription to its capital stock the com- 
 pany would not call for the bonds until satisfactory assurance 
 should be given of the completion of the road, cannot be regarded 
 as a fraud operating to induce an affirmative vote. 2 When it 
 appears that the stipulation as to the time within which the road 
 should be completed was not of the essence of the contract, and 
 the benefits sought to be derived from the road have actually been 
 received by the municipality subscribing, it will not be released 
 from paying the subscription. 3 
 
 There may also be a condition that the road shall be built in 
 a certain place ; and a breach of this would forfeit the right of 
 the company to demand the aid granted upon such condition; 4 
 but after the bonds have been issued and sold in the market, no 
 objection to the validity of the bonds can be sustained on the 
 ground of a breach of such condition. 5 Damages may, however, 
 be recovered by the municipality for a breach of such condition. 6 
 
 After a municipality has subscribed for the stock of a railroad 
 company, and issued its bonds in aid of its proposed main line, it 
 may restrain the company from wasting its means in constructing 
 branch roads when such use of its funds might result in disabling 
 it from building its main line." 
 
 A divergence in part from the proposed line of road may be au- 
 thorized by a municipality after it has voted to grant aid. 8 
 
 274. A charter of a corporation authorizing a municipal 
 subscription, being a contract between the state granting it 
 and the company receiving it, rights and privileges conferred by 
 the charter, cannot be taken away without the company's con- 
 sent, either by legislation or by constitutional provision. Thus a 
 
 1 Stockton & Visalia R. R. Co. v. City see Stockton & Visalia R. R. Co v. City 
 of Stockton, 51 Cal. 328. of Stockton, 51 Cal. 328. See Supervisors 
 
 2 Hensley Township v. People, 84 111. of County of Portage v. Wisconsin Cent. 
 544. . R. R, Co. 121 Mass. 460. 
 
 3 Kansas City & Council Bluffs R. R. 5 Munson v. Town of Lyons, 539. 
 
 Co. v. Alderman, 47 Mo. 349. See, also, G Missouri, Kansas & Texas Ry. Co. v. 
 
 Supervisors of County of Portage v. Wis- City of Fort Scott, 15 Kans. 435. 
 
 cousin Cent. R. R. Co. 121 Mass. 460. 1 Town of Platteville v. Galena & South- 
 
 4 Virginia & Truckee R. R. Co. v. Lyons ern Wis. R. R. Co. 43 Wis. 493. 
 County, 6 Nev. 68, 71 ; State v. County 8 Coleman v. Board of Supervisors, 50 
 Court of Daviess County, 64 Mo. 30 ; and Cal. 493. 
 
 252
 
 CONDITIONS PRECEDENT TO GRANTING MUNICIPAL AID. [§ 275. 
 
 charter of a railroad company, conferring upon it the right to 
 receive subscriptions to its stock from an} 7 county in which any 
 part of its route might be, without a vote of the county in favor 
 of it, is held not to be affected by a subsequent constitutional pro- 
 vision prohibiting subscriptions to the stock of any corporation by 
 counties, cities, or towns, unless two thirds of the qualified voters 
 thereof shall assent thereto. A subscription authorized by the 
 charter may be made after the adoption of such a constitutional 
 provision, and the bonds issued in pursuance of it will be valid. 
 The provision is construed to be prospective, and not retroactive 
 with respect to legislative grants of authority. 1 
 
 A subscription to the stock of one railroad company may be 
 transferred to another company, with the assent of the county or 
 municipality making the subscription, and such subscription there- 
 upon becomes a vested right which a subsequent change in the 
 Constitution of the state will not defeat or impair. 2 
 
 A statute authorizing a municipal corporation to loan its credit 
 to a railroad company specified, and to " any other company duly 
 incorporated and organized for the purpose of constructing rail- 
 roads," leading in the same direction, authorizes aid to a company 
 afterwards incorporated and organized. 3 
 
 275. But the power to subscribe may be annulled by con- 
 stitutional provision, or by statute, at any time before the sub- 
 scription or the right to subscribe has become a vested right of 
 the parties. 4 Bya statute of the State of Illinois, enacted in 1867, 
 towns were authorized to make appropriations or donations in aid 
 of the construction of a railroad, to be paid as soon as its tracks 
 should have been located ami constructed through such town. 
 
 1 County of Kay /•. Vansyclc, 96 U. S. State v. Greene County, .">) Mo. 540 
 
 or.".; County of Henry v. Nicolay, 95 II. also, Stater. Saline County, 51 Mo. 350. 
 
 S. 619; County of Scotland v. Thomas, Not in harmony with the foregoing: Jef 
 
 94 I Conn ty of Callaway v. Fos- fries v. Lawrence, 42 Iowa 198; Wilson v. 
 
 . t'. s. 567 ; :: Dill. 200; Nicolay v, Garroutte, 7 Cent. L. J. 29. 
 
 St. Clair County, 3 Dill 163; Kansas City, - County of Hay v. Vansycle, 96 I 8 
 
 &c I:. R. Co. v. Alderman, 47 Mo. 349; 675. See, however, Wilson v. Garroutte, 
 
 Stater. Macon County Court, n Mo. 453; Sup. Ct. Mo. April T. 1878; 7 Cent. L. J 
 
 Smith v. County of Clark, - r .i Mo 58; 29. 
 
 State v. County Court of Sullivan County, '■'■ James v. Milwaukee, 16 Wall 159. 
 
 51 Mo. 522; Town of Concord v. Ports* - Falconer v. Buffalo >< Jamestown R. 
 
 mouth Savings Bank, 92 I ,8.625; Hui R. Co. 69 N. F.491; 7 Hun, 499. 
 dekoper v. Dallas County, 8 Dill. 171 j 
 
 258
 
 § 275.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 The town of Concord, in 1869, voted to make an appropriation for 
 that purpose, provided the railroad company would run its road 
 through the town. On the 20th of June, 1870, the company gave 
 notice of its acceptance of the donation ; and in the year follow- 
 ing its bonds, representing the donation, were issued. The Con- 
 stitution of Illinois, which took effect July 2, 1870, provided that 
 no municipality should become a subscriber to the capital stock of 
 any railroad, or make a donation to, or loan its credit in aid of, such 
 corporation, provided that subscriptions authorized under existing 
 laws, by vote had prior to the adoption of the Constitution, should 
 not be affected. In an action upon the bonds, the Supreme Court 
 of the United States held that the Constitution annulled the power 
 of a town to make a donation, or to loan its credit, to a railroad 
 company after its adoption ; and moreover, that as the town had 
 no authority to make a contract to give money to the railroad 
 company, and the acceptance by the company was an undertak- 
 ing to do nothing which it was not bound to do, before the au- 
 thority of the town to make, or to engage to make, a donation 
 came into existence, no valid contract arose from such offer and 
 acceptance. Such acceptance was not regarded as an engagement 
 to locate and build the road through the town. There was, 
 therefore, no consideration for the town's promise to give, even 
 if the popular vote could be considered as a promise. There was 
 no contract to be impaired ; and a contract should be clearly 
 proved before the federal Constitution is invoked for its protec- 
 tion. 1 
 
 In like manner, where a town in the State of New York im- 
 posed as a condition precedent to subscribing for stock and deliv- 
 ering the town bonds, that the road should be located and con- 
 structed through the town, and this condition was not complied 
 with prior to the first day of January, 1875, when the amendment 
 to the Constitution of the state went into effect, prohibiting any 
 town from loaning its credit in aid of any corporation, or from 
 subscribing for its stock or bonds, the Court of Appeals of that 
 state held that the power to issue the bonds thereupon ceased ; 
 that inasmuch ps commissioners appointed by the town could 
 neither issue the bonds nor subscribe for the stock until the con- 
 dition was complied with, they could not issue the bonds upon an 
 agreement by the railroad company to comply with the condition 
 1 Town of Concord v. Portsmouth Savings Bank, 92 U. S. 625. 
 
 251
 
 CONDITIONS PRECEDENT TO GRANTING MUNICIPAL AID. [§ 276. 
 
 so as to give the company any right to the bonds upon a subse- 
 quent compliance with it after the adoption of this constitutional 
 amendment. 1 
 
 276. But completed subscriptions or contracts to sub- 
 scribe for the stock of a railroad company, made in pursuance of 
 legislative authority previously given, are not affected by the 
 adoption of a constitutional provision abrogating the power to 
 subscribe. Thus, a board of supervisors having the power to 
 subscribe for the stock of a railroad company and to issue bonds 
 therefor when the road should be open for traffic, ordered a sub- 
 scription, which the company accepted just before the new Consti- 
 tution took effect. This was regarded as a binding contract, 
 which authorized the subsequent delivery of the bonds, although 
 the power to enter into such a contract was, after the adoption 
 of the Constitution, withdrawn. The subsequent delivery of the 
 bonds was only the performance of a binding contract made be- 
 fore the authority to make it was annulled. The Constitution of 
 a state cannot be allowed to impair a contract, any more than its 
 statutes can. The subscription being valid, the bonds issued for 
 the sum subscribed are also valid. 2 
 
 Bonds valid by the Constitution and laws of a state, as ex- 
 pounded by the authorities whose duty it is to administer those 
 laws, cannot be impaired in obligation by any subsequent action 
 of the legislature or judiciary. 3 When bonds have been sold 
 upon the faith of decisions of the Supreme Court of a state es- 
 tablishing their validity, they cannot be invalidated in the hands 
 of persons who have already purchased them in good faith, by a 
 subsequent reversal of the former decisions of that court. 1 
 
 When a subscription in aid of a railroad has been made in any 
 legal form, and the conditions precedent, have been complied with, 
 a contract exists which may he, enforced by mandamus. 6 Cred- 
 
 » Falconer v. Buffalo & JameBtown I!. B People v. Ohio Grove Township, 51 
 
 B. Co. 69 N. V. 491. III. L92; State v. I. inn Countj Court, 14 
 
 onty oi .Moultrie v. Rockingham Mo. 504; Selma & Gulf 1!. R. Co. ex 
 
 Ten I i: ik, 92 U. 8. 631 parte, 15 Ala. 696 ; C issioners of 
 
 .. I. County, 3 Wall. Roads, &c. v. Shorter, 50 Ga, 489 ; Napa 
 
 327; Havemeyer v. Iowa County, 3 Wall. Valley R. R. Co. v. Supervisors of Napa 
 
 294; Gelpcke v. City of Dubuque, 1 Wall. County, 80 Cal. 435; California North- 
 
 175, (in R, R. i !o. v. Butte County, L8 Cal. 
 
 4 United States v. Supervl oi of Lee 671. 
 County, u lie-. 77; :; Wall. 827.
 
 § 277.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 itors of the company may then rely upon such subscription for 
 the payment of the company's debts to them as implicitly as upon 
 any other assets of the company, although the company may sub- 
 sequently abandon all proceedings under its charter on account of 
 its insolvency. 1 
 
 277. The corporate existence of a railroad company cannot 
 be called in question in a suit upon municipal bonds issued to it, 
 when it has been a corporation de facto from the date of its organ- 
 ization, whether it be a corporation de jure or not. 2 The issuing 
 of the bonds to a railroad company is an admission that it is a 
 corporation. 
 
 Neither can the corporate existence of a municipality or other 
 organization, which has exercised the functions of a corporation 
 by issuing its bonds under its corporate seal, signed by its officers, 
 be questioned by itself in a suit upon the bonds. Whether it 
 has been organized according to law or not it is concluded by its 
 acts. 3 
 
 A company is none the less a railroad company, within the 
 meaning of an act authorizing municipal subscriptions to the cap- 
 ital stock of railroad companies, because its charter vests it with 
 the power to carry on also the business of a coal mining or manu- 
 facturing company. If the people of a county think well of the 
 undertaking, and that it will be a benefit to them, it is a matter 
 for their judgment; and having the authority of law to subscribe 
 in aid of it, the matter of the expediency of the enterprise is not 
 for the reconsideration of the courts. 4 
 
 It is no defence to a municipal bond, that the corporation for 
 whose benefit it was issued was not organized within the time 
 limited by its charter, or that the charter was obtained by fraud, 
 or that it has been forfeited by misuser or nonuser. Advantage 
 can be taken of the forfeiture of the charter of a corporation only 
 by process in behalf of the state instituted directly against the 
 corporation for the purpose of avoiding the charter. Until such 
 
 1 Morgan County v. Thomas, 76 111. and see Coleman v. Board of Supervisors, 
 120. 50 Cal. 493. 
 
 2 Commissioners of Douglas County 3 Bonham v. Board of Education of 
 v. Bolles, 94 U. S. 104 ; County of Leaven- Harrisonville, 4 Dill. 156. 
 
 worth v. Barnes, 95 U. S. 70, 73 ; Dai- 4 County of Randolph v. Post, 93 U. S. 
 lington v. La Clede County, 4 Dill. 200 ; 502. 
 256
 
 RATIFICATION OF BONDS IRREGULARLY ISSUED. [§ 278. 
 
 forfeiture has been judicially declared in this way, it cannot be 
 availed of in collateral suits. 1 
 
 A town having voted and issued bonds as a corporation is es- 
 topped in favor of a bond fide holder to set up that it was not 
 incorporated. 2 Although the authority to subscribe to the stock 
 of a railroad company be confined " to any incorporated town or 
 city," this language will embrace towns and cities afterwards in- 
 corporated at any time before the subscription is made. 3 
 
 IV. Ratification of Bonds irregularly issued and Waiver of 
 
 Conditions. 
 
 278. Bonds issued in contravention of statute may be legal- 
 ized by subsequent legislation. 4 It is competent for the legislat- 
 ure to impose upon a municipal corporation the payment of bonds, 
 which are just obligations, but which, from some irregularity or 
 omission in the proceedings creating them, cannot be enforced at 
 law. 5 Having the power to authorize the issue of the bonds 
 originally, it can by a retrospective act cure defects occasioned 
 by the irregular execution of the authority conferred. The ques- 
 tion with the legislature is one of policy, and its determination is 
 conclusive. 6 
 
 While municipal aid bonds issued without compliance with 
 legislative authority may ordinarily be legalized by subsequent 
 legislation, this cannot be done when the Constitution of the state 
 has in the mean time prohibited the legislature from authorizing 
 the i-sue of such bonds, except on condition that two thirds of the 
 qualified voters of the municipality assent thereto at an election. 7 
 
 mtyof -Macon v. Shores, U. S. 1G7 ; Thomson v. Lee County, 3 Wall. 
 
 Supreme Ct. 17 Albany L. J. 35 ; Olcott >■. 327; St. Joseph Township v. Roj 
 
 Bynum, 17 Wall. 44, 58; Smith v. County Wall. 644,666; Campbell '•. City of 
 
 of Clark,. 04 Mo. 58 ; Kayser v. Trustees of Kenosha, 5 Wall. 194 ; Putnam v. City of 
 
 Bremen, 16 M New Albany, 4 Biss. 365 ; National Bank 
 
 2 Aller v. Town of Cameron, 3 Dill. 198. of Cleveland v. city of Iola, U. S. C. C. 
 
 3 l, ..... i Clarei Ion, U. S. C. 9 Kans. 689; Supervisors v. Wis. Cut. 
 
 I r, 609. R. R. <''.. i^i Ma-. 160. Some cases in 
 
 4 Coop i' '■■ Town of Thompson, 13 .stair courts hold, however, thai th 
 Blatchi I ountj v. Walser, islature cannot legalize illegal v< 
 47 Mo. 189; Williams v. Town of Duanes- aid of a railroad. Atchison 
 burgh, 66 N. V. , San ia I ■ I; R. Co. v. Com' 
 
 burgh p.Jenkins, :.: N. V. 177; Belo v. Co. 17 Kans. 29 ; Marshall v. Silliman, 61 
 
 mty, 76 N. I 189 [11. 218 ; Vv*i ej v. Silliman, 62 III. 170. 
 
 Clarke, 95 U. 8. 644. '■ Sykes v. Mayor, 4c. of Columbus, B 
 
 ■• Ritchii i Franklin County, 22 Wall. Reporter, 501. 
 
 17 257
 
 § 279.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 The measure of the authority of the legislature after the adop- 
 tion of the constitutional restriction is fixed by that. In order 
 to ratify and legalize a loan previously made, the legislature is 
 obliged to conform to this constitutional limitation of its powers. 
 It cannot then validate the bonds by the mere expression of its 
 consent or ratification. 1 
 
 In Illinois it is the settled doctrine that while under the Con- 
 stitution of 1848 it was competent for the legislature to bestow 
 directly upon a county, without requiring a previous vote of the 
 people, the power to subscribe for stock in railroad companies ; 2 
 yet, as the power to subscribe is not a subscription, and there is 
 nothing binding until the corporate authorities have actually made 
 a subscription under the power, the legislature has no authority 
 to pass an act rendering avoid election and subscription valid, and 
 thereby compel the corporation to incur a debt against its own 
 wishes for such purpose. 3 
 
 These decisions were followed by the Supreme Court of the 
 United States, because they determined the construction of a pe- 
 culiar provision of the Constitution of the state, though the con- 
 struction was evidently contrary to the views of the Supreme 
 Court, 4 
 
 The act of a municipal corporation may be ratified, although it 
 be ultra vires, so long as it is not within any constitutional pro- 
 hibition. 6 
 
 279. A municipal corporation may waive conditions con- 
 tained in its subscription to a railroad company, or it may, by 
 its action, be estopped to take advantage of them. 6 It would be 
 an unreasonable restriction of the rights and powers of a munici- 
 pal corporation to hold that it did not possess the power to alter 
 
 1 Sykes v. Mayor, &c. of Columbus, 111.160; Barnes v. Town of Lacon, 84 111. 
 supra; Hardenbergh v. Van Keuren, 4 461. 
 
 Abb. N. C. (N. Y.), 43. 4 Township of Elmwood *;. Marcy, 92 
 
 2 Town of Keithsburg v. Frick, 34 111. U. S. 289. 
 
 405. 5 Brown v. Mayor, &c. of New York, 63 
 
 3 County of Richland v. People, Chi- N. Y. 2.39. 
 
 cago Legal News, 43, for Oct. 26, 1878; 6 County of Randolph r. Post, 93 U. S. 
 
 Cairo & St. Louis R. R. Co. v. City of Spar- 502; Grand Chute v. Winegar, 15 Wall, 
 
 ta, 77 111. 505; Wiley v. Silliman, 62 III. 373; County of Moultrie v. Rockingham 
 
 170; Marshall v. Silliman, 61 111. 218; Ten Cent Savings Bank, 92 U. S. 631; 
 
 and see Quincy, Mo. & Pacific R. R. Co. Converse v. City of Fort Scott, 92 U. S. 
 
 17. Morris, 84 111. 410 ; Ryan v. Lynch, 6S 503 ; Muller v. Pondir, 55 N. Y. 325 ; Bar- 
 
 258 nard v. Campbell, 55 N. Y. 456, 457.
 
 RATIFICATION OF BONDS IRREGULARLY ISSUED. [§ 280. 
 
 its legally made contract by waiving conditions found to be inju- 
 rious to its interests, or that it could not, like other parties to a 
 contract, estop itself. Thus, if the delivery of the bonds be made 
 conditional upon the completion of the road, or of a certain por- 
 tion of it, by a time specified, and the municipality, before that 
 date, by its proper officers, declares the road completed to its 
 satisfaction, and delivers the bonds and receives the stock sub- 
 scribed for, its action constitutes a waiver and an estoppel, which 
 prevent it from afterwards objecting that the contract was not 
 performed in time. 1 
 
 When a subscription has been made for the benefit of a railroad 
 company, conditioned upon the compliance of the company with 
 certain terms, as for instance the completion of a portion of the 
 road within a specified time, the delivery of the bonds may be 
 suspended by the officers whose duty it is to issue the bonds, or 
 by the same authority that ordered the subscription, as for in- 
 stance the county court. 2 
 
 280'. A municipality may be estopped by its course of deal- 
 ing with the railroad company to interpose a defence of irregular- 
 ity in the exercise of the power of issuing bonds ; and its position 
 then in regard to the company is similar to that which it occupies 
 to bond fide holders of the bonds without notice. 3 A distinct ion 
 is to be observed that ratification by acquiescence, or by affirma- 
 tive acts, lias been established only in cases of irregularities in 
 the exercise of the power to issue bonds, and not in any case where 
 there was a total want of power to issue the bonds. 
 
 But the doctrine of estoppel as against a municipal corporation 
 not apph in respect to acts done in the exercise of a prohib- 
 ited power; as for instance the issuing of bonds in violation of a 
 constitutional restriction upon the power of municipal corporations 
 
 1 County of Randolph v. Post, upra; Lincoln, 81 111. 156; New Haven, Middle- 
 Commonwealth v. Pittsburg, i. Pa. St. town & Willimantic R. R. Co. 1 Town of 
 391. Chatham, 42 Conn. 165 ; 10 Am. Railw. 
 per v. 8ullivan County, 65 Mo. R. L68 ; Steines v. Franklin County, 48 
 542. Mo. 167, I7c>, 185; Barretl v. County 
 
 ■• i: Burlington, 3 Wall. 654, Courl of Bchuyler County, n Mo. 197, 
 
 667; I I ille, 24 201 ; State v. Van Home, 7 Ohio St. 327, 
 
 How. 287; Bupi . Schenck, 5 831 ; Shoemaker v. Goshen Township, 14 
 
 Wall. 772, 781; Butler v. Dunham, 27 Ohio i •■ Cown of Bennington 
 
 111.474, 177; People v. Cline, 63 01.394, v. Park, 50 Vt. its, a woll considered 
 
 per Walker, J. ; Logan Count) p. Cityod case, ' 
 
 269
 
 § 2S1.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 to create Indebtedness. 1 Such a restriction operates upon the cor- 
 poration itself; and it can neither be bound by its agents in cre- 
 ating an indebtedness in excess of the constitutional limit, nor by 
 their acts in munition of such indebtedness. The assent of all 
 the tax-payers, or of all the inhabitants of the municipality, to the 
 creation of such unauthorized indebtedness, or their recognition 
 and confirmation of it after it has been created, would not make 
 the debt valid, or estop the corporation to deny its validity. 
 
 281. A municipality may be estopped by its acts from 
 taking advantage of irregularities in the vote authorizing a 
 subscription. A town in Connecticut, for the purpose of aiding 
 in the completion of a railroad, was authorized to guarantee a cer- 
 tain amount of the bonds of the railroad company after the com- 
 pletion of the road, provided, that at a town meeting the vote upon 
 the question of guaranteeing the bonds should be taken by ballot, 
 and the ballot boxes should remain open for the reception of the 
 ballots not less than two hours. In the warning, calling the 
 voters together, the selectmen explicitly notified them as to the 
 precise propositions which were to be submitted for their action, 
 and directed that those in favor of their adoption, and aiding the 
 railroad, should deposit a ballot having the word "Yes" upon 
 it, and that those who were opposed to the adoption of them 
 should deposit a ballot with the word " No " upon it. The record 
 of the meeting by the town clerk was that " the resolution was 
 adopted: "Yes," 178; "No," 80." The vote was in fact taken 
 by division of the house, and not by ballot, but neither the officers 
 of the town nor any person in its behalf ever claimed or gave no- 
 tice that it was not taken by ballot, until more than three years 
 after, and until long after the railroad company had, in good 
 faith, and with the knowledge of the town, issued the bonds which 
 were to be guaranteed, and delivered them to contractors who 
 had performed work, purchased materials, and expended money 
 in reliance upon them, the contractors having taken them with 
 an order upon the town for its guaranty of them when the work 
 should be completed. Upon an application by the railroad com- 
 pany for a mandamus to compel the town to guarantee the bonds 
 according to the vote, the Supreme Court of the state held 2 that 
 
 1 McPherson ». Foster, 43 Iowa, 48. tic R. R. Co. v. Town of Chatham, 42 Conn. 
 
 2 New Haven, Middletown & Williman- 465 ; 10 Am. Railw. R. 168. 
 
 260
 
 RATIFICATION OF BONDS IRREGULARLY ISSUED. [§ 2S2. 
 
 the votes, the record, and the subsequent conduct of the town 
 and its inhabitants, subjected them to the operation of the law of 
 estoppel as completely as if the town had become the makers of 
 the bonds and had declared in them that it had complied with all 
 the requirements of the law in issuing them, and had allowed 
 them to pass into the hands of innocent holders ; and that the 
 town could not avail itself of the fact that the vote was illegally- 
 taken, or of a correction of the vote afterwards made by order of 
 court. It was attempted in this case to charge the railroad com- 
 panv with notice of the illegality of the vote, on the ground that 
 when the vote was taken the treasurer and managing director of 
 the railroad company was present, and saw how it was done ; but 
 inasmuch as he was not acting officially, and his knowledge was 
 not conveyed to any of the other directors of the company, it was 
 held that the company was not affected by his knowledge. Of 
 course, if notice of the illegality of the vote had been brought 
 home to the company, it could have acquired no rights under it. 
 Thus, in People v. Cline, 1 an application for a mandamus to com- 
 pel (he proper county authorities to issue bonds in aid of a rail- 
 road pursuant to a contract of subscription was decreed ; on the 
 ground that the company, at the time the contract of subscrip- 
 tions was made, had notice of illegalities in the petition on which 
 the election was held, and in the election itself. 
 
 282. A municipal corporation may by the payment of in- 
 terest, or by holding stock received for the bonds, or by other 
 acts, become bound to pay bonds issued in its name, although the 
 execution of them was irregular, or without authority. 2 Ratifica- 
 tion may also be inferred from long delay in taking advantage of 
 an irregular or unauthorized issue of municipal bonds, though 
 such ratification is doubtless more cautiously inferred in case of 
 municipal corporations than it is as against private" corporations, 
 because experience shows that public officers do not guard the in- 
 terests confided to them with the same vigilance and fidelity (hut 
 characterize the officers of private corporations.' 1 In Pendleton 
 County v. Amy, 4 where it appeared that the county had received 
 
 1 63 111.394; 7 Am. Railw. R. 873. 1 Biss. 314; Leavenworth, Lawrence & 
 
 ntjrof Ray v. Vansycle, 96 I'. 8. GalvestonR. R.Co. v. Douglas County, 18 
 r,">; McKee v. Vernon County, •'; Dill. Cans. 169. 
 
 210; Afunson '•. Town <>f* Lyons, 12 - Dillon on Municipal Bonds, p. 59. 
 Blatchf. 539; Luling v. City of Racine, < 13 Wall. 297. 
 
 261
 
 § 283.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 in exchange for its bonds stock of a railroad company which it 
 had held for seventeen years without questioning the validity of 
 its hi 'mis, it was not allowed to assert against an innocent holder 
 of the bonds that they were issued in disregard of a condition re- 
 quiring a popular election. The bonds contained no recitals, and 
 no interest had been paid, so that the estoppel rested altogether 
 upon the receipt and holding of the railroad stock. 1 
 
 A municipality by accepting and holding stock of a railroad 
 company, and issuing its bonds in aid of it under legislative au- 
 thority, is thereby estopped from claiming as against any holder 
 of them, entitled to the position of a bond fide purchaser for 
 value, that there was any defect in the order for an election, or 
 in the manner of holding it. 2 
 
 V. Negotiability of Municipal Securities. 
 
 2S3. Without legislative authority municipal corporations 
 cannot invest its obligations with the character and inci- 
 dents of commercial paper, so as to give them immunity, in the 
 hands of bond fide holders, from defences to which they would 
 be subject in the hands of the original parties. 3 It is not essen- 
 tial, however, that the authority to give bonds a negotiable and 
 commercial form and character should be given in express terms ; 
 but such authority may be inferred from authority to issue in- 
 terest bearing bonds having a long time to run, in aid of rail- 
 roads. 1 But ordinary corporation orders, warrants, and certificates 
 of indebtedness, are not within this principle. Although negoti- 
 able in form and negotiable in character, so far as to enable the 
 holder to sue in his own name, they do not exclude inquiry into 
 the legality of their issue, or preclude defences in the hands of 
 any holder. 5 The power to issue such warrants is doubtless im- 
 plied as incidental to municipal corporations in carrying on their 
 
 1 This case is regarded as an extreme &c. of Hoboken, 39 N. J. L. 394 ; Town 
 application of the doctrine of Estoppel ; of Hackettstown v. Swackhamer, 37 N. J. 
 but the decision is believed to be correct, L. 191 ; Hamlin v. Meadville, 6 Neb. 227. 
 while that in .Marsh v. Fulton County, 10 * City of Vicksburg v. Lombard, 51 
 Wall. C7G, irreconcilable with it, is wrong. Miss. 111. 
 
 See Town of Bennington v. Park, 50 Vt. 5 Mayor v. Ray, 19 Wall. 468; Town 
 
 178. of Hackettstown v. Swackhamer, supra ; 
 
 2 Commissioners of Johnson County v. Knapp v. Mayor, &c. of Hoboken, supra ; 
 January, 94 U. S. 202. Matthis v. Town of Cameron, 02 Mo. 504. 
 
 3 Dillon's Munic. Corp. § 106 ; Mayor Contra, Garvin v. Wiswell, 83 111. 215. 
 v. Ray, 19 Wall. 468; Knapp v. Mayor, 
 
 262
 
 NEGOTIABILITY OF MUNICIPAL SECURITIES. [§ 283. 
 
 affairs ; though the power to issue them is usually conferred by- 
 charter or statute. 1 Negotiable bonds issued by such corpora- 
 tions, in pursuance of a power conferred by the legislature, are 
 valid commercial instruments ; though if issued without such au- 
 thority they are invalid, even in the hands of innocent holders. 2 
 In respect to the implied power of corporations to issue negoti- 
 able securities, there is a wide distinction between ordinary com- 
 mercial or business corporations and municipal corporations ; for, 
 while the former, according to the American doctrine, may bor- 
 row money and issue their negotiable securities therefor without 
 legislative authority, 3 the latter either have no such implied 
 power, or such power is very much limited. This distinction is 
 founded in the general public policy which requires the main- 
 tenance of such a restraint upon public officers and public cor- 
 porations. " Private corporations are much more vigilant and 
 watchful of their interests than it is possible for public or munic- 
 ipal corporations to be." 4 Judge Dillon is therefore of opinion that 
 public and municipal corporations have no implied power to bor- 
 row money even for their ordinary purposes, and incidentally no 
 implied power to issue commercial securities for such purposes. 
 This view is dissented from by other authorities, which hold that 
 where a municipality has lawfully created a debt, it has the 
 implied power, unless restrained by its charter or a statute, to 
 acknowledge the same by a bill, bond, or other negotiable instru- 
 ment; that the power to contract the debt implies the right to 
 issue the' proper acknowledgment of it. 6 It is admitted, however, 
 that in a broad sense the power to borrow money and issue bonds 
 
 1 Mayor v. Ray, 19 Wall, 468, 477; made by a divided court. Paxson, J., 
 Shirk v Pulaski County, 4 Dill. 209. giving the judgment of the court, criticises 
 
 2 St. Joseph Township v. Rogers, 16 the authorities cited in the prei 
 
 644,659. and cites in support of the implied power 
 
 8 See § 19. of such corporations to borrow and issue 
 
 4 Dillon o n Municipal Bonds, § 0. securities for ordinary purposes: Bank 
 
 6 Muni ipal Bonds, p. L3. See, also, of Chillicothe v. Mayor of Chillicothe, 7 
 
 Police Jury v. Britton, 15 Wall. 566; Ohio, 354; Sturtevant v. City of Alton, 
 
 Mayor <•. Ray, 19 Wall. 468, cited by a McLean, 393; Mullarky v. Town of 
 
 Judge Dillon; also, Shawnee County v. Cedar Falls, 19 [owa,21; Citj -l' Galena 
 
 ;•, - Kan-. 1 1 :. ; Town of Backetts- v. Corwith, 48 Ml. 123; Mills v, Gl a on, 
 
 town v. Swackhamer, 37 N. J. L. 191; 11 Wi-. 170 ; Clai k v. I it] oi Dea Moines, 
 
 Knapp v. Mayor of Boboken, 39 N.J. I.. 19 towa, 199; Ketcl v. City of Buffalo, 
 
 894. I i N. V 356. See, also, Tucker v. < litj of 
 
 '• City of William-port v. Common- Raleigh, 75 N. C 
 wealth, - 1 Pa. St. 187. This decision was 
 
 263
 
 § 284.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 therefor cannot be said to be among the implied powers of a mu- 
 nicipal corporation. " For general purposes such power does not 
 exist, Eor the reason that it is not necessary for the objects for 
 which it was created. Tims, it has never been contended that a 
 municipality may borrow money and issue bonds or notes for ob- 
 jects having no necessary relation to the performance of municipal 
 duties." 1 As regards bonds issued to aid private corporations, 
 there is no division of opinion. Municipal corporations have no 
 implied power to issue such bonds. 
 
 284. Bonds issued by municipal corporations payable to 
 bearer are negotiable instruments, and as such give the holder 
 a good title, free of all prior equities between antecedent parties, 
 to the same extent as bills of exchange and promissory notes. 2 
 The fact that they are issued under the seal of the corporation 
 does not affect their negotiability. 3 
 
 Municipal bonds payable to bearer are subject to the same rules 
 as other negotiable paper. They are transferable by delivery, and 
 when issued by competent authority pass into the hands of a bond 
 fid-: purchaser for value, before maturity freed from any infirmity 
 in their origin. As with other negotiable paper, mere suspicion 
 on the part of a purchaser that there may be a defect of title in 
 the holder of such bonds, or even knowledge on the part of the 
 purchaser of circumstances which would excite suspicion as to the 
 title in the mind of a prudent man, is not sufficient to impair the 
 title of the purchaser. 4 " Gross negligence," said Lord Denman, 5 
 "may be evidence of mala fides, but it is not the same thing." 
 Nothing short of bad faith on the part of the purchaser will affect 
 his title. 
 
 i Per Paxson, J., in City of Williams- Banking Co. v. Fisher, 1 Stockt. (N.J.) 
 
 port v. Commonwealth, supra. 667 . Morris Canal & Bunking Co. v. 
 
 2 Commissioners of Marion County v. Lewis, 1 Beas. (N. J.) 323 ; Boyd v. Ken- 
 Clark, 94 U. S. 278 ; Thomson v. Lee ne dy, 38 N. J. L. 146 ; Hackett v. City of 
 County, 3 Wall. 327; Mercer County v. Ottawa, U. S. C. C. for N. I). 111. 11 
 Hackct, 1 Wall. 83 ; Murray r. Lardner, 2 Chicago Leg. N. 82. 
 Wall. 110; Dutchess County Ins. Co. v. 8 Mercer County v. Hacket, supra. 
 Hachfield, 1 Hun (N. Y.), 075 ; Welch v Contra, see Diamond v. Lawrence County, 
 Sage, 47 N.Y. 143; Seyhel v. National Cur- 37 Pa. St. 353 ; County of Armstrong v. 
 rency Bank, 54 N. Y. 288 ; Garvin v. Brinton, 47 lb. 3G7. 
 
 ell, 83 111. 215 ; City of Mt. Vernon 4 Cromwell v. County of Sac, 96 U. S. 51. 
 
 v. Bovey, 52 Ind. 5G3 ; Morris Canal & s Goodman v. Harvey, 4 Ad. & El. 870. 
 
 264
 
 NEGOTIABILITY OF MUNICIPAL SECURITIES. [§§ 285, 286. 
 
 285. Municipal bonds issued under legislative authority, 
 with blanks for the name of the payee, have the same nego- 
 tiable quality as bonds complete when issued. A subsequent 
 bond fide holder has implied authority to fill the blank with his 
 name. 1 The rule that a deed must be complete when issued has 
 no application in this country to negotiable bonds and other com- 
 mercial paper drawn with a blank for the name of the payee. 
 The addition following the blank of the words "his executors, 
 administrators, or assigns," does not affect the negotiability of the 
 bonds. 2 
 
 286. A recital in a bond payable to bearer of the purpose 
 for -which it is issued, as " that it is issued for the purpose of sub- 
 scribing to the capital stock of the Fort Scott and Allen County 
 Railroad, and for the construction of the same through the said 
 township, in pursuance of and in accordance with an act of the 
 legislature of the State of Kansas ; . . . . and for the payment of 
 the said sum of money and the accruing interest thereon, in man- 
 ner aforesaid, upon the performance of the said condition the faith 
 of the aforesaid Humboldt Township, as also its property, revenue, 
 and resources, is pledged," does not destroy the bond's negotiabil- 
 ity. The words " upon the performance of the said condition" 
 were declared not to refer to anything mentioned in the recital, 
 for there was no condition there ; but rather to a stipulation for 
 the payment of the interest at a banker's " on the presentation and 
 surrender of the respective interest coupons." In giving judg- 
 ment the court say : 3 " The construction of the road as well as the 
 subscription for stock were mentioned in the recital as the reasons 
 why the township entered into the contract, not as conditions 
 upon which its performance was made to depend. It was for the 
 purpose of subscribing, and to aid in the construction of the mad, 
 that the bond was given. The words ' upon the performance el' 
 the said condition' cannot, then, refer to anything mentioned in 
 the recital, for there is no condition there." 
 
 A stipulation in the bond that the interest is payable at :i 
 
 1 White '■. Vt. ;■■ M., ... i;. R. < '.,. m 2 DutchesB Comity Mut. Ins. Co. v. 
 
 Bow. 575; Bubbard <-. X. V. & Barlem Bachfield, 1 T. & ' '. (N. V.) 158. 
 
 i;. K. Co.36 Barb. (X. 5f.)286j Brainerd '■'■ Bumboldl Township v. Long, 92 U. 
 
 v. X. V. Barlem R. R. I 0. 25 N. V. S. 642. See, also, Botchkiss v. National 
 
 4'JD; Ledwicb v. McEim, 53 N. Y. 307 ; Banks, 21 Wall. 354. 
 Kennedy, 38 X. J. I,. 1 L6. 
 
 265
 
 §§ 287, 288.] MUNICIPAL BONDS in aid of railroads. 
 
 banker's on the presentation and surrender of the respective in- 
 terest coupons dors not destroy the negotiability of the instru- 
 ment. Such presentation and surrender are implied. 1 
 
 VI. Rights of bond fide Holders of Negotiable Bonds of Munici- 
 palities. 
 
 2iSl . The circumstance that chiefly distinguishes munici- 
 pal bonds from bonds of private corporations and from nego- 
 tiable paper of individuals is, that municipal corporations have no 
 inherent power to make such securities, but their power is in all 
 cases derived from legislation ; and therefore their authority to 
 issue these securities is always open to question, unless they have 
 estopped themselves by their action in relation to such securities, 
 or by their recitals of authority contained in them, from denying 
 thai they are bound by them. Estoppel by their own acts, such 
 as the payment of interest upon the securities, or long delay in 
 raising any question of their validity, applies in favor of the orig- 
 inal holders of the bonds, as well as to subsequent bond fide pur- 
 chasers for value. This part of the subject has already been con- 
 sidered ; estoppel by recital contained in the bonds themselves ap- 
 plies only in favor of subsequent purchasers who may be supposed 
 to know nothing of the circumstances of the original issue of the 
 securities, and to have bought them relying upon the recitals of 
 authority contained in the bonds themselves. This part of the 
 subject will be considered in the following sections as part of the 
 law pertaining to the rights of bond fide purchasers and holders 
 of municipal bonds. 
 
 288. As against the title of a bona fide holder of municipal 
 bonds, irregularity, fraud, or misconduct on the part of the officers 
 or agents of the corporation in issuing its bonds cannot be consid- 
 ered. 2 Want of power to issue the bonds is the only defence that 
 is open to the corporation after it has put its bonds upon the mar- 
 ket and they have passed into the hands of innocent holders for 
 value. 
 
 A defective execution of bonds, as for instance an omission of 
 
 1 Humboldt Township v. Long, 92 U.S. Chute v. Winegar, 15 Wall. 355; Rail- 
 642. road Co. v. Otoe County, 1 Dill. 338; 
 
 2 Town of East Lincoln v. Davenport, Belo v. Com'rs of Forsythe County, 76 
 94 U. S. 801 ; Commissioners of Johnson N. C. 489 ; Black v. Cohen, 52 Ga. 621 ; 
 County v. Thayer, 94 U. S. 631; Grand Lane v. Schomp, 20 N. J. Eq. 82. 
 
 266
 
 RIGHTS OF BONA FIDE HOLDERS. [§ 289. 
 
 the treasurer of a county to countersign its bonds as provided by- 
 statute, does not invalidate them. 1 
 
 When a municipal corporation has in fact authority to issue 
 negotiable bonds, and it proceeds to exercise this power, and to 
 send into the market such bonds, which upon their face purport 
 to have been issued in pursuance of a given law, the corpora- 
 tion cannot afterwards deny this affirmation as against holders 
 who have purchased them for value and in good faith. It cannot 
 claim that the conditions prescribed for the issue of the bonds had 
 not been complied with ; or that no occasion for their issue, ex- 
 isted. 2 
 
 289. Three important rules governing municipal bonds are 
 hud down by Mr. Justice Hunt in a case before the Supreme 
 Court of the United States, as follows : 3 — 
 
 " I. If an election or other fact is required to authorize the 
 issue of the bonds of a municipal corporation, and if the result of 
 that election, or the existence of that fact, is by law to be ascer- 
 tained and declared by any judge, officer, or tribunal, and that 
 judge, officer, or tribunal, on behalf of the corporation, executes 
 or issues the bonds, with a recital that the election has been held, 
 or that the fact exists or has taken place, this will be sufficient 
 evidence of the fact to all bond fide holders of the bonds. 4 
 
 " II. If there be lawful authority for the municipality to issue 
 its bonds, the omission of formalities and ceremonies, or the exist- 
 ence of fraud on the part of the agents of the municipality issuing 
 the bonds, cannot be urged against a bond fide holder seeking to 
 enforce them. 
 
 " III. There must, however, be an original authority, by stat- 
 ute, to the municipality to issue bonds. Municipal corporal ions 
 have not the power, except through the special authority of the 
 in!.-, to issue corporate bonds which will bind their towns ; 
 
 1 Melvin v. Lisenby, Supreme Court of burg Township, 27 Ohio St;. 96 ; Steam- 
 Ill. 5 Cent. L J. 15. boat Co. /■. McCutcheon, 13 Pa. Si. 13. 
 
 otj of Macon v. Shores, U. S. Contra, Town of Eagle v. Kohn, 
 
 Supreme Ct. 17 All/any L. . J.: :;.'); Super- 292. 
 
 . nek, 5 Wall. 772, 784; Mer- :; Kenicott v. Supervisors, 16 Wall. 452 ; 
 
 chants' B 10 Wall. 604, quoted and approved bj Judge Dillon in 
 
 Douglas County Huidekoper '•. Buchanan County, 3 Dill. 
 
 - . Bo le , 94 U. S. 10 < My 17.".. 
 
 of Fort Scon, '.rj i". s. 503; State of * See, also, Township of Rock Creek v. 
 
 Ohio v. Board of Education of Perrys- Strong, 96 I , S. 271. 
 
 267
 
 § 290.] MUNICIPAL BONDS IN AID OF RAILROADS.' 
 
 neither have they the power to sell or mortgage the lands belong- 
 ing to such (owns, without special authority." 
 
 290. Although its agents or officers violated their instruc- 
 tions and their duty in issuing- the bonds of a corporation having 
 authority to borrow money and issue its bonds therefor, it is re- 
 sponsible for them to bond fide holders. Thus certain bonds of 
 the city of Richmond having been confiscated under authority of 
 the Confederate government during the late war, and the city 
 having been directed by decree of court to issue to its receiver 
 bonds in place of those so confiscated, the city council directed its 
 officers to issue the bonds as directed by the decree ; but to insert 
 on the face of the bonds so issued a declaration that they were so 
 issued in lieu of confiscated bonds. This direction was obeyed in 
 the first issue of the bonds, but was disregarded in an issue to a 
 subsequent purchaser, who paid value for the bonds in ignorance 
 that they represented confiscated bonds. The city was held liable 
 upon the bonds so issued. 1 Although the officers exceeded their 
 authority in issuing the bonds in this manner, the city cannot 
 avail itself of this defence. The very nature of such a bond is 
 that it shall furnish authentic and conclusive evidence of the hold- 
 er's title to it. Facility of transfer is one of the advantages be- 
 longing to this species of property, and this advantage would be 
 destroyed if a purchaser should be required to look to the regu- 
 larity of the transfer to all the various persons through whom the 
 bond has passed. Bonds which are not negotiable may be as- 
 signed by a written assignment, but the assignee takes only an 
 equitable title, and the bonds are in his hands subject to the same 
 defences to which they would have been subject in the hands of 
 any previous holder. But when upon a transfer new bonds are 
 issued to the purchaser, they give him a legal title, unaffected by 
 any defences which might have been taken against any prior 
 holder. 
 
 The rights of a bond fide holder of bonds apparently issued in 
 conformity to law are forcibly illustrated in the case of the bonds 
 of the town of Lansing issued in aid of the Cayuga Lake Rail- 
 road Company. By statute the county judge was authorized, on 
 a petition by a specified number of tax-payers, to ascertain, by 
 judicial inquiry, whether the majority of the tax-payers of the 
 1 De Voss v. City of Richmond, 18 Gratt. (Va.) 338. 
 
 268
 
 RIGHTS OF BONA FIDE HOLDERS. [§ 291. 
 
 town, in number and in taxable property, desired the town to issue 
 its bonds in aid of a railroad company, and upon ascertaining 
 such to be the fact he was authorized to appoint three commis- 
 sioners to execute and issue bonds in behalf of the town, and in- 
 vest them in the stock of the company. On a petition and proofs, 
 the county judge adjudged that the bonds should be issued, and 
 appointed commissioners for that purpose. Opposing tax-payers 
 obtained a writ of certiorari for the review of the Supreme Court, 
 which ultimately reversed the judgment. After the writ had been 
 issued the commissioners executed the bonds and delivered them 
 to the railroad company. It was held that although the writ sus- 
 pended the operation of the judgment and the authority of the 
 commissioners, yet the illegality and fraud in the issue of the 
 bonds was no defence against one who had purchased them in 
 good faith and for value, although they cast upon him the bur- 
 den of proving himself such a purchaser. 1 
 
 291. A purchaser of municipal securities need not look fur- 
 ther than to ascertain that the corporation had authority by law 
 to issue them and that upon their face they import a compliance 
 with the law under which they were issued. 2 He has the right 
 to presume that such securities were issued under circumstances 
 which gave the requisite authority. The securities being exe- 
 cuted by the proper municipal officers, the purchaser is under no 
 obligation to ascertain whether they were authorized to execute 
 these securities; and there is no distinction, in this respect, be- 
 tween securities issued by officers of the municipality having 
 general powers to represent it in its fiscal transactions, and bonds 
 
 1 Bailey v. Town of Lansing, 13 Blatchf. County v. Clews, 21 lb. .317 ; Cromwell v. 
 424. County of Sac, 94 U. S. 351 ; Commis- 
 
 2 Board of Commissioners of Knox sioners of Douglas County v. Bolles, 94 
 County v. Aspinwall, 21 How. 539; Bis- U.S. 104; County of Ca^s v. Slums, '.>5 
 sell v. City of Jeffersonvillc, 24 How. 287; U. S. 375 ; County of Henry v. Nicolay, 
 Moran v. Commissural rsof .Miami County, 95 U. S. 619 ; Town of Concord '■. Ports- 
 2 Black, 722; Woods v. Lawrence County, mouth Savings Bank, 92 U. S. 625; 
 1 Black, 386; Mercer County <-. Hacket, Humboldt Township v. Long, 92 U. S. 
 1 Wall. 83, 93; Gelpcke v. City of Du- 642; Miller v. Town of Berlin, 13 Blatchf. 
 buque, l Wall, it:.; Meyer v. City of 245; State v. Saline County Court, 48 
 Muscatine, 1 lb. 884 ; I I ington Mo. 390; Belo v. Com'rs of For 6y the 
 v. Butl r, it II.. 282; Grand Chute v. County, 76 NT. C. 489; City of Yicksburg 
 Wincgar, 15 lb. 355; St. Joseph Town- v. Lombard, 51 Miss, ill. 
 
 bhip v. Sogers, 16 li<. oil; Chambers 
 
 269
 
 § 291.1 MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 issued by officers acting under a special power in the particular 
 transaction. 1 Not being required to look beyond the recitals of 
 the bonds when he purchases them, he is not required, upon trial, 
 to produce any evidence of the truth of those, recitals. He can- 
 not be defeated if such recitals are disproved upon the trial, for 
 us against a bond fide purchaser of a negotiable security no de- 
 fences are known to the law, except that the defendant never 
 made the instrument, or that it is void by positive statute. Proof 
 that any or all of the recitals are incorrect does not constitute a 
 defence to a suit on the bonds or coupons, if it appears that it 
 was the sole province of the municipal officers who executed the 
 bonds to decide whether or not there had been an antecedent com- 
 pliance with the regulations, conditions, or qualifications which it 
 is alleged were not fulfilled. 2 
 
 A statute authorized a town to loan its credit in aid of a rail- 
 road company by issuing its bonds, but expressly prohibited the 
 making of the loan except on the condition that the written con- 
 sent of a majority of the tax-payers, representing a majority of 
 the taxable property of the town, should first be acknowledged 
 and recorded, together with a copy of the assessment roll of the 
 town, in the office of the county clerk. Without obtaining the 
 consent of the requisite number of tax-payers, and without mak- 
 ing any record as provided, the commissioners specially charged 
 with the duty issued bonds which recited that they were issued pur- 
 suant to the statute. The town was held liable to a bond fide pur- 
 chaser of the bonds, for authority had been conferred upon it to issue 
 its bonds in aid of the railroad, and the commissioners were its 
 officers expressly designated for this purpose, and the bonds issued 
 by them purported to be made in compliance with the statute. 3 
 
 1 Miller v. Town of Berlin, supra. a similar statute of New York, was 
 
 2 Commissioners of Marion County v. made by the Supreme Court of the United 
 Clark, 94 U. S. 278 ; Town of Coloma v. States, in Town of Venice v. Murdoch, 
 Eaves, 92 U. S. 484 ; St. Joseph Town- 92 U. S. 494. The court in this case re- 
 ship v. Rogers, 16 Wall. 644, 659 ; Huide- fused to follow the decisions of the Court 
 koper v. Buchanan County, 3 Dill. 175; of Appeals of New York to the contrary, 
 Grand Chute v. Winegar, 15 Wall. 355; arising upon the same statute and similar 
 Smith v. County of Clark, 54 Mo. 58 ; facts, because these decisions do not pre- 
 City of Vicksburg v. Lombard, 51 Miss, sent a case of statutory construction. See 
 111 ; First Nat. Bank of St. Johnsbury v. Starin v. Town of Genoa, 23 N. Y. 439 ; 
 Town of Concord, 50 Vt. 257. Gould v. Town of Sterling, 23 N. Y. 456 ; 
 
 :; Miller v. Town of Berlin, 13 Blatchf. People v. Mead, 24 N. Y. 114 ; 36 N. Y. 
 245. A like decision, with reference to 224. These decisions assert that where 
 
 270
 
 RIGHTS. OF BONA FIDE HOLDERS. 
 
 [§ 292. 
 
 292. A recital in municipal bonds of compliance with a 
 condition precedent, such as a popular vote favoring the sub- 
 scription, when made by officers of the municipality who are 
 invested with power to decide whether that condition has been 
 complied with, is conclusive of the fact and binding upon the mu- 
 nicipality, the recital itself being a decision of the fact by the 
 appointed tribunal. The truth or falsehood of the assertion does 
 not concern a purchaser of the bonds ; he is bound in such case to 
 look for nothing beyond the recital except legislative authority. 1 
 
 This rule is now so firmly seated in reason and authority, that 
 it cannot be shaken. It has been repeatedly affirmed by the Su- 
 preme Court of the United States. In a recent case before that 
 court, 2 Mr. Justice Strong carefully restated the rule in the fol- 
 lowing terms : " Where legislative authority has been given to a 
 
 authority is given to an officer to exe- 
 cute and issue bonds, on the assent of two 
 thirds of the voters of a town, the assent 
 to be obtained by the officer and filed in 
 a public office, with an affidavit verifying 
 the assent, the verification amounts to 
 nothing, subserves no purpose, and that a 
 bona fide holder of the bonds is bound to 
 prove that the requisite number of voters 
 did actually assent. They assert this as a 
 proposition; not that the statute so de- 
 clares, or that such is the interpretation 
 of the statute. They ignore the para- 
 mount purpose for which the bonds were 
 authorized by the legislature, and they 
 treat the written assent of the tax-pa] 
 as the authority to the township officers, 
 when, in fact, the power was given by the 
 legislature, and it was only left to the 
 town to determine by the action of two 
 thirds of the resident tax-payers whether 
 tin: supervisors and commissioners might 
 act under the power. Per Strong, J., in 
 n of Venice <-. Murdock, supra. 
 I San Antonio v. Mehaffy, 96 U. S. 
 812; Commissioners of Douglas County 
 ,-. Bolles, '-'1 I'- S. I'M; County of 
 Leavenworth <■. Bai ae . 94 I'. S. To ; 
 <•,,,,, of Johnson County v. 
 
 Janaarj ,94 U. S. 202 ; Town of < loloma 
 
 ,. I. ph Town- 
 
 ship <■. Rogers, 16 Wall. 64 1 ; Town of 
 
 Venice v. Murdock, 92 IT. S. 494 ; Town- 
 ship of Rock Creek v. Strong, 96 U. S. 
 271 ; Pollard v. City of Pleasant Hill, 3 
 Dill. 195 ; Jordan v. Cass County, lb. 245 ; 
 Washburn v. Cass County, lb. 251 ; Nic- 
 olay v. St. Clair County, lb. 163; Jud- 
 son v. City of Plattsburg, lb. 181 ; Smith 
 v. Tallapoosa County, 2 Woods, 574; 
 Sala v. City of New Orleans, 2 Woods, 
 188; Flagg v. Mayor, &c. of City of 
 Palmyra, 33 Mo. 440 ; Smith v. County 
 of Clark, 54 Mo. 58; Belo v. Com'rs of 
 Forsythe County, 76 X. <'. 189. 
 
 The case of Marsh v. Fulton County, 
 10 Wall. 676, so far as it contains any as- 
 sertions inconsistent with this rule, is not 
 to be regarded. Thai case is nor, however, 
 really inconsistent, because it was decided 
 upon the ground that the subs'cription was 
 made for the stock of a different corpora- 
 tion from that lor which the people had 
 voted. 
 
 Tb' 1 rule of the United States courts is 
 also that of most of the state courts. So- 
 ciety for Savings v. City of New Lon- 
 don, 29 Conn. 17 1; Evansville, Indiuii- 
 I lleveland Straighi Line R. < !o. 
 v. City of Evansville, 15 1ml. 395; Corn* 
 missioners of Knox County <•. Nichols, 14 
 
 Ohio Si. 260. 
 
 - 'Town of Coloma '■. Eaves, 92 CJ. S. 
 184. 
 
 271
 
 § 293.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 municipality, or to its officers, to subscribe for the stock of a rail- 
 mad company, and to issue municipal bonds in payment, but only 
 on some precedent condition, such as a popular vote favoring the 
 subscription ; and where it may be gathered from the legislative 
 enactment that the officers of the municipality were invested with 
 power to decide whether the condition precedent has been com- 
 plied with, this recital, that it has been made in the bonds issued 
 by them and held by a bond fide purchaser, is conclusive of the 
 fact, and binding upon the municipality; for the recital is itself a 
 decision of the fact by the appointed tribunal." This rule is of 
 unquestionable application in all cases where the recital is of facts 
 peculiarly within the knowledge of the persons to whom the 
 power to issue the bonds had been conditionally granted. 1 
 
 Judge Dillon, in an essay on this subject, after an examination 
 of the decisions of the Supreme Court of the United States, says : 
 "The principle adopted, and the reasoning of the court by which 
 it is sustained, lead, it would seem, logically to the conclusion 
 (although there is, perhaps, no case in the Supreme Court where 
 the facts required a direct decision of the point), that where the 
 power to issue the bonds is given upon the condition of a previous 
 vote in favor of the proposition, that the public or municipal offi- 
 cers can, where no vote whatever has been taken, or the projjosition 
 has been voted doivn, bind the county or municipality by the false 
 recitals in such unauthorized bonds, provided they are issued by 
 the officers intrusted by the statute with the power. Under this 
 doctrine, limitations upon the exercise of the power intended to 
 prevent fraud and to secure a compliance with the conditions upon 
 which the bonds are authorized are of little practical value, and 
 generally prove illusory." 2 
 
 293. A recital in municipal bonds that they were issued 
 in pursuance of a subscription made by the supervisors of the 
 county, in conformity to the provisions of a certain statute, estops 
 
 1 Marcy v. Township of Oswego, 92 U. svpra, and that the case in which the doc- 
 S. G37 ; and see Humboldt Township v. trine was first announced, Knox County 
 Long, 92 U. S. 042. In the latter case v. Aspinwall, 21 How. 539, is not sup- 
 Mr. Justice Miller delivers a dissenting ported by the English case on which it was 
 opinion in which he criticises thi* doc- based. 
 
 trine, and declares that the reasoning on 2 Law of Municipal Bonds in 2 South. 
 
 which it is founded was examined for the Law Rev. N. S. p. 437 ; also published as 
 
 first time in Town of Coloma v. Eaves, a monograph, p. 2G. 
 
 272
 
 RIGHTS OF BONA FIDE HOLDERS. [§ 293. 
 
 the county from setting up, against a bond fide holder of the 
 bonds, that the authority to make a subscription with all its legiti- 
 mate consequences had expired before the subscription was made. 
 After assuring a purchaser that the subscription was made at a 
 date when the county had the power to make it, it would be tol- 
 erating a fraud to permit the county to set up, when called upon 
 for payment, that the subscription was not made until a later date 
 when authority to make it had been abrogated by constitutional 
 provision. 1 
 
 A recital that the bonds of a township are issued under and by 
 virtue of the act incorporating the railroad company, and in ac- 
 cordance with the vote of the electors of the township in pursu- 
 ance of such act, was held to estop the township from denying 
 that the terms of the act had been complied with. 2 
 
 But if there be no law authorizing a subscription in aid of a 
 railroad, a recital in a municipal bond that it is issued in payment 
 of a subscription made in pursuance of a vote of the people at an 
 election specified, the recital, instead of estopping the municipal- 
 ity to claim the invalidity of the bonds, is notice to the holder of 
 the illegality of the subscription. 3 
 
 An erroneous reference in the recitals of a bond to the act un- 
 der which the bonds were issued does not affect their validity. 4 
 
 Where the common council of a city was authorized by the 
 legislature to subscribe for stock in a railroad company, and to 
 issue bonds for the subscription, on the petition of three fourths of 
 the legal voters of the city, the council, reciting such a petition, 
 adopted a resolution to subscribe, and authorized the execution 
 and delivery of bonds for the sum subscribed. The bonds recited 
 that they were issued by authority of the common council, and 
 that three fourths of the legal voters had petitioned for the same, 
 
 1 County of Moultrie v. Rockingham purported to be issued conferred no power 
 
 Ten Cent Savings Bank, 92 U. S. 631. to make the donation after the Constitu- 
 
 In the Town of Concord v. Portsmouth tion went into effect. 
 
 Savin-- I5ank, '.)2 U. 8. 625, the recitals a Town of Coloma v. Eaves, 92 U. S. 
 
 made direct reference by its title to the 484. See, also, Belo v. Com'rs of Forsythe 
 
 act authorizing the bonds, but did not County, 70 N. C. 489; Westermann v. 
 
 show that the subscription waa made be- Cape Girardeau County, U. S. C. C. for 
 
 fore the Constitution abrogated the author- Mo. 7 ( lent. L. J. 353. 
 
 ity to make it; and moreover, if a pur- ;i Barnes v. Town of Lacon, 84 III. 
 
 chaser was bound to take notice of the 461. 
 
 constitutional provision, he was bonnd to 4 Commissioners of Johnson County v. 
 
 know that th I t which the bonds January, 94 U. 8. 202. 
 
 is 278
 
 § 294.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 as required by the charter. In a suit by an innocent holder for 
 value it was held inadmissible for the city to show that three 
 fourths of the legal voters of the city had not signed the petition 
 for the stock subscription. 1 
 
 294. The mere issue of bonds containing a recital that they 
 were issued under and in pursuance of a legislative act was, 
 in the leading case of Knox County v. Aspinwall? declared to be 
 a sufficient basis for an assumption by the purchaser that the con- 
 ditions on which the municipality was authorized to issue them 
 had been complied with ; and that the purchaser was not bound 
 to look further for evidence of such compliance, though the reci- 
 tals in the bonds did not affirm it. This position was supported 
 by the citation of a case in the Exchequer Chamber. 3 Although 
 this rule has never been reversed by the Supreme Court of the 
 United States, doubts have been expressed respecting its correct- 
 ness to its full extent ; and while a recital that a condition prece- 
 dent, such as a vote for subscription, has been complied with, is 
 acknowledged to be conclusive proof of its performance with a 
 bond fide purchaser, yet the mere execution and issue of the bonds 
 without such recital is not regarded as conclusive of the question, 
 but only primd facie evidence of the regular issue of the bonds, 
 until the contrary be shown. 4 
 
 So it is with regard to any other prerequisite to the execution 
 and issue of such bonds ; such for instance as a requirement that 
 thirty days' notice of the election to determine upon a subscription 
 and issue of bonds be given. A recital of compliance with the 
 statute made by the officers or agents intrusted with the power 
 of issuing the bonds, and with the power of determining whether 
 the conditions of fact made precedent to the exercise of the author- 
 ity granted, is conclusive in a suit by a bond fide holder. " The 
 
 i Bissell v. City of Jeffersonville, 24 lb. 384 ; Darlington v. La Clede County, 
 
 How. 287. See, also, Van Hostrup v. Mad- 4 Dill. 200 ; and approved in Steines v. 
 
 ison City, 1 Wall. 291 ; Mercer County v. Franklin County, 48 Mo. 167, 179; De- 
 
 Hacket, 1 Wall. 83 ; St. Joseph Township Voss v. City of Eichmond, 18 Gratt. ( Va.) 
 
 v. Rogers, 16 Wall. 644 ; Mygatt v. City 338, 356. 
 
 of Green Bay, 1 Biss. 292. 3 Royal British Bank v. Turquand, 6 
 
 2 21 How. 539, 544; reaffirmed in Mo- Ell. & Bl. 327. 
 
 ran v. Commissioners of Miami County, 2 4 See dissenting opinion of Bradley, J., 
 
 Black, 722, 732 ; Mercer County v. Hacket, in Town of Coloma v. Eaves, supra ; citing 
 
 1 Wall. 83 ; Supervisors v. Schenck, 5 lb. Lynde v. County, 16 Wall. 6, 13. 
 772, 784 ; Meyer v. City of Muscatine, I 
 
 274
 
 RIGHTS OF BONA FIDE HOLDERS. [§ 295. 
 
 election was a step in the process of execution of the power 
 granted to issue bonds in payment of a municipal subscription to 
 the stock of a railroad company. It did not itself confer the 
 power. Whether that step had been taken or not, and whether 
 the election had been regularly conducted with sufficient notice, 
 and whether the requisite majority of votes had been cast in favor 
 of a subscription, and consequent bond issue, were questions 
 which the law submitted to the board of county commissioners, 
 and which it was necessary for them to answer before they could 
 act." * 
 
 295. A condition in a legislative act that the amount of 
 bonds which a township may vote in aid of a railroad shall not 
 be above such a sum as will require a levy of more than one per 
 cent, per annum on the taxable property of the township, to pay 
 the yearly interest on the amount of bonds issued, does not invali- 
 date, in the hands of bond fide holders for value, bonds issued in 
 violation of such provision, when they contain a recital that they 
 were issued in accordance with the act, and all prerequisite facts 
 to the execution and issue of the bonds were by the act referred to 
 the board of county commissioners, by whom the bonds were 
 issued. 2 The assessment rolls of the township may have been 
 proper evidence for the consideration of the board of county com- 
 missioners when they were inquiring what the value of the tax- 
 able property of the township was ; but the bonds are not invalid 
 in the hands of a bond fide holder by reason of their having been 
 
 1 Humboldt Township v. Long, 92 U. tion for the election, or the fact that 
 
 S. 642 : The recital was that the bonds fifty freeholders, had signed, or that three 
 
 were " issued in pursuance of and in ac- fifths of the legal voters had voted for the 
 
 cordance witli the act of the legislature." subscription. These are all extrinsic facta 
 
 The recital in Board of Commissioners of bearing not so much upon the authority 
 
 Knox County v. Aspinwall, 21 How. 539, vested in the board to issue the bonds, as 
 
 was very similar. upon the question whether that authority 
 
 - Marc.v v. Township of Oswego, 92 U. should be exercised. They are all, by the 
 
 S. <;:;;. "It is to be observed that every statute, referred to the inquiry and deter- 
 
 prerequisite fact to the execution ami issue ruination of the board, and they were all 
 
 of the bond- was of a nature that required determined before the bonds and coupons 
 
 examination and decision. The existence came into the hands of the plaintiff. He 
 
 of sufficient taxable property to warrant was, therefore, no: bound when be pur- 
 
 the amount of the subscription and issue chased to look beyond tin' act oi thelegis- 
 
 ntied to ib- terci e of lature and the recitals which the bonds 
 
 tin: authority conferred upon the board of contained." Per Strong, J. 
 
 loners than wa- the peti- 
 
 _l.)
 
 § 295.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 voted and issued in excess of the statutory limit as shown by the 
 rolls. Whatever may be the right of the township as against 
 those who issued the bonds, it cannot set up against a bond fide 
 holder of the bonds that the amount issued was too large, in the 
 face of the decision of the board, and their recital that the bonds 
 were issued pursuant to and in accordance "with the act. 1 
 
 It is to be observed in reference to this case that the recital of 
 compliance with the law is general and not specific, and that the 
 facts showing the illegality of the bonds appeared of record in the 
 township. Judge Dillon remarks that the case affords, perhaps, 
 a more striking illustration than any previously decided by the 
 court, that the purchaser may implicitly rely upon the recitals of 
 the bonds made by the proper officers, that the authority to issue 
 them has arisen, and that he need not look elsewhere to ascertain 
 this fact. 2 
 
 Where a legislative act, under which township bonds purport 
 to be issued, did not on its face show the purpose of the bonds, 
 except by reference " to the order and proclamation of the town- 
 ship officers " in calling an election previously had, but the bonds 
 recited that they were issued " for the purpose of aiding internal 
 improvements in said township," and the general legislation of 
 the state showed that "internal improvements " meant such pub- 
 lic improvements as might legitimately be aided by taxation, 
 Judge Dillon was inclined to think that the purchaser might as- 
 sume without inquiry, aliunde the bonds and legislative act, that 
 the bonds were issued under competent legislation ; although they 
 were in fact issued to aid in the improvement of a water power 
 and the erection of a water-mill owned by private persons. 3 
 
 A constitutional restriction upon the amount of indebtedness 
 a municipal corporation may create is binding upon a bond fide 
 purchaser of its negotiable securities ; and if such securities are 
 issued in excess of the constitutional limit they are void, even in 
 the hands of such a purchaser. He cannot presume that indebt- 
 edness in excess of the constitutional limitation was authorized in 
 any way. He is not only bound to know that the power of the 
 
 1 See, also, Humboldt Township v. Long, 4 Dill. 200; Nicolayt>. St. Clair County, 
 
 92 U. S. 642, per Strong, J.; Town of 3 Dill. 163. 
 
 Concord v. Portsmouth Savings Bank, 92 2 Municipal Bonds, p. 33. 
 
 U. S. 625 ; Darlington v. La Clede County, 3 Guernsey v. Burlington Township, 4 
 
 Dill. 372. 
 
 276
 
 RIGHTS OF BONA FIDE HOLDERS. [§§ 296, 297. 
 
 corporation is limited, but also to ascertain whether the bonds he 
 is purchasing have been issued in compliance with the law. 1 
 
 296. When, however, the statute authorizing the issuing 
 of municipal bonds declares absolutely that they shall be 
 void in case a condition precedent be not complied with, they will 
 in that case be void in whosesoever hands they may be. 2 A statute 
 of the State of Missouri 3 provided that "before any bond here- 
 after issued by any county shall obtain validity or be negotiated," 
 it shall be registered by the state auditor, who shall certify upon 
 it that all conditions precedent required by law, and by the con- 
 tract under which the bonds are issued, have been complied with. 
 Subsequently county bonds were issued in aid of a railroad com- 
 pany before the company had complied with conditions upon 
 which the issue of the bonds had been authorized by a vote of the 
 people ; and to evade the statute, they were antedated to a date 
 prior to the passage of the act. They were held void in the 
 hands of an innocent holder. 
 
 It may be that when a municipal bond contains no recitals on 
 its face of the authority under which it is issued, and the want of 
 power to issue it appears upon the records of the municipal cor- 
 poration, the bonds may be void, even in the hands of a bond fide 
 holder. Such at any rate was the decision of the Supreme Court 
 of Kansas. 4 
 
 297. "When bonds purport to be issued under the authority 
 of a statute referred to, but recite on their face facts incon- 
 sistent with the statute, they are not valid in the hands of any 
 bolder. Thus where the act authorizing a loan provided that the 
 bonds should be disposed of at not less than their par value, and 
 the money invested in the stock of a railroad company, and the 
 bonds referring to the act recited that they were issued " for value 
 received in the stock of the Monticello and Port Jervis Railroad 
 Company," they Bhowed upon their face that they were issued in 
 violation of the act, and therefore void. 5 
 
 1 bfcPherson v. Foster Bros. 13 Iowa, 8 Laws 1872, p. 56. 
 
 48; Mosher v. Independent School l>Lt. 4 Lewis v. Bourbon County, 12 Kane, 
 
 of Ackley, 1 1 fowa, \'22. l B6, 221. 
 
 2 Anthony v.Jasper County, 4 Dill. 186, ''■ Sarton v. Town of Thompson, Court 
 following the principle in Bayleyv. Taber, <>f Appeals of N. Y. 1878, 17 Albany Law 
 5 Mass. 286; and : iwnof Eagle J, 334 ; and Bee McClure v, Township of 
 p. Kohn, 84 III. 292. rd, 94 U. 8. 429. 
 
 •JT7
 
 §§ 208, 299.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 Several state courts have held that a purchaser of municipal 
 securities is chargeable with notice of any defect in the power of 
 the municipality to issue them, which is disclosed by the corporate 
 records ; l and that the recitals of authority in the bonds are not 
 conclusive. 2 
 
 298. Municipal bonds issued in excess of the authority- 
 conferred by the legislature are void in whosesoever hands they 
 may be. A county having authority to subscribe to the stock of 
 a railroad company to such amount as should be fixed by a ma- 
 jority of the voters of the county, and to pay the subscription by 
 issuing bonds of the county for the amount of the stock subscribed 
 for, has no power to issue bonds for a larger amount and dispose 
 of them at a discount in order to raise a sum sufficient to pay the 
 amount of stock subscribed for in cash. 3 The power to issue such 
 bonds should be strictly pursued ; and the fact that the county has 
 made a subscription, payable in cash, does not justify the issue of 
 bonds to any greater amount, or in any other way than the legisla- 
 ture provided for. The power to sell the bonds to raise money to 
 pay for the stock was not given by the act. Therefore, the county 
 may be enjoined at the instance of a tax-payer from levying a tax 
 to pay the interest or principal of the over-issue of bonds. But 
 bond fide holders without notice would not be affected. 
 
 299. A purchaser of municipal bonds cannot claim protec- 
 tion as a bona fide holder where he has notice that any of the 
 essential proceedings prescribed by law with reference to their 
 issue have been dispensed with. He is chargeable with notice of 
 that which the law requires him to know, and with notice of that 
 which he might have ascertained by the exercise of reasonable 
 diligence after being put upon inquiry. When the bonds refer 
 to the statute under which they were issued, a purchaser is bound 
 to take notice of the statute and of all its requirements ; such 
 for instance as a requirement that the statute shall not take effect 
 until its publication in a certain paper, when the date of the bonds 
 
 1 Starin v. Town of Genoa, 23 N. Y. 2 Veeder v. Town of Lima, 19 Wis. 
 439 ; Gould v. Town of Sterling, lb. 456 ; 280. 
 
 People v. Mead, 24 N. Y. 114; S. C. 36 3 Daviess County Court v. Howard, 13 
 N. Y. 224. Bush (Ky.), 101 ; and see City of Atchi- 
 
 son v. Butcher, 3 Kans. 104. 
 
 278
 
 ENFORCEMENT OF MUNICIPAL BONDS. [§ 300. 
 
 is such as to show that the law could not have taken effect at the 
 time of the election held to authorize the issue of the bonds. 1 
 
 As against a railroad company for the aid of which a munici- 
 pality has issued its bonds, or as against others who do not occupy 
 the position of bond fide holders for value without notice, the 
 defence is generally open that the conditions on which the proper 
 exercise of the power to issue the bonds depended have not been 
 complied with. 2 
 
 VII. Enforcement of Municipal Bonds. 
 
 300. A provision authorizing municipal corporations to 
 exercise the local power of taxation to the extent necessary 
 to meet their bonds, such as is usually contained in acts author- 
 izing them to issue negotiable bonds in aid of public improve- 
 ments, enters into and becomes a part of the obligation of the 
 contract between such corporations and the holders of the bonds. 3 
 The power thus given cannot be withdrawn until the. contract is 
 satisfied. A subsequent statute or constitutional provision of the 
 state abrogating or repealing the statute authorizing the levying 
 of taxes to meet the interest or principal of such bonds, is in viola- 
 tion of the Constitution of the United States, and therefore invalid. 
 The statutory authority to exercise the power of taxation to meet 
 these engagements is as much a part of the contract as if it had 
 been written out at length in the bonds. 4 
 
 This principle is illustrated by the leading case of Von Hoffman 
 v. City of Quincy, 5 in the Supreme Court of the United States. 
 When the bonds in question were issued there were laws in force 
 which authorized and required the collection of taxes to meet the 
 interest as it should accrue. A subsequent statute limited the 
 
 1 McClure v. Township of Oxford, 94 705, 70'J ; Von Hoffman v. City of Quincy, 
 U. S. 429. See, also, George v. Oxford 4 Wall. 535 ; llees v. City of Watertown, 
 Township, 16 Kans. 72; Mygattw. City of 19 Wall. 107, 120; Lansing v. County 
 Green Hay, 1 Mis-. 292. Treasurer, 1 Dill. 522; United States V. 
 
 2 Dillon on Munic. Corp. § 108 ; Colum- Jefferson County, 6 Reporter, 186. 
 
 I rotj < lews, 21 Wall.317; Union i City of Dubuque v. Illinois Cent. H. 
 
 Pacific R. R. Co. v. Lincoln County, 3 It. Co. 39 Iowa, 56 ; Hasbrouck v. Citj of 
 
 Dill. 300; Same v. Merrick County, Ik Milwaukee, 25 Wis. 122; Western Saving 
 
 859; Portland & Oxford Central K. R. Fund of Philadelphia v. Qitj of Philadel- 
 
 Co. v. Hartford, 58 Me, 23; People v. phia, 31 Pa. St. 175; Beckwith v. English, 
 
 Cline, 63 111. 394. 51 111.147; Vance v. City of Little Bock, 
 
 » Riggs v. Johnson County, 6 Wall. 80 Ark. 435, 440, 441. 
 
 ICC, 194; City of Galena v. Amy, 5 Wall. & 4 Wall. 535.
 
 § 301.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 amount of taxes the corporation could levy and collect. " The 
 amount permitted to be collected by that act," say the court, 
 k > will be insufficient; and it is not certain that anything will be 
 yielded applicable to that object. To the extent of the deficiency 
 the obligation of the contract will be impaired, and if there be 
 nothing applicable, it may be regarded as annulled. A right with- 
 out a remedy is as if it were not. For every beneficial purpose 
 it may be said not to exist. It is well settled that a state may 
 disable itself by contract from exercising its taxing power in par- 
 ticular cases. It is equally clear that where a state has authorized a 
 municipal corporation to contract and to exercise the power of local 
 taxation to the extent necessary to meet its engagements, the 
 power thus given cannot be withdrawn until the contract is satis- 
 fied. The state and the corporation, in such cases, are equally 
 bound. The power given becomes a trust which the donor cannot an- 
 nul, and which the donee is bound to execute ; and neither the state 
 nor the corporation can any more impair the obligation of the con- 
 tract in this way than in any other. The laws requiring taxes to 
 the requisite amount to be collected, in force when the bonds were 
 issued, are still in force for all the purposes of this case. The Act 
 of 18G3 is, so far as it affects these bonds, a nullity. It is the duty 
 of the city to impose and collect the taxes in all respects as if that 
 act had not been passed. A different result would leave nothing 
 of the contract but an abstract right, — of no practical value, — 
 and render the protection of the Constitution a shadow and a de- 
 usion. 
 
 Where there is a special provision for the levy and collection 
 of taxes for the payment of such bonds, the bondholder may re- 
 quire the enforcement of this provision without first obtaining ex- 
 ecution and attempting to enforce it. 1 Judgment must, however, 
 be obtained upon the bonds, so as to establish the validity and 
 amount of the debt. 2 A demand should then be made upon the 
 municipal corporation to perform its duty in levying the necessary 
 tax and making payment. 3 
 
 301. A state can no more impair an existing contract by 
 
 1 Knox County v. Aspinwall, 24 How. 18 Wall. 83, 92 ; Bath County v. Amy, 13 
 376 ; Benbow v. Iowa City, 7 Wall. 313. Wall. 244. 
 
 2 Heine v. Levee Commissioners, 19 3 Dillon on Municipal Bonds, p. 58. 
 Wall. 655 ; Town of Queensbury v. Culver, 
 
 280
 
 ENFORCEMENT OF MUNICIPAL BONDS. [§ 302. 
 
 a constitutional provision than by a legislative act ; both are 
 within the prohibition of the national Constitution. 1 A constitu- 
 tional provision of a state so limiting the rate of taxation which 
 municipal corporations may exercise as to prevent their making 
 the payment of the interest or principal of bonds previously is- 
 sued, under statutes authorizing the levy of sufficient taxes for 
 that purpose, is invalid and inoperative to the same extent that a 
 statute to the same effect would be. The Constitution of Arkan- 
 sas 2 provided that "no county shall levy a tax to exceed one 
 half of one per cent, for all purposes, but may levy an additional 
 one half of one per cent, to pay indebtedness existing at the time 
 of the ratification of this Constitution." But this was held hot to 
 impair or lessen in any degree the obligation of a previous statute 
 under which municipal bonds were issued and by which the levy 
 of a special tax of sufficient amount to meet the bonds was au- 
 thorized. 3 " It is no answer," said Caldwell, J., " to say that the 
 present Constitution does not utterly destroy the right given by 
 the act under which the bonds were issued ; that a limited tax 
 may still be levied. If, by any subsequent act of the state, the 
 rate could be limited to five mills, it could be limited to one, or 
 taken away altogether." The court remark upon the excessive 
 amount of taxes that would be required in the case before it 
 to meet the obligations of the county ; but while suggesting to 
 the creditors the expediency of reducing the volume of indebted- 
 ness, declared this to be a matter between the county and its 
 creditors, over which the court had no control ; and accordingly 
 directed a peremptory writ of mandamus for the levy and collec- 
 tion of a tax sufficient to meet the interest and principal of the 
 bonds. 4 
 
 302. Mandamus is the proper remedy to compel a mu- 
 nicipal corporation to appropriate moneys already in its treas- 
 ury to tin- payment of its bonds, or to levy such tax as may be 
 ary lor that purpose/"' This writ may be issued in all cases 
 
 1 Gunn '■. Barry, 15 Wall. 610, 623. note to United States v. Miller County, l 
 
 '•; Const. 1874, art. \vi. § 0. Dill. 233. 
 
 8 Uniti-.l States y. Jefferson County, U. 4 Ami Bee United States w.Countyof 
 
 S I I for the Eastern Districl of Ark. Clark, U. S. Supreme Court, 1878, 5 Re> 
 
 7 Am. I,:i.\ Bee. 154, tor Sept. 1S78; 6 porter, 131. 
 
 Reporter, 486 j 7 Cent Law Jour. ; S. C. " Walkleyr.City of Muscatine, 6 Wall. 
 
 281
 
 § 303.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 to compel the performance of some official or corporate act by a 
 public officer or corporation, when there is no other adequate rem- 
 edy, and the right to such performance is clear. It is also the 
 proper remedy to compel the delivery of bonds which a munici- 
 pality haying the power to issue has contracted to deliver in aid 
 of a railroad. 1 
 
 This is not only the proper but the only remedy to compel the 
 performance of the duty of collecting taxes and paying munic- 
 ipal bonds. The Supreme Court, even in an exceptional case, 
 where the process of mandamus had proved ineffectual for a pe- 
 riod of fourteen years, on account of successive resignations of mu- 
 nicipal officers, refused to exercise equity jurisdiction to compel 
 payment. 2 To enforce a bond given by a county in behalf of a 
 township within the county, mandamus will be issued against the 
 county or its proper officers to compel the levy and collection of 
 a tax in accordance with the provisions of the law under which 
 the bonds were issued. 3 
 
 303. A mandamus does not confer power upon those to 
 whom it is directed. It only enforces the exercise of power al- 
 ready existing, when its exercise is a duty. Thus if a municipal- 
 ity has exercised its power of taxation to the full extent of its au- 
 thority the court cannot by mandamus order the levying of a fur- 
 ther tax. There may be some other remedy for enforcing the debt 
 against it in such case, but at any rate this remedy does not apply. 4 
 
 Mandamus may also be used to enforce ordinary county war- 
 rants ; but inasmuch as such warrants are payable out of the ordi- 
 
 481; State of Ohio v. Board of Education 107; Heine v. Levee Commissioners, 19 
 
 of Perrysburg Township, 27 Ohio St. Wall. 655. In the absence of a statute to 
 
 96 ; Cincinnati, Wilmington & Zanesville the contrary, the writ of mandamus abates 
 
 R. R. Co. v. Clinton County, 1 Ohio St. with the death, resignation, or removal of 
 
 77 ; Atchison, Topeka & Sante Fe' R. R. the officer to whom it is directed. 
 
 Co. v. Jefferson County, 12 Kans. 127; 3 County of Cass v. Johnston, 95 U. S. 
 
 United States v. County Court of Vernon 360; Jordan v. Cass County, 3 Dill. 185 ; 
 
 County, 3 Dill. 281. County of Cass v. Shores, 95 U. S. 375. 
 
 1 New Haven, Middletown & Williman- i United States v. County of Clark, 95 
 tic R. R. Co. v. Town of Chatham, 42 U. S. 769 ; Supervisors v. United States, 
 Conn. 465; People v. Cline, 63 111. 394; 18 Wall. 71. United States v. Mayor, &c. 
 Union Pacific R. R. Co. v. Commissioners of City of New Orleans, 2 Woods, 230; 
 of Davis County, 6 Kans. 256 ; in re Ham- United States v. Miller County, 4 Dill, 
 ilton & North Western Ry. Co. 39 Q. B. 233 ; Vance v. City of Little Rock, 30 Ark. 
 Upper Canada, 193. 435 ; State v. Walker, Supreme Court of 
 
 2 Pees v. City of Watertown, 19 Wall. Mo. Oct. T. 1878, 7 Cent. L. J. 390. 
 
 282
 
 ENFORCEMENT OF MUNICIPAL BONDS. [§ 304. 
 
 nary revenues of the county, and are not, like the negotiable bonds 
 of a county, expressly provided for by a special tax, the writ can- 
 not command the levying of a tax specially for the payment of 
 such warrants, but can only command the proper officers to dis- 
 charge the duty they owe by charter or by statute to the warrant- 
 holders. 1 
 
 304. A writ of mandamus issued by the Circuit Court of 
 the United States for the collection of a tax cannot be inter- 
 fered with or obstructed by the courts or the legislature of the 
 state in which the tax is to be collected. It does not matter that 
 prior to the application for the mandamus a court of the state had 
 perpetually enjoined the proper officers against making such levy; 
 for the mandamus, when so issued, is regarded as a writ necessary 
 to the jurisdiction of the federal court which had previously at- 
 tached, and to enforce its judgment, and in such case the state 
 court cannot be regarded as in prior possession of the case. 2 If 
 the officers obey the state court in such case and refuse to levy 
 and collect the tax, the federal court will attach them for con- 
 tempt and punish them. 3 
 
 Municipal and county officers who disobey a writ of mandamus 
 requiring them to levy a tax to pay judgments against the munici- 
 pality or county are also liable to damages for the non-perform- 
 ance of this duty. But the measure of such damages is not the 
 amount of the claim ; 4 and in fact, only nominal damages and 
 costs seem to be recoverable. 5 Judge Drummond, in the Circuit 
 Court of the United States, while feeling compelled by the de- 
 cisions of the Supreme Court to allow only nominal damages, said 
 that if left free to adopt his own view it would be to allow the 
 plaintiff the interest upon the money that would have been col- 
 lected, if the defendants had performed their duty. " Under the 
 
 1 Supervisors v. United States, 18 Wall, have been in consequence of ignorance, in- 
 
 71; Dinted States v. Vernon County, 2 advertence, or mistake on the part of the 
 
 Cent. L.J. 771. oilicers, although it does not exactly ap- 
 
 - Biggs v. Johnson County, 6 Wall, pear how, or under what, circumstances, 
 166; \rauce '•. City of Little Rock, 30 that inference was drawn. Per Drum- 
 Ark. 435, 452. mond, J., in Newark Savings Institution 
 
 8 United States v. Silverman, 4 Dill. v. Panhorst, 7 Biss. 99. 
 224, •'■ Newark Savings [nstitution v. Pan 
 
 ■ Dow ^.Humbert, 91 U. 8. 294. In hurst, supra. In this case the judgment 
 
 e the court assumed that it might wa 
 
 -js:;
 
 § 305.] MUNICIPAL BONDS IN AID OF RAILROADS. 
 
 decisions of the Supreme Court," added the judge, "these judg- 
 ments against municipal corporations, where people do not choose 
 to pay them, are not very potential. It was held that where the 
 laws of a state declare that there can be no execution against the 
 property of a municipal corporation, the federal courts are with- 
 out power to collect judgments by the imposition of taxes, al- 
 though that may be the only resource. 1 And now it has been 
 decided, substantially, that the officers of such corporations are 
 not liable for more than nominal damages if they refuse to per- 
 form the duty which the law imposes on them. The result is, 
 judgments can be obtained in the courts against these municipali- 
 ties, upon the bonds or coupons they have issued, and their obli- 
 gations construed with the greatest rigor; but after judgments, 
 and when it is attempted to make their property available to sat- 
 isfy them, then arises the real difficulty of the case, in the effort 
 to overcome which the old legal maxim, that there is no wrong 
 without a remedy, seems sometimes to be reversed." 
 
 305. The holder of municipal bonds is not limited to the 
 special tax provided for in the act authorizing the issue of the 
 bonds, but may look to the funds of the county raised by general 
 taxation, unless the act expressly provides that the bonds shall 
 not be paid in any other manner. 2 Thus, where bonds in aid of 
 a railroad were issued pursuant to a law which authorized a levy 
 of a special tax " not to exceed one twentieth of one per cent, 
 upon the assessed value of taxable property for each year," which 
 was a provision wholly inadequate to meet the interest of the 
 bonds, Mr. Justice Strong, speaking for the Supreme Court, said: 
 "It is incredible that the legislature intended to deny to the pur- 
 chasers of the bonds any right to look for payment beyond such 
 a meagre provision ; or, if it was so intended, that the intention 
 would not have been expressed in precise terms. In the absence 
 of any express declaration that the creditor's right to claim pay- 
 ment shall not reach beyond the fund derived from the small 
 special tax, we cannot think the legislature proposed rendering 
 the bonds unsalable or almost worthless in the hands of those who 
 
 1 Rses v. City of Watertown, 19 Wall, pervisors v. United States, 18 "Wall. 71 ; 
 107. State v. Shortridge, 56 Mo. 126, which are 
 
 2 United States v. County of Clark, 95 not inconsistent with this proposition. 
 U.S. 769; S. C. 96 U. S. 211. See Su- 
 
 284
 
 ENFORCEMENT OF MUNICIPAL BONDS. [§ 305. 
 
 might be so unfortunate as to hold them. Such an intention 
 would have defeated the object sought to be secured by giving 
 authority for their issue. Nor can we think that the legislature 
 intended to set a trap for purchasers, and lead them to suppose 
 they were obtaining valuable securities, when, in fact, they would 
 obtain what was worth next to nothing. The statute justifies no 
 implication of any such legislative intention. If it be said that 
 the legislature, in limiting the special tax allowed, contemplated 
 no issue of bonds beyond what one twentieth of one per cent, 
 would pay, and did not anticipate the improvidence of purchasers 
 who might buy bonds issued in excess of that sum, it may be an- 
 swered that still a larger issue was in fact authorized." 
 
 It is the general rule in the United States that debts incurred 
 by or in the name of a public or quasi corporation, under legisla- 
 tive authority, cannot under any circumstances be enforced against 
 the private property of the inhabitants, 1 although the inhabitants 
 of towns in New England are personally liable for judgments 
 against town corporations. 2 Consequently bonds issued in pursu- 
 ance of a statute authorizing county courts to issue bonds, in the 
 name of the county, on behalf of unincorporated townships voting 
 the aid, cannot be enforced, either against the township or its in- 
 habitants ; but judgment may be recovered against the county 
 issuing the bonds, and although it cannot be enforced against the 
 county or its property, or its tax-payers at large, the county court 
 may be compelled by mandamus to levy and collect a tax to pay 
 the same. 3 
 
 1 Kces v. City of Watertown, 19 Wall. §§ 446, 687, 693 n. ; Beardsley v. Smith, 
 107 ; Jordan v. Cass County, 3 Dill. 185. 16 Conn. 368. 
 
 2 Dillon on Municipal Corporations, 3 Jordan v. Cass Count v, 3 Dill. 185. 
 
 285
 
 CHAPTER VIII. 
 
 PROMISSORY NOTES AND UNSECURED BONDS OF CORPORATIONS. 
 
 I. Promissory notes of corporations, 306- I II. Unsecured bonds of corporations, 
 311. I 312-31G. 
 
 I. Promissory Notes of Corporations. 
 
 306. Corporations, except as restrained by express pro- 
 visions, or by necessary implications, may use any form of 
 security, or any kind of acknowledgment of indebtedness that an 
 individual may use. 1 
 
 Where the nature and character of the business of a corpora- 
 tion warrant the use of ordinary negotiable instruments, such as 
 promissory notes and bills of exchange, the company has an im- 
 plied authority to issue them. In the United States this implied 
 authority is held to belong to all ordinary commercial corporations, 
 when used for proper corporate purposes ; 2 yet in England the 
 courts have at different times denied the power to almost all cor- 
 porations, 3 except those whose business is banking, or some kind 
 of financial enterprise which necessarily involves the making or 
 
 i Pusey v. New Jersey R. R. Co. 14 N. Y. 3 "Wend. (N. Y.) 94 ; Clark v. Far- 
 Abb. Pr. X. S. 434. mers' Woolen Mfg. Co. 15 lb. 256 ; Smith 
 
 2 Mossy. Averell, ION. Y. 449, 457 ; 01- v. Eureka Flour Mills Co. 6 Cal. 1; 
 
 cott v. Tioga R. R. Co. 27 lb. 546. " No Richmond, Fredericksburg & Potomac R. 
 
 question is better settled upon authority R. Co. v. Snead, 19 Gratt. (Va. ) 354. 
 than that a corporation, not prohibited by 3 Bateman v. Mid- Wales Ry. Co. L. R. 
 
 law from doing so, and without any ex- 1 C. P. 499 ; Peruvian Ry. Co. v. Thames 
 
 press power in its charter for that purpose, & Mersey M. Ins. Co. L. R. 2 Ch. 617; 
 
 may make a negotiable promissory note, Broughton v. Manchester W. Works Co. 
 
 payable either at a future day or upon de- 3 B. & A. 1 ; East London W. Works Co. 
 
 mand, when such note is given for any of v. Bailey, 4 Bing. 283 ; Dickinson v. 
 
 the legitimate purposes for which the com- Valpy, 10 B. & C. 128; Burmester v. Nor- 
 
 pany was incorporated." The American ris, 6 Ex. 796; Steele v. Harmer, 14 M. & 
 
 courts have fully established this principle, W. 831 ; 4 Ex. 1 ; Bramah v. Roberts, 3 
 
 and from general considerations of policy Bing. N. C. 963 ; Thompson v. Universal 
 
 and of law it must be regarded as cor- Salvage Co. 1 Ex. 694. See, however, 
 
 rect. Barker v. Mechanic Fire Ins. Co. of Moseley Green Coal, &c. Co. in re, 4 De 
 
 286 G., J. & S. 756.
 
 PROMISSORY NOTES OF CORPORATIONS. [§ 307. 
 
 negotiating of negotiable instruments. 1 In some cases where such 
 a power cannot be inferred from the nature of the business, it is 
 conferred by implication from the general words of the charter or 
 the articles of association. 2 Thus the memorandum of association 
 of a company formed for the purpose of purchasing a concession 
 from the government of Peru for the construction of a railway 
 contained the provision, that " in order to the attainment of the 
 main object of the company they may do, either in the United 
 Kingdom, or Peru, or elsewhere, whatsoever they from time to 
 time think incidental or conducive thereto." It was held that 
 this language was wide enough to authorize the company to 
 make negotiable instruments. " It is, I think," said Lord Cairns, 
 L. J., " beyond all possibility of dispute, that, if they think it 
 incidental or conducive to the attainment of the concession, when 
 the instalments become or are about to fall due, in place of mak- 
 ing calls on their shareholders, they should give a bill of ex- 
 change, payable at a future day, for the amount of the instal- 
 ments, they may do so." 3 
 
 307. The English decisions are not altogether uniform in 
 this matter, for while there are a few decisions which really rest 
 upon the principle that a corporation may make such ordinary 
 negotiable paper as is incidental to the nature of its business, 4 
 yet the cases generally are the other way. Thus, in Bateman v. 
 Mid- Wales Railway Company? the question was whether a rail- 
 way company could lawfully bind itself by accepting a bill of 
 exchange. Earl, C. J., delivering the judgment, said: "I am of 
 opinion it cannot. The bill of exchange is a cause of action, a 
 contract by itself, which binds the acceptor in the hands of any 
 indorsee for value ; and I conceive it would be altogether contrary 
 to the principles of the law which regulates such instruments that 
 any should be valid or not, according as the consideration between 
 the original parties was good or bad, or whether, in the ease oi a 
 corporation, the consideration in respect of which the acceptance 
 is given is sufficiently connected with the purposes for which the ac- 
 
 i General Estates Co. in re, L. II. .'J 01). 8 Peruvian Ry. Co v. Thames >^ Mer- 
 758,761; Land Credit Co. of Ireland in sey M. Ins. Co. supra, 
 ,, I, |;. i Ch. 460. ' Moseley Ciecn (\>:il >^ ('<>kr Co. in 
 
 a Peruvian Ry. Co. v. Thames & Mersey re,4 De G.,J. & S. 756; Peruvian Ry.Co. 
 M. I,,-. Co. L. R. 2 Ch. 017, 624. v. Thames & Mersey M, [ns. Co. supra. 
 
 •'• L. R. I C. I'. 499, 509. 
 
 287
 
 § 808.] PROMISSORY NOTES AND UNSECURED BONDS. 
 
 ceptors are incorporated. It would be inconvenient to the last degree 
 if such an inquiry could be gone into. Some bills might be given 
 for a consideration which was valid, as for work done for the com- 
 pany, and others as a security for money obtained on loan beyond 
 their borrowing powers. It would be a pernicious thing to hold 
 that, in respect to the former, the corporation might be sued by 
 an indorser, but in respect of the latter, not." 
 
 There is no question, however, that corporations of all kinds 
 may draw checks in the usual course of business. This power is 
 necessary for every corporation, and being necessary, is implied. 1 
 
 A distinction is taken between bills and notes, by a corporation 
 having no power to borrow, given in its ordinary business, as for 
 instance in the purchase of property essential for its use, and bills 
 and notes given for actual loans of monejr. In like manner, an 
 existing debt may be paid by means of bills of exchange, when 
 the debt could not be created originally in that way. 2 " Borrow- 
 ing and lending," says Stuart, V. C, " are things perfectly well 
 understood, and although the procuring of money by means of a 
 bill of exchange confers the same benefit on the person who pro- 
 cures it as if he were to borrow the amount, yet it is impossible to 
 consider transactions upon bills of exchange given in this manner 
 as borrowing and lending within the meaning of the company's 
 articles of association. It has been well decided that a balance 
 due a bank by a company which keeps an account with it, and has 
 had the benefit of the money, is a debt, but not a loan in the 
 proper sense." 
 
 308. Accommodation paper. — As a corollary to the prop- 
 osition that a corporation may make negotiable paper, it follows 
 that such paper, though made for accommodation, is binding upon 
 the maker in the hands of a holder in good faith for value. It 
 may not be within the scope of the corporate powers to make ac- 
 commodation paper ; but having a general power to make negoti- 
 able paper, the doctrine of ultra vires does not apply when in a 
 particular case a corporation abuses this general power, and issues 
 accommodation paper which comes into the hands of a holder for 
 
 i Waterlow v. Sharp, L.R. 8 Eq. 501 ; 2 Cefn Cilcen Mining Co. in re, L. R. 7 
 
 Serrell v. Derbyshire, &c. Ry. Co. 9 C. B. Eq. 88; and see Waterlow v. Sharp, L. R. 
 
 811. 8 Eq. 501. 
 288
 
 PROMISSORY NOTES OF CORPORATIONS. [§§ 309, 310. 
 
 value -without knowledge of such abuse. 1 The corporation is es- 
 topped from setting up the defence of ultra vires in such case, 
 because it has virtually represented that the paper was given for 
 some legitimate purpose, and having the general power to give 
 negotiable paper, a purchaser cannot be presumed to know that 
 any particular obligation was given for an unauthorized purpose. 2 
 
 309. Paper given to enable a corporation to prosecute an 
 unauthorized business. — The same reasoning applies as well 
 to obligations given by a corporation for money borrowed to ena- 
 ble it to prosecute a business which it had no power to engage 
 in. The corporation having the general power to borrow money, 
 it would be pressing the doctrine of ultra vires to an extent not 
 to be tolerated, to allow it to evade the payment of the money 
 on the ground that it expended the money in prosecuting an 
 unauthorized business, even though the lender knew the money 
 would be so expended, provided the business itself be free from 
 any intrinsic immorality or illegality. 3 
 
 310. Of course if the holder has notice that the instru- 
 ment was improperly issued by the corporation, he cannot en- 
 force it ; and such notice may be either actual or constructive. A 
 limitation in the power of the corporation in respect to issuing a 
 security imposed by statute or by the charter of the company, 
 must be taken notice of by every person dealing with it. In the 
 leading English case upon this subject, Cockburn, C. J., deliver- 
 ing the judgment, said: 4 "'It is contended that the plaintiffs, 
 not having had any knowledge of the want of such authority, are 
 
 1 Monument Nat. Bank v. Globe Works, Olcott v. Tioga R. R. Co. 27 N. Y. 546 ; 
 
 101 Mass. 57 ; S. C. 3 Am. R. 322. See, State Bank v. U. S. Pottery Co. 34 Vt. 
 
 also, Farmers' & Mechanics' Bank n. Em- 144; Smead v. Indianapolis, Pittsburg & 
 
 pire Stone Dressing Co. 5 Bosw. (N. Y.) Cleveland 11. R. Co. 11 Ind. 104. 
 
 275; Maitland /•.Citizens' Nat. Bank of - Bissell v. Michigan South. & North. 
 
 Baltimore, 40 Md. 540 ; S. C. 17 Am. R. Ind. R. R. Cos. 22 N. Y. 258, 289, 290, per 
 
 620; Bank of Genesee v. Patchin Bank, 13 Seldcn, J. ; City of Lexington v. Butler, 
 
 N. X". 809; Merchants' Hanking Associa- L4 Wall. 282. 
 
 tionv.N. Y.,&c White L \. V. :; Bradley v. Ballard, 55 111. 418 j 8 
 
 505; Centra] Bank v. Empire Stone Dress- Am. 1>. C56. 
 
 Co. 26 Barb, IN. V.) 23; Morford v. ' Balfour v, Ernest, 5 C. B. N. S. 601 ; 
 
 Farmers' Bank of £ County, Il>. 28 L.J. (C. P.) 1 70, quotation Erom latter 
 
 : Bridgeport City Bank v. Empire report; and see Hood v. New JTork & N. 
 
 Dre ring Co. 30 Barb. (N. T.) 121; H. R. R. Co. 22 Conn. 502. 
 
 18 289
 
 § 311.] PROMISSORY NOTES AND UNSECURED BONDS. 
 
 entitled to treat this bill as a bill taken from a partner having a 
 general power of drawing bills, and which might be considered as 
 drawn for partnership purposes, though, in fact, it was drawn by- 
 one partner in fraud of the others. There is, however, this dif- 
 ference between that case and the present one, that then, there 
 would be no reason for supposing that the bill was not given for 
 partnership purposes, whereas here, the bill was taken by the 
 plaintiffs in payment of a debt, for the discharge of which they 
 knew it was not within the general scope of the authority of the 
 directors of this society to draw bills, for the plaintiffs must have 
 known that the company were constituted under a deed of settle- 
 ment, to which, being registered pursuant to the statute, the 
 plaintiffs could have had access, and the case which has been re- 
 ferred to by my brother Willes shows that a man must be taken 
 to have knowledge of the contents of a deed of this kind." 
 
 311. Notes under corporate seal. — Ordinary promissory 
 notes and other instruments usually made without sealing, when 
 issued by corporations, are not infrequently issued under the cor- 
 porate seal. The seal in such cases is practically without effect. 
 It does not affect the negotiability or the validity of the instru- 
 ment. 1 
 
 A note signed by the directors or other officers of a corpora- 
 tion by their individual names, although they describe themselves 
 as such officers, is not the note of the corporation unless it pur- 
 ports to be made on behalf or on account of the company. Even 
 the affixing of the corporate seal to such a note does not make it 
 the note of the corporation, where the parties do not otherwise use 
 terms to exclude their personal liability. 2 But a note signed by 
 individual officers of a corporation " by and on behalf of the said 
 society," was held to be binding upon the company, and not upon 
 the parties who signed it. 3 And so a note signed by individuals, 
 "for" a corporation named, is binding upon the corporation if 
 
 1 Connecticut Mut. Life Ins. Co. v. The note in this case was as follows : "We, 
 Cleveland, Columbus & Cincinnati R. R. the directors of the Isle of Man Slate Co., 
 Co. 41 Barb. (N. Y.) 9 ; Halfordu. Came- limited, do promise to pay J. D. £1,600, 
 ron's Coalbrook, &c. Ry. Co. 16 Q. B. with interest at 6 per cent, till paid, for 
 442; Aggs v. Nicholson, 1 H. & N. 165; value received." The company's seal was 
 Goodwin v. Robarts, L. R. 10 Ex. 337 ; affixed. 
 
 General Estates Co. in re, L. R. 3 Ch. 758. 3 Aggs v. Nicholson, 1 H. & N. 165. 
 
 2 Dutton v. Marsh, L. R. 6 Q. B. 361. 
 
 290
 
 UNSECURED BONDS OF CORPORATIONS. [§§ 312, 313. 
 
 the signers had authority to bind it. But where such persons 
 " jointly and severally " promised for a corporation, these words 
 were considered as fixing the undertaking as a personal one. 1 
 
 II. Unsecured Bonds of Corporations. 
 
 312. At common law a private corporation has the power 
 to issue bonds not secured by mortgage, for any purpose for 
 which it may lawfully contract a debt. No special legislative 
 authority is needed unless some restriction is imposed by the com- 
 pany's charter, or by general enactment. " A bond is merely an 
 obligation 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 powers, but 
 was originally the usual and peculiarly appropriate form of cor- 
 porate agreement." 2 Restrictions upon the issuing of bonds have 
 been imposed in some states, and where this is the case such bonds 
 can be issued only in the mode and for the purposes authorized. 
 Bonds issued in disregard of such statutes are void. 3 They may 
 be repudiated not only by the corporation itself, but by a subse- 
 quent mortgagee whose mortgage is not made expressly subject to 
 them. 
 
 A railroad company unless restrained by statute has power to 
 contract debts, and the power to acknowledge its indebtedness by 
 making bonds under its seal. 4 This is a very different question 
 from that which relates to the power of such corporation to mort- 
 gage its property without legislative authority. 
 
 313. A corporation having the power to borrow money for 
 a specific purpose has the right to issue any instrument in ac- 
 knowledgment of the debt which the parties may consider conven- 
 ient. It may issue bonds for such debt without the aid of any 
 statute in terms conferring the power to issue bonds. 5 Such cor- 
 poration has the same power as an individual to issue any kind of 
 instrument acknowledging its indebtedness and promising pay- 
 
 1 Bradlee v. Boston Glass Manufactory, * Commissioners of Craven >■. Atlantic 
 
 16 Pick. (Mass.) 847, cited approvingly by & N. C. It. R. Co. 77 N. C. 289. 
 
 Bramwell, B.,in Aggs v. Nicholson, supra. 5 Miller v. N. Y. ft Erie R. II. Co. 18 
 
 ■ immonwealth v. Smith, LO Allen How. (N. v.j Pr. 874; 8 Abb. Pr. 131 . 
 
 (Ma- i, 148, per Hoar, J. Dana p.Bankof U. 8. 5 \V. ft B. (Pa.) 
 
 8 Commonwealth v. Smith, su/na. 223. 
 
 291
 
 § 314.] PROMISSORY NOTES AND UNSECURED BONDS. , 
 
 ment. The bonds of a corporation having the power to borrow, 
 but not the power to grant a mortgage to secure the loan, are 
 valid although the mortgage is void. In such case when it is 
 sought to enforce the bonds, the power to issue them is all the 
 court has to do with, and the company is liable upon them with- 
 out regard to the mortgage. 1 
 
 A statute authorizing a railroad company to borrow money 
 from time to time for maintaining and working the railroad, and 
 to pledge the lands, tolls, and revenues, and to make bonds or de- 
 bentures for securing the payment of the sums borrowed, does not 
 restrict a company to the use of bonds or debentures rather than 
 other evidences of debt. 2 
 
 314. A statutory bond or debenture holder in England 
 occupies a position quite different from that of a mortgagee ; while 
 the latter has a lien upon the tolls and traffic receipts of the 
 undertaking, and may have a receiver of them appointed for the 
 purpose of paying his claim, the former has no such lien or right 
 to have a receiver appointed. 3 A judgment creditor might, prior 
 to the Railway Companies Act of 1867, as against such bond- 
 holder, levy his execution upon the personal or real property of the 
 company. 4 Although such creditor had recovered his judgment 
 upon a debenture if his execution was paid before any of the 
 other bondholders intervened, he might keep what he had re- 
 ceived. He might bring a suit in behalf of himself and all other 
 bondholders, but was not bound so to do. The non-priority clauses 
 of the statute were regarded as applying between executions and 
 not as between bonds. 5 
 
 An English company owning land in Italy issued bonds or 
 debentures binding their " estate, property, and effects," and it 
 was claimed that they constituted a charge upon the land, and 
 that the debenture holders could restrain a sale of it under a sub- 
 sequent mortgage ; but the master of the rolls held them to be 
 merely bonds, and that they created no mortgage or lien ; that 
 
 1 Philadelphia & Sunbury E. E. Co. v. Preston v. Corporation of Great Yar- 
 Lewis, 33 Pa. St. 33. mouth, L. R. 7 Ch. App. 655. 
 
 2 Commercial Bank of Canada v. Great 4 Bowen v. Brecon Ry. Co. L. R. 3 Eq. 
 Western Ry. Co. of Canada, 3 Moore P. 541,548; Eussell v. East Anglian E. Co. 
 C. C. (N. S.) 295. 3 Mac. & G. 104, 151. 
 
 3 Imperial Mercantile Credit Associa. v. 6 Imperial Mercantile Credit Asso. v. 
 Newry & Armagh Ey. Co. 2 Ir. Eq. 524 ; Newry & Armagh Ey. Co. 2 Ir. Eq. 524. 
 
 292
 
 UNSECURED BONDS OF CORPORATIONS. [§§ 315, 816. 
 
 even if they had been mortgages they could not be preferred to 
 subsequent mortgages which had been perfected by registry ac- 
 cording to the law of Italy, although the mortgagees had notice, 
 according to the English law, of the prior charge ; and further, 
 that the Italian court was the proper forum to exercise jurisdic- 
 tion in the matter. 1 
 
 315. Prohibition against issuing notes for circulation as 
 money. — Bonds of a canal or railroad company issued in the 
 course of its legitimate business do not fall within a statutory 
 prohibition against issuing notes for a circulating medium in the 
 similarity of a bank note, the intention of the statute being to 
 prohibit the exercise of banking privileges. 2 It was urged that 
 inasmuch as the legislature had conferred upon the canal com- 
 pany power to borrow money on mortgage to enable it to com- 
 plete its work, this authority covered the whole scope of power 
 possessed by the company, and it could not issue bonds without 
 such mortgage ; and it was insisted that the parties executing 
 such bonds made themselves personally liable. But the Supreme 
 Court of Pennsylvania held that the company had of necessity 
 the right to enter into such obligations in carrying out the pur- 
 poses of the corporation, and that the obligations were binding 
 upon it. 3 
 
 A n insurance and loan company which was forbidden " to issue 
 for circulation as money any of its own promissory notes in the 
 nature- of bank notes or certificates of deposit payable to bearer, ' 
 having issued certain certificates of deposit payable to order, it 
 was found as a fact that they were not intended for circulation as 
 money. After an indorsement in blank by the payee, they in 
 effect became payable to bearer; and it was admitted in point 
 of law that they were fully negotiable; but it was decided that 
 tin- issue of these instruments was not illegal, and that therefore 
 tli" company was liable upon them. 4 
 
 316. The issuing of income bonds for the payment of the 
 
 i Norton v. Florence Land & Public :; McMasters v. Reed, supra. 
 
 Works Co. 2 \v. l:. 123. 4 Mumfordv. Am. Life Ins. & Trust Co. 
 
 a m, M Reed, l Grant (Fa.), 36; 4 N. Y. 463. 
 
 Bnbbard <•. New V«rk, &<•. I;.];. Co. 30 
 
 ,. (N. V.) 28G.
 
 § 316.] PROMISSORY NOTES AND UNSECURED BONDS. 
 
 interest and principal of which the income of a railroad company 
 is specifically pledged, does not debar the company of the legal 
 right to execute a mortgage of its road and property to secure 
 the payment of other bonds. The pledge of the income is bind- 
 ing upon the company, but is no incumbrance upon the property 
 itself, which, under a subsequent mortgage, may be taken out of 
 the possession of the company and applied to the payment of the 
 mortgage debt. 1 
 
 The Central Ohio Railroad Company having made a first and 
 second mortgage of its property issued certain income bonds, 
 wherein it was recited, that "for the punctual payment of the 
 interest and principal of said obligations, and of others of like 
 tenor, issued or to be issued, in preference to the payment of div- 
 idends on the capital stock of said company, the income aris- 
 ing from the road and its appurtenances is hereby specifically 
 pledged ; " subsequently the company executed a mortgage of its 
 whole line, and was about to issue bonds under it, when the hold- 
 ers of certain of the income bonds filed a bill to restrain the sale 
 of the mortgage bonds. It was contended in their behalf that 
 the company could not, without a violation of their own obliga- 
 tions, tantamount to fraud, attempt to impair the unrecorded 
 lien on their property by placing on record a mortgage designed 
 to secure third mortgage bonds to be paid in order after the first 
 and second mortgage bonds ; and therefore that the company 
 ought to be restrained from issuing the third mortgage bonds, 
 which, in the hands of bond fide purchasers, without notice of the 
 unrecorded lien of the income bonds, would be preferred. The 
 Court of Appeals of Maryland held, however, that fraud could 
 not be imputed to the company, in consequence of the issuing of 
 the third mortgage bonds, and that it was not in any way pre- 
 cluded from executing such subsequent obligations. The terms of 
 the income bonds were declared to be specific, and the holders of 
 them confined to the preference therein set forth. 2 
 
 i Perkins v. Deptford Pier Co. 13 Sim. 2 Garrett v. May, 19 Md. 177 
 277,281. 
 
 294
 
 CHAPTER IX. 
 
 INTEREST AXD INTEREST COUPONS. 
 
 I. The contract to pay interest, 317-320. 
 
 II. Negotiability of coupons, 321-326. 
 
 III. Order of payment of coupons, 327- 
 331. 
 
 IV. Interest on overdue coupons and 
 bonds, 332-336. 
 
 V. Suits upon coupons, 337-340. 
 
 I. The Contract to pay Interest. 
 
 317. The terms in which coupons are expressed are very- 
 different. Usually they are in the form of express promises to pay 
 the interest due at fixed times to the bearer at a place designated. 1 
 In such case the instrument is a complete contract in itself, and 
 may, when consistent with the terms of the bond, be declared on 
 as such without reference to the bond. But sometimes a coupon 
 is merely a memorandum of the interest due, and of the time and 
 place of payment, without any express promise of payment. 2 In 
 such case the coupon is not a complete instrument in itself, and 
 can be declared on only in connection with the bond. Again, a 
 coupon may be in the form of a draft for the interest in favor of 
 bearer. 3 In such case, however, the coupon is not strictly a bill 
 of exchange. It is not intended for acceptance. It is usually 
 drawn against funds deposited to meet it, and is therefore more 
 like a check. If such a coupon be construed as a mere token or 
 ticket or warrant, indicating the time when and the place where 
 the interest is due, it will satisfy the terms in which it is expressed, 
 and be consistent with the bond and the purpose for which the 
 coupon was devised. 4 
 
 Whatever be the form of the coupon, its purpose is substan- 
 tially the same, which is to afford to the holder evidence of his 
 
 i As it) Thomson v. Lee County, 3 93; Arcnts v. Commonwealth, 18 Gratt. 
 
 Wall. 327. (Va.) 750. 
 
 2 As in Woods i'. Lawrence County, 1 4 Areuts v. Commonwealth, 18 Gratt. 
 
 Black. (Va.) 750, 771. 
 
 8 Sheboygan County v. Park) r, •'( Wall.
 
 § 318.] INTEREST AND INTEREST COUPONS. 
 
 right to demand the interest according to the provisions of the 
 bond, and a convenient mode of collecting it; and to afford to 
 the maker of the bond a convenient voucher of the payment of 
 the interest. 
 
 The contract for the payment of the interest is generally fully 
 defined by the bonds, while the coupon for the interest often 
 expresses the contract very imperfectly. When such is the case, 
 the instruments necessarily being construed together, the bond 
 determines what the contract is. A coupon, also, which in terms 
 differs from the contract contained in the bond, must, by construc- 
 tion, be made consistent with that contract; and in this connec- 
 tion the purpose for which the coupon is given is to be considered. 
 
 Coupons are often signed by a printed fac-simile of the auto- 
 graph of the maker or of the officer empowered to execute the 
 bonds ; and this constitutes a legal signature, though not ex- 
 pressly authorized by statute. 1 
 
 318. Usury laws do not generally apply to bonds issued by 
 corporations. They are expressly excepted from the operation of 
 the statutes in several states. 2 In England debentures may be 
 issued at a discount, and the holders will be allowed to prove for 
 the full nominal amount in proceedings for winding up. 3 
 
 The usury laws apply to corporations, in the absence of special 
 legislation, to the same extent as to natural persons, and corpora- 
 tions cannot, any more than individuals, legally sell their bonds, 
 bearing the highest rate of interest, at a discount, for the purpose 
 of borrowing money. 4 
 
 A statute authorizing corporations to sell their bonds at a dis- 
 count may have no application to foreign corporations, so that the 
 
 1 Pennington v. Baehr, 48 Cal. 565 ; In several other states and territories 
 McKee v. Vernon County, 3 Dill. 210; there are no usury laws. See Jones on 
 Lynde v. County, 16 Wall. 6. Mortgages, § 633. 
 
 2 Alabama, § 27 ; Arkansas, § 28 ; Da- 3 Anglo-Danubian Steam Nav. &c. Co. 
 kota Territory, § 32 ; District of Colum- in re, L. R. 20 Eq. 339 ; Foss v. Harbottle, 
 bia, § 34; Florida, § 35; Indiana, §38; 2 Hare, 461 ; Regent's Canal Ironworks 
 Iowa, § 39 ; Maine, § 43 ; Maryland, § 44 ; Co. in re, 24 W. R. 687 ; In Blakely Ord- 
 Michigan, § 46 ; Minnesota, § 47 ; Mon- nance Co. in re, 8 Eq. 244, the Master of 
 tana Territory, § 50 ; Nebraska, § 51 ; the Rolls, Romilly, allowed proof for only 
 New Hampshire, § 53 ; New Jersey, 1 Rev. the sum actually advanced. 
 
 1877, p. 514; Laws 1855, p. 500; New 4 Commissioners of Craven v. Atlantic & 
 York, 2 R. S. 1875, p. 1166 ; Laws 1850, N. C. R. R. Co. 77 N. C. 289. 
 ch. 172; Vermont, § 64; Wisconsin, § 67. 
 296
 
 THE CONTRACT TO PAY INTEREST. [§ 319. 
 
 same provisions as to interest and usury apply to them that apply 
 to private individuals. 1 
 
 A special clause in a charter authorizing a company to borrow 
 money on such terms as may be agreed upon by the parties over- 
 rides an existing general law upon the subject, and enables it to 
 borrow at any rate of interest. 2 
 
 Under a statute authorizing the sale of corporate bonds at less 
 than par value, there can be no ground of objection to an exchange 
 of the bonds for iron rails. It could make no difference whether 
 the bonds were sold at a reduced rate and the iron rails bought for 
 cash, or the bonds exchanged directly for the iron rails ; the trans- 
 action might easily be made to assume either form. 3 
 
 When a statute limits the rate of interest a corporation may pay 
 for loans, but does not provide for the times of payment, it is a 
 proper exercise of the power to make the interest payable semi- 
 annually. So long as the specified rate be not exceeded, the pay- 
 ment of the interest may be regulated according to the usual course 
 of dealing in borrowing money. 4 
 
 319. The law of the place where a bond is made payable, 
 as a general rule, determines whether it is usurious or not. If it 
 be not usurious by that law, a plea of usury cannot be sustained, 
 unless it alleges that the place of payment was inserted as a shift 
 or device to evade the law of the place where the bond was 
 made. 5 
 
 When the rate of interest at the place where the bonds are 
 made differs from that at the place where they are made pay- 
 able, the parties may stipulate for either rate, and their contract 
 will govern. 6 
 
 The laws of the state where the corporation was organized 
 and issued its bonds determine the cjuestion of usury as to such 
 bonds, in a suit in the same state to enforce them, although they 
 
 I McGtt ;ort>. Covington & Lexington 6 Junction R. It. Co. v. Bank of A^li- 
 
 R.R.] Dis. (Ohio) 509. land, 12 Wall. 226; Butler v. Myer, 17 
 
 a Morrison v. Eaton & Hamilton R.R. Ind.77; Butleru. Edgerton, L5 Lnd. L5. 
 
 Co. i * lnd. 110. ,; l Jones on Mortga 
 
 Piqua & lnd. R B. Cromwell v. County of Sac, 96 1 . B. 51, 
 
 Co. 10 Ohi 02 ; Miller v. Tiffany, l Wall, S 
 
 * Coe v. Columbns, Piqua & [nd. K B. 
 Co. 10 Ohio St. 
 
 297
 
 §§ 320, 321.] INTEREST AND INTEREST COUPONS. 
 
 are made payable in another state, whose laws are different. 1 The 
 statute of such other state where the bonds are made payable 
 might control in an action upon the bonds in that state. 
 
 II. Negotiability of Coupons. 
 
 320. Coupons •which promise payment to bearer are in le- 
 gal effect promissory notes by the law merchant, and possess all 
 the attributes of negotiable paper. 2 The purchaser of such cou- 
 pons is not an assignee of the causes of action, but he acquires 
 title by delivery, and the promise to bearer is a promise to him- 
 self directly. 3 Even when the coupons themselves do not purport 
 to be negotiable, if the bonds to which they belong are nego- 
 tiable, the coupons are negotiable also, so long as they are not 
 detached from the bonds. The title to negotiable interest cou- 
 pons passes from hand to hand by mere delivery, and a transfer 
 of possession is presumably a transfer of title, but does not im- 
 port a guaranty of payment. 4 
 
 321. Coupons are not rendered non- negotiable by the fact 
 that they are not made payable to a particular person. 5 — Such 
 coupons are to be taken in connection with the bonds to which 
 they are annexed, and though not themselves negotiable instru- 
 ments by the law merchant, they follow the instrument to which 
 they are attached, and when that is negotiable the coupons are 
 negotiable. 6 The obligation to pay the interest is to be found 
 
 1 Commissioners of Craven v. Atlantic & Biss. 98 ; Myers v. York & Cumberland R. 
 N. C. R. R. Co. 77 N. C. 289. R. Co. 43 Me. 232. 
 
 2 Mercer County v. Hacket, 1 Wall. 3 Cooper v. Town of Thompson, 13 
 83; Thomson v. Lee County, 3 Wall. Blatchf. 434,437; City of Lexington v. 
 327 ; Aurora City v. West, 7 Wall. 105 ; Butler, 14 Wall. 282, 283. 
 
 Clark v. Iowa City, 20 Wall. 583 ; Ken- 4 Ketchum v. Duncan, 96 U. S. 659. 
 
 nard v. Cass County, 3 Dill. 147 ; Chesa- 5 Smith v. County of Clark, 54 Mo. 58. 
 
 peake & Ohio Canal Co. v. Blair, 45 Md. The coupons in this case were in the fol- 
 
 102,110; Town of Cicero v. Clifford, 53 lowing form: " State of Missouri. Bond 
 
 Ind. 191 ; Gilbough v. Norfolk & Peters- No. 51. $35. The County of Clark will 
 
 burg R. R. Co. 1 Hughes, 410; Arents pay thirty-five dollars on this coupon on 
 
 v. Commonwealth, 18 Gratt. (Va.) 750; the first day of January, 1867, at the 
 
 Miller v. Town of Berlin, 13 Blatchf. 245 ; treasury of said county." 
 
 Cooper ». Town of Thompson, lb. 434 ; 6 McCoy i?. Washington Co. 3 Wall. Jun. 
 
 Haven v. Grand Junction R. R. & Depot 381. The coupons were as follows: 
 
 Co. 109 Mass. 88; Spooner v. Holmes, 102 "Washington County Bonds. Warrants 
 
 Mass. 503 ; 3 Am. R. 502. Contra, but not for thirty dollars interest on bond No. 108, 
 
 authorities, Clarke v. City of Janesville, 1 payable in the city of New York, on the 
 
 15th of May, 1857." See § 323. 
 298
 
 NEGOTIABILITY OF COUPONS. [§ 322. 
 
 in the bond, not in the coupons. These are intended by the par- 
 ties to be evidence of debt in the hands of the holder, and proof 
 of payment when in possession of the debtor. By the contract 
 of the parties and the usage of the country, they are sufficient 
 evidence of a debt to the holder as against the obligors of the 
 bonds. The possession of them is primd facie evidence that the 
 holder is the holder of the bond, or was so when they were 
 cut off, and as such entitled to receive the interest. 
 
 322. Interest coupons, detached from bonds, payable to 
 bearer at a specified time and place, are negotiable promises for 
 the payment of money, and therefore subject to the same rules as 
 bank bills or other negotiable instruments. Such coupons hav- 
 ing been detached and sent to New York by express, on March 
 31, 1871, for presentation and payment, were on that day stolen 
 from the express office, and on the third day of April following 
 were purchased by the plaintiff in good faith at Albany. He 
 was held to have acquired a valid title to them as against the 
 true owner. The fact that the coupons are declared to be for 
 interest upon bonds specified by their numbers does not destroy 
 their negotiability when separated from the bond, or impair the 
 title of one purchasing from another without production of the 
 bond. 1 Though overdue, such coupons are still negotiable in- 
 struments, and one who has taken them before or after maturity 
 may give a good title to another. 2 
 
 A coupon for accrued interest, payable to bearer, is just as 
 much a lien under the mortgage given to secure the bond as the 
 bond itself ; and it is just as much a lien after it is detached from 
 the bond as before ; and when held by another person as when 
 held by the bondholder. The fact that the coupon is made paya- 
 ble to bearer shows that a severance from the bond was contem- 
 plated. It is part of the mortgage debt, and being made capable 
 of separate transfer, an assignment of it carries a corresponding 
 interest in the mortgage security. Upon a foreclosure of the 
 
 1 Evertson v. National Bank of New- lars, in gold coin, on the 1st day of April, 
 
 port, 66 N. Y. 14. The form of the con- 1871, fur semi-annual interest on bond 
 
 pens was as follows :" $35. The Indian- No. . A. P. Lewis, Secretary." 
 
 apolis, Bloomington & Western Railway 2 Grand Rapids & Indiana R. R. Co. v 
 
 Company will pay the bearer, at its agency Sanders, 54 Bow. (N. V.) Pr.214 ; Arents 
 
 in the city of New fork, thirty-five dol- v. Commonwealth, L8 Qratt. (Va.) 750. 
 
 299
 
 § 323.] INTEREST AND INTEREST COUPONS. 
 
 mortgage the holder of a detached coupon is entitled to a pro rata 
 distribution with the holders of the residue of the mortgage debt. 1 
 
 323. But coupons not payable to bearer or order are not ne- 
 gotiable when separated from the bonds. 2 It is doubted whether 
 the parties to an instrument can give it a negotiable character 
 with all the incidents pertaining to negotiable papers when it is 
 not in terms within the class of instruments known to the law as 
 negotiable. 3 It is not essential that an interest warrant should 
 be negotiable for the purpose of its serving as authority from the 
 railroad company to its financial agent to pay the amount named 
 in it upon presentation although detached from the bonds. " It 
 is possible," says Mr. Justice Allen, 4 " that as between such agent 
 and the debtor corporation the possession and presentation of the 
 interest warrants at maturity would be evidence of an authority 
 to receive the money by the person presenting it, even as against 
 the true owner. But if this be conceded, it does not make them 
 negotiable as between third persons. In this contract, as in others, 
 its negotiability depends upon its terms ; and the rule is, with 
 certain exceptions not applicable to this case, that in instruments 
 for the payment of money, if no one be designed as payee, either 
 by name or as bearer, the instrument is not a promissory note. If 
 these warrants are not promissory notes they are not negotiable; 
 
 they are neither checks nor bills of exchange The contract 
 
 embodied in these interest warrants, so far as any contract can 
 be implied, cannot, upon principle or within any well considered 
 authority, be made an exception to the general rules by which the 
 negotiability of promises for the payment of money is determined. 
 There is no usage or custom proved that would give these war- 
 rants a negotiable character, even if custom and usage so recent 
 as one applicable to these instruments would be could change 
 
 1 Miller v. Rutland & Washington R. Farmers' Loan and Trust Company in the 
 R. Co. 40 Vt. 399 ; Sewall v. Brainerd, 38 city of New York, April 1, 1871. 
 
 Vt. 364. " W. J. Ermentrout, Secretary." 
 
 2 Evertson v. National Bank of New- See, also, Myers v. York & Cumberland 
 port, 66 N. Y. 14. The form of the war- R. R. Co. 43 Me. 232 ; Jackson v. York 
 rant was as follows : "$35. Interest war- & Cumberland R. R Co. 48 Me. 147; 
 rant for thirty-five dollars ($35), upon Crosby v. New London, &c. R. R. Co. 26 
 bond No. of the Danville, Urbana, Conn. 121. 
 
 Bloomington & Pekin Railroad Company. 3 Cranch v. Credit Foncier of England, 
 Payable in gold coin at the office of the L. R. 8 Q. B. 374. 
 
 300 
 
 4 Evertson v. National Bank of Newport, 
 supra.
 
 NEGOTIABILITY OF COUPONS. [§§ 324, 825. 
 
 their legal effect." Therefore one who in good faith purchased 
 such warrants after they had been stolen from the rightful owner 
 acquired no better title to them than his vendor had and could 
 convey, and the transaction was the same in legal effect as the 
 purchase of any article of merchandise from one having no title 
 or authority to sell. 
 
 Dividend warrants of the Bank of England payable to a partic- 
 ular person, without words making them transferable, were held 
 not negotiable, although by custom they had been so treated for 
 sixty years. 1 
 
 324. Overdue coupons, like other overdue negotiable instru- 
 ments, though in the hands of a bond fide purchaser for value, are 
 subject to all the defences and equities that attach to ordinary 
 choses in action ; the purchaser takes no better title than the 
 party from whom he received them had. 2 
 
 A purchaser of overdue coupons takes only the title of the 
 vendor, and therefore acquires no title at all to such coupons 
 when they have been obtained by fraud or theft. 3 
 
 The fact that past due coupons are attached to a bond at the 
 time of it purchase does not invalidate the purchaser's title as a 
 bond fide purchaser of the coupons thereafter to become due, and 
 of the bond itself. 4 The burden of proof is upon the defendant to 
 show the existence of any other facts which, in connection with 
 the overdue coupons, might deprive the purchaser of the charac- 
 ter of a bond fide holder. 
 
 325. A coupon is ordinarily considered due and payable, 
 aside from the question of days of grace, on the day when the in- 
 terest it represents is by the terms of the bond made payable. 5 
 It is not the less payable at such times because the bond provides 
 that the interest shall be paid on presenting or surrendering the 
 proper coupon. This evidence of title must be produced before 
 
 1 Partridge v. Bank of England, 9 Q. 5 Arents v. Commonwealth, 18 Gratt. 
 
 B, 896. (Va.) 750, 770. The coupon in this < 
 
 - Arents v. Commonwealth, 18 Gratt. was as follows: " Coupon, city ofWheel- 
 
 (Va.,i : tag, guaranteed by the State of Virginia, 
 
 3 Gilbongh r. Norfolk & Petersburg R. Duncan, Sherman & Co., of New York, 
 l:. ' !o. l Hughes, 4 1 o. will pay the bearer thirty dollars, the half- 
 
 4 Miller v. Town of Berlin, 13 Blatchf. yearly interest on the Wheeling bond 
 245, 250. due 1st January, 1867. M. Nelson, Mayor." 
 
 301
 
 §§ 326, 327.] INTEREST AND INTEREST COUPONS. 
 
 the money it calls for can be demanded, and it must be surren- 
 dered when the money is paid. But this is just what the law 
 requires of every holder of a negotiable security, and no more. 
 Such a coupon, as to the time of its maturity is different from a 
 note payable on demand. It becomes due without any demand 
 or presentation. 
 
 326. Negotiable interest coupons are entitled to days of 
 grace, like other negotiable instruments payable at a given day 
 or on time ; and therefore one purchasing them after the expira- 
 tion of the time of payment specified, but before the expiration of 
 the days of grace, is a purchaser before maturity. 1 Such coupons 
 having every other characteristic of promissory notes, they cannot 
 be excepted from the general rule which by commercial usage, 
 sanctioned by law, is applied to every instrument, negotiable in 
 its character, coming within the ordinary definition of bills of ex- 
 change or promissory notes. " It is probably true that they are 
 regarded and treated, as well by promisor as promisee, as payable 
 at the day, and paid as if, in terms, payable without grace ; but 
 this cannot destroy the character or change the legal effect of the 
 instruments, the interpretation of which is for the courts. It is 
 only as negotiable commercial paper that the plaintiffs, as a bond 
 fide purchaser, could acquire a good title to the coupons from one 
 having no title thereto; and he can only acquire such title by a 
 purchase under the same circumstances that would give him a 
 title to other commercial paper; and if there were no days of 
 grace for the payment of these coupons they could not be trans- 
 ferred so as to give a good title." 2 If they were payable at a 
 fixed day without grace, a purchaser after that day would take 
 them as overdue paper, and would gain no better title than the 
 vendor had. It is not doubted that a negotiable bond, payable at 
 a given day or on time, is entitled to days of grace ; and there can 
 also be no doubt that negotiable coupons are entitled to the same 
 
 privilege. 
 
 III. Order of Payment of Coupons. 
 
 327. Payment of coupons should be made in the order in 
 which they fall due ; and it is doubtless true that the holder 
 
 1 Evertson v. National Bank of New- Thompson, 13 Blatchf. 434, 438, where 
 port, 66 N. Y. 14. See Cooper v. Town of above case is cited. 
 
 2 Per Allen, J., in Everlson v. National 
 302 Bank of Newport, supra.
 
 ORDER OF PAYMENT OF COUPONS. [§ 328. 
 
 may in equity claim payment in this order ; and it has some- 
 times been claimed that a holder of coupons separated from 
 the bonds ought to be paid before the bondholder, because that 
 would be the order of payment if the bonds and coupons were 
 held by the same party. As between debtor and creditor the law, 
 it is true, applies payment first to extinguish the interest ; but 
 where a part of the mortgage debt has been assigned, and the 
 mortgage security is about to be appropriated to pay the debt, 
 and is insufficient to pay the whole, mere priority of maturity 
 does not give any right to priority of satisfaction. 1 Neither is the 
 coupon holder entitled to priority over the holder of the bond 
 from which it was detached in a final distribution of the proceeds 
 of the whole mortgage property. The bond and the coupon are 
 entitled to a pro rata distribution. 2 
 
 The appointment of a receiver is for the protection of all par- 
 ties interested in the mortgaged property. When therefore a 
 subsequent mortgagee has obtained the appointment, he is not 
 entitled to have the interest coming due on his mortgage paid out 
 of the receipts of the road, to the exclusion of a prior mortgagee, 
 upon the ground that the bonds secured by such subsequent mort- 
 gage are so drawn that the principal debt becomes due and pay- 
 able if the interest be not paid. 3 
 
 328. Priority of overdue interest. — A railway mortgage 
 contained the following clause : " In case of default in the pay- 
 ment of interest or principal of any bonds, and a sale or other 
 proceedings to coerce the same, all bonds which shall then be 
 a lien in common therewith, and the interest accrued thereon, 
 shall be considered, and shall in fact be equally due and payable, 
 and entitled to a pro rata dividend of the proceeds of said sale or 
 other proceedings ; but in no case shall the principal of any bond 
 be considered due until twenty years from the date thereof." 
 Upon ;i sale under the mortgage within the twenty years, it was 
 held that the overdue interest warrants were entitled to no prefer- 
 ence; and it was declared that the provision that no bond should 
 >nsidered due until twenty years after its date was inserted 
 merely t" exclude any possible inference that a bondholder under 
 
 « Bewail v. Brainerd, 38 Vt. SI 14. a Brown -•. \. V. & Brie B. K. Co. 39 
 
 2 Bewail ". Brainerd, supra ,• Miller v. How. Pr. (N. V) 451. 
 
 Rutland & Washington l.\ U. Co. 40 Vt. 
 
 3'J'J. ; ' li; »
 
 § 329.] INTEREST AND INTEREST COUPONS. 
 
 any circumstances might, bring an action for the principal before 
 it became due by its terms. 1 
 
 329. But coupons which the bondholders had presented for 
 payment, and which they had reason to suppose were paid by 
 the company, are not entitled to share in the proceeds of sale as 
 against such bondholders, although they were in fact taken up by 
 one who advanced the money under an agreement that they were 
 to be delivered to him uncancelled, as security for the advances. 2 
 The bondholders had a direct interest in having the coupons paid, 
 so as to preserve the value of their security. They delivered 
 them up to the company for payment, and supposed they were 
 paid. If they had known the true state of the case they might 
 have refused to assign the coupons, and thus, by allowing an accu- 
 mulation of interest, to have impaired the value of their security. 
 And they could have caused a foreclosure of the mortgage for a 
 default in the payment of interest. The court regarded the po- 
 sition of the bondholders who had presented their coupons and 
 received payment in this way as being equally strong as if they 
 had purchased their bonds in the belief that the coupons had 
 actually been paid. As against such purchasers there could be no 
 question that the person who had advanced the money for the 
 coupons would be estopped from claiming that he took a transfer 
 of them. 3 
 
 Of course the mortgage remained a security for the payment of 
 the coupons until paid, whether detached or not. As against the 
 railroad company, the persons who advanced money for the coupons 
 in this way could enforce the mortgage. The company had not 
 paid the coupons, and was in no way harmed by their payment 
 by a third person under this arrangement ; but the bondholders 
 never agreed that he should take and hold the coupons, and they 
 did not agree that he should have any interest in the mortgage 
 security. The mortgage security proving insufficient to pay the 
 entire debt, their equity is superior to the equity of the party 
 who advanced the money; and as against their equity .he cannot 
 be subrogated to the claim under the mortgage. 
 
 1 Dunham v. Cincinnati, Peru, &c. Ry. Virginia v. Chesapeake & Ohio Canal Co. 
 Co. 1 Wall. 254. 32 Mil. 501. 
 
 2 Union Trust Co. of N. Y. v. Monti- s Haven v. Grand Junction R. R. & 
 cello & Port Jervis Ry. Co. 63 N. Y. 31 1 ; Depot Co. 109 Mass. 88. 
 
 304
 
 ORDER OF PAYMENT OF COUPONS. [§§ 330, 331. 
 
 330. But one who has taken up coupons in this way may 
 claim payment from any surplus left after payment of the 
 bondholders. Although having taken up the coupons due on 
 mortgage bonds of a corporation at its request, upon an under- 
 standing between him and the corporation that they were not ex- 
 tinguished as against it, but were to be held by him in place of 
 the persons who presented them, he may be estopped to come for- 
 ward as a purchaser and assignee of the coupons when the trans- 
 action appeared to be a payment of the coupons by the company, 
 and was supposed by its creditors to be a payment of them and 
 not an assignment, and the security proves to be insufficient to 
 pay the entire mortgage debt; yet if there be a surplus of pro- 
 ceeds remaining after full satisfaction of the claims of all the 
 other creditors whose claims were covered by the mortgage, he is 
 not estopped to maintain a claim for the amount of the coupons 
 paid by him, with interest from the date of payment. 1 The only 
 parties who could object to this proceeding would be the other 
 creditors secured by the same mortgage ; and when their divi- 
 dend will not be diminished by allowing the claim of one who has 
 taken up coupons under such an arrangement, there can be no 
 objection to the allowance of the claim. They cannot object to 
 the claim, although the supposed payment of the coupons at ma- 
 turity may have induced them to make purchases of the bonds, 
 becanse having received their entire debt they cannot be said to 
 have suffered any loss or inconvenience from the mode in which 
 the coupons were taken up. 
 
 331. But when the transaction is not upon its face a pay- 
 ment, but rather a transfer, as for instance when the coupons 
 are not redeemed by the corporation that made them, or at its 
 office or other place where the coupons are made payable, there is 
 no presumption of the payment and extinguishment of the cou- 
 pons. When therefore; a corporation which had previously paid 
 its coupons at its own office directs the holders to take the cou- 
 pons to a bank where they would receive payment, and the 
 holders there received the amounts due on the coupons and left 
 them in the possession of the hank, they might properly presume 
 that the- company was not paying the coupons. Inasmuch as the 
 
 i Haven v. Grand Junction B. U. ft Depot Co. 109 Mm 
 
 20 305
 
 § 831.] INTEREST AND INTEREST COUPONS. 
 
 holders of the coupons received from the corporation no checks 
 upon the bank, they must have known that the bank had no 
 vouchers for its payments unless the coupons continued in force 
 after the bank received them ; and hence it is regarded as a fair 
 presumption, that, when they delivered the possession, they as- 
 sented to a transfer of ownership. 1 "Interest coupons," says Mr. 
 Justice Strong, delivering the judgment of the Supreme Court 
 of the United States, " are instruments of a peculiar character. 
 The title to them passes from hand to hand by mere delivery. 
 A transfer of possession is presumptively a transfer of title. And 
 especially is this true when the transfer is made to one w r ho is not 
 a debtor, to one who is under no obligation to receive them or to 
 pay them. A holder is not warranted to believe that such a per- 
 son intended to extinguish the coupons when he hands over the 
 sum called for by them and takes them into his possession. It is 
 not in accordance with common experience for one man to pay the 
 debt of another without receiving any benefit from his act. We 
 cannot close our eyes to things that are of daily occurrence. It is 
 within common knowledge that interest coupons, alike those that 
 are not due and those that are due, are passed from hand to hand, 
 the receiver paying the amount they call for without any inten- 
 tion on his part to extinguish them, and without any belief in the 
 other party that they are extinguished by the transaction. In 
 such a case, the holder intends to transfer his title, not to extin- 
 guish the debt. In multitudes of cases, coupons are transferred 
 by persons who are not the owners of the bonds from which they 
 have been detached. To hold that in all these cases the coupons 
 are paid and extinguished, and not transferred or assigned, unless 
 there was something more to show an assent of the person parting 
 with the possession that they should remain alive, and be avail- 
 able in the hands of the person to whom they were delivered, 
 would, we think, be inconsistent with the common understanding 
 of business men." 
 
 1 Ketchum v. Duncan, 96 U. S. 659. of the justices of the court dissented, on 
 
 This case is clearly distinguished from the ground that the holders had no 
 
 cases like those in the preceding section, thought of selling the coupons, and there- 
 
 where the coupons were paid at the com- fore in law did not sell them. The deci- 
 
 pany's office, or with money advanced to sion of the court is, however, regarded as 
 
 the company for the purpose. Yet four sound. 
 
 306
 
 INTEREST ON OVERDUE COUPONS AND BONDS. [§ 332. 
 
 IV. Interest on Overdue Coupons and Bonds. 
 
 332. Interest is recoverable upon coupons after their ma- 
 turity by way of damages for the detention of money due, and 
 should be computed at the lawful rate without semi-annual or 
 other rests. 1 Such interest will be computed only at the legal 
 rate, even where the rate of interest on the bonds themselves after 
 maturity continues at a higher rate which the parties are allowed 
 under the statutes to contract for, the statutory rate applying only 
 in the absence of a different stipulated rate. 2 
 
 A bond payable at a fixed time and place on the surrender of 
 the bond bears interest from its maturity, although no demand 
 of payment, or offer to surrender the bond, be made. 3 This 
 principle has been long established, though there is some dif- 
 ference of opinion whether the interest follows as a part of the 
 contract, by the recognized rule appertaining to the breach of a 
 written promise to pay a named sum at a fixed period, or as com- 
 pensation, in the way of damages, for the detention of the debt. 
 If a bond be made payable on demand at a particular place, no 
 default of payment could be averred without a compliance with 
 the condition precedent of making demand ; and consequently 
 there can be no recovery of interest except from the time of a 
 demand. 4 
 
 The owner of lost coupons is entitled, upon tendering indem- 
 nity, to recover the amount of them, with interest from the date 
 of demand and tender of indemnity. 5 
 
 Interest upon the coupons of the Chesapeake and Ohio Canal 
 
 I Town of Genoa v. Woodruff, 92 U. Life Ins. Co. v. Cleveland, Columbus & 
 
 S. 502; Aurora City v. West, 7 Wall. 82, Cincinnati R. R. Co. 41 Barb. (N. Y.) 9; 
 
 105; Cromwell v. County of Sac, 9G U. S. C. 26 How. Pr. 225; McLcndon v. 
 
 S. 51 ; llollingsworth v. City of Detroit, Com'rs of Anson County, 71 N. C. 38. 
 
 :; McLean, 472; Gelpcke <•. City of Du- - < 'rorawell v. County of Sac, 96 U.S. 
 
 buque, 1 Wall. 175; Ashuelot R. R. Co. 51,62. 
 
 v. Elliot, 57 N. II. .i'.)7 ; Langston v. So. 3 Langston v. So. Carolina R. R. Co. 2 
 
 Carolina II. 1!. Co. 2 S. C. 248 ; County S. C. 248; Spencer v. Pierce, 5 R. 1. 63. 
 
 of Bi t r. Armstrong, 44 Pa. St. 63; 4 Aurora City v. West, 7 Wall. B2, LOS ; 
 
 Virginia v. Chesapeake & Ohio Canal Co. Gelpcke v. City of Dubuque, I Wall. 175, 
 
 82Md. 501; North Pennsylvania li. R. 206; Corcoran v. Chesapeake & Ohio 
 
 Co. o.Adams, 54 Pa. St. 94; Mills v. Canal Co. 1 McArthur (1>. C), 358; 
 
 Town of Jefferson, 20 Wis. 50; Arents v. Whitakerv. Hartford, Providences Pish 
 
 I nmonwealth, 18 Gratfc (Va.) 750, 776; kill R. R. Co. 8 R. I. 17. 
 
 Burroughs v. Co issioners of Richmond " Fitchew v. North Pa. R. R. Co. 5 
 
 N. C 234; Connecticut Mat. Phila. (Pa.) 182. 
 
 807
 
 §§ 333, 334.] INTEREST AND INTEREST COUPONS. 
 
 Company was not allowed as against the State of Maryland, 
 which, having a prior lien upon the property, waived it in favor 
 of the bonds, " so as to make the said bonds and the interest to 
 accrue thereon preferred and absolute liens," until the bonds and 
 interest should be fully paid. This waiver was construed to ex- 
 tend only to the principal and interest of the bonds, so that inter- 
 est on the overdue coupons could not be paid until the lien of the 
 state had been satisfied. 1 
 
 333. In like manner where, by the terms of the mortgage, 
 bonds to a certain amount are to be called or drawn for re- 
 demption semi-annually, and to be paid from a sinking fund before 
 the time fixed for the final redemption of the mortgage, if bonds 
 are drawn and remain unredeemed through failure of the mort- 
 gagor to provide funds, interest continues to run upon these bonds 
 up to the time of their payment. And where, in such a case, 
 default having been made, the trustees took possession and after- 
 wards had funds, out of which they proposed to pay interest oniy 
 on the undrawn bonds, they were enjoined from so doing, and 
 directed to apply the funds in the first place in payment of in- 
 terest, pari passu, on undrawn bonds, and on drawn bonds which 
 remained unpaid through the failure of the borrowers to provide 
 funds. 2 
 
 334. If a corporation has no funds at the place at which 
 the coupons of its bonds are to be presented for payment, interest 
 is payable on the coupons after maturity without presentation. 
 To make available a defence of readiness to pay the coupons 
 at the time and place they were payable, it must be alleged, and 
 inasmuch as such a plea is affirmative, it casts the burden of proof 
 upon the defendant. 3 If, however, the corporation has money at 
 the time and place fixed for the payment of its coupons sufficient 
 to pay them and all other maturing obligations, it is not neces- 
 sary for the company, in order to escape after-accruing interest, 
 to show that the money for the payment of its coupons was kept 
 separate from the other funds of the company. 4 
 
 1 Corcoran v. Chesapeake & Ohio Canal 3 North Pennsylvania R. R. Co. v. Ad- 
 Co. 1 Mc Arthur (D. C), 358. arns, 54 Pa. St. 94. 
 
 2 Gordillo v. Weguelin, L. R. 5 Ch. D. * Emlen v. Lehigh Coal & Navigation 
 287. Co. 47 Pa. St. 76. 
 
 308
 
 INTEREST ON OVERDUE COUPONS AND BONDS. [§§ 335, 33G. 
 
 It is not necessary to present a coupon for payment at a place 
 named as a condition precedent to a recovery of judgment upon it 
 against the maker. 1 
 
 Coupons payable at a particular office are like notes payable at 
 a specified bank, and import that the debtor will have a deposit 
 at the time and place specified to pay them with. Unless it be 
 shown that a fund was so provided, it is no defence to allege a 
 want of demand. 2 In North Carolina, contrary to the general 
 rule, it is held that in an action against the board of commis- 
 sioners of a county, a demand is necessary, not to fix the liabil- 
 ity, but simply to give notice of the liability, and an opportunity 
 to pay without suit. 3 
 
 A demand of payment of interest due upon bonds at the place 
 where they are made payable by the holder is sufficient without 
 any demand by the trustee. 4 
 
 335. A corporation is not bound to seek its creditors in a 
 foreign country, unless it has agreed so to do ; and therefore a 
 foreign bondholder, or a resident bondholder who is absent from 
 the country, cannot compel the company to pay interest on over- 
 due coupons, or upon the loan after it has fallen due, in the ab- 
 sence of all proof of inability or want of readiness to pay them at 
 the time and place they were made payable. 5 
 
 336. The rate of interest recoverable after maturity, where 
 the statutes allow the parties to agree upon any rate, upon a bond 
 not providing for the rate after the debt becomes due, according to 
 some authorities is that fixed by law for cases where the parties 
 have not agreed upon a rate, although the rate which the bond 
 bears upon its face before maturity be either higher or lower than 
 the legal rate. 6 But a different rule has been declared by some 
 courts, and the weight of authority supports the rule that the rate 
 
 1 Smith v. Tallapoosa County, 2 Woods, 6 Emlen v . Lehigh Coal & Navigation 
 
 574, Co. 47 Pa. St. 76. 
 
 • Philadelphia & Baltimore Central It. c Brewster v. Wakefield, 22 How. 118; 
 !,'. Co. v. John on, 54 Pa. St. 127. Langston v. S. Carolina K. K. Co. 2 8. C. 
 
 • Alexander v. Com'rs of McDowell, 67 248; Virginiav. Chesapeake &Ohio Canal 
 N. C.330; McLendon v. Com'rs of Anson Co.82Md.501; Lash w.Lambert, 15 Minn. 
 Connty, 71 N. C. 38. 416; Searle v. Adams, 3 Kans. 515; 
 
 < Tali, r v. Cincinnati, Logansnort & Pearce v. Hennessy, 10E. I. 223. 
 
 Chicago Hy. Co. 15 In.l. 169. 
 
 :;<!'.)
 
 § 336.] INTEREST AND INTEREST COUPONS. 
 
 of interest stipulated in the bond attends the contract until it i=i 
 merged in judgment. 1 It is doubtful whether the Supreme Court 
 of the United States would now follow the case of Brewster v. 
 Wakefield, under like circumstances, although there is a clear dis- 
 tinction between that and the later case of Cromwell v. County of 
 Sac. The former case arose under a statute of the Territory of 
 Minnesota, which allowed parties to agree upon any rate of in- 
 terest, and prescribed seven per cent, in the absence of such agree- 
 ment. The court, bound by no adjudication of the territorial court 
 and looking with disfavor upon the exorbitant interest stipulated 
 for in that case, gave a strict construction to the contract of the 
 parties, saying : " When a party desires to extort, from the neces- 
 sities of a borrower, more than three times as much as the legisla- 
 ture deems reasonable and just, he must take care that the con- 
 tract is so written in plain and unambiguous terms ; for with such 
 a claim he must stand on his bond." The case of Cromwell v. 
 County of Sac arose under a statute which fixed the legal rate of 
 interest at six per cent., but allowed parties to agree in writing for 
 a rate not exceeding ten per cent., and provided that a judgment 
 upon the contract shall bear the same rate. The bonds in ques- 
 tion bore interest at the rate of ten per cent., and the court held 
 that they drew the same rate after maturity. In this decision the 
 Supreme Court followed the adjudications of the state courts. The 
 argument also was conclusive that as a judgment in case of a stip- 
 ulated interest must bear the same rate, it could not have been 
 intended that a different rate should be allowed between the ma- 
 turity of the contract and the entry of the judgment. Moreover, 
 the limitation of ten per cent., within which the parties may 
 agree for interest, relieves the court from sanctioning an extrava- 
 gant and unreasonable agreement for interest. 
 
 The doctrine of the English decisions is, that after the maturity 
 of a mortgage or mortgage bond, when the money for the payment 
 of the debt has not been provided for at the place of payment, in- 
 terest will run on at the old rate up to the time of redemption. 
 What is paid for interest after maturity may be technically called 
 
 1 Brannonv. Hursell,112 Mass.6.3; Crom- McDaniel, 28 111. 201; Pruyn v. City of 
 
 welly. County of Sac, 96 U. S. 51 ; Beck- Milwaukee, 18 Wis. 367; Hand v. Arm- 
 
 with v. Hartford, Providence & Fishkill strong, 18 Iowa, 324; Kohler v. Smith, 2 
 
 R. R. 29 Conn. 268 ; Marietta Iron Works Cal. 597 ; McLane v. Abrams, 2 Nev. 199 ; 
 
 v. Lottimer, 25 Ohio St. 621 ; Etnyre v. Hopkins v. Crittenden, 10 Tex. 189. 
 
 310
 
 SUITS UPON COUPONS. [§ 337. 
 
 damages, but it is damages of a peculiar kind, for it would not be 
 left to a jury to regulate their amount; the jury would be directed 
 as a matter of law to find damages of the same amount as the 
 interest, which would have been payable if the covenant had ex- 
 tended over this period. 1 There may, perhaps, be an exception 
 to this rule when the agreed rate of interest is excessive and ex- 
 traordinary ; and when the court would adopt the statute rate of 
 interest after maturity, as damages for the breach of the condi- 
 tion. 2 
 
 V. Suits upon Coupons. 
 
 337. A holder of negotiable coupons may sue and recover 
 upon thern without producing or being interested in the bonds 
 from which they were detached. 3 The declaration need not recite 
 the bond from which the coupons were cut, though it is proper in 
 some cases to show the relation which the coupons originally bore 
 to the bond. 4 Several coupons may be declared upon in a single 
 count, distinguishing them by a reference to the numbers of the 
 bonds to which they belonged. 5 
 
 Neither does it make any difference that the bond itself has 
 been paid, when demand is made or suit commenced upon a nego- 
 tiable coupon in the usual form detached from it. When the cou- 
 pon is detached from the bond it loses its character as a mere 
 incident to the bond, and becomes an independent claim, and 
 therefore the payment of the bond could have no effect upon the 
 coupon previously detached. The action is not upon the bond, 
 but upon the coupon as separated from the bond. A special 
 count of a declaration setting forth the bond by way of induce- 
 ment, but founding the cause of action upon a coupon, and aver- 
 ring that it had been detached before the bond was paid and that 
 it was subsequently presented for payment, and payment refused, 
 is not, probably, open to objection ; but at any rate a general 
 count in debt is not. 6 It may sometimes be necessary to resort to 
 
 1 Gordillo v. Weguelin, L. R. 5 Ch. D. for interest are issued with bonds, mid, for 
 287, per Amphlett, J. ; .Morgan v. Jones, 8 a valuable consideration, arc detached and 
 Ex. 020; Price d. Great Western By. Co. assigned by delivery, the assignee may 
 16 M. & W. 2ii. maintain assumpsil upon them in his own 
 
 2 Cook v. Wood, L. R. 7 II. L. 27. name against the corporation engaging to 
 
 3 Thomson v. Lee County, :; Wall. :i27 ; pay them. K. S. 1-71, p. 454. 
 
 City v. Lamson, 9 Wall. 477. B New London City National Bank v. 
 
 * City >■. Lamson, 9 Wall. 477 ; Bing». Ware River R. R. Co. U Conn. 542. 
 
 County of Johnson, 6 Iowa, 265. In Maine « Thomson v. LeeCounty.S Wall.S27 ; 
 
 it is provided by statute that when coupons Spooner v. Holmes, 102 Mass. 308 ; 3 Am. 
 
 811
 
 § 338.] INTEREST AND INTEREST COUPONS. 
 
 the bond to prove the execution of the coupon; but when it con- 
 tains a promise of payment to bearer, it is an independent negoti- 
 able instrument, and the cancellation of the bond has no effect 
 
 upon it. 
 
 But in a suit upon coupons of municipal bonds which could be 
 issued only by virtue of legislative authority, that authority should 
 appear either by distinct averment of the specific act conferring it, 
 or by stating the recital of the bond in that respect. The cou- 
 pons, though detached, are related to the bonds to which they 
 originally belonged, and by way of inducement or recital this re- 
 lation ought to appear on the face of the declaration or petition. 1 
 It is not necessary, however, to set out the vote orelection pro- 
 vided for under the statute preliminary to the issuing of the bonds 
 and coupons. 2 
 
 338. Coupons which contain no negotiable words, nor any 
 lano-uao-e from which it can be inferred that the intention was to 
 make them negotiable, cannot be enforced in the name of an as- 
 sin-nee. 3 Such coupons can be enforced only in the name of the 
 bondholder. He would be bound to enforce the coupons in be- 
 half of the person to whom he had thereby transferred a portion 
 of his interest in the bond ; but the nature of the contract as a 
 mere right of action is not changed by the transfer. 4 
 
 A coupon which is not negotiable is equally a part of the mort- 
 gage debt, and an assignment of it carries with it by implication 
 an interest in the mortgage security ; only the assignee would be 
 obliged to seek payment of it in the name of the person to whom 
 it was issued. 5 
 
 An interest warrant which does not import a promise, but is a 
 mere acknowledgment of indebtedness for interest on the bond 
 itself, cannot generally be made the ground of an action. 6 When 
 
 R. 491 ; National Exchange Bank v. Hart- hill v. Trustees of the City of Sonora, 17 
 
 ford, Providence & Fishkill R. R. Co. 8 Cal. 172. 
 
 R. I. 375; Miller v. Town of Berlin, 13 3 Jackson v. York & Cumberland R. R, 
 
 Blatchf. 245, 250 ; Cooper v. Town of Co. 48 Me. 147. 
 
 Thompson, lb. 434, 438. i Wright v. Ohio & Miss. R. R. Co. 1 
 
 1 City v. Lamson, 9 Wall. 477; Ken- Dis. (Ohio) 465. 
 
 nard v. Cass County, 3 Dill. 147 ; Thayer s Sewall v. Brainerd, 38 Vt. 364. 
 
 v. Mont-gomery County, 3 Dill. 3S9. See, 6 Crosby v. New London, Willimantic 
 
 however, Ring v. County of Johnson, 6 & Palmer R. R. Co. 26 Conn. 121. The 
 
 Iowa, 265. interest warrant was in the following 
 
 2 See §§ 287-299, of ch. vii. ; Under- form: " Interest Warrant. Mortgage and 
 
 312
 
 suits upon coupons. [§§ 339, 340. 
 
 the right of interest is founded upon the bond itself, the declara- 
 tion should be specially upon that. Thus, if the bond be made 
 payable to bearer, with semi-annual interest thereon payable at 
 the office of the company on delivery of certain interest warrants 
 annexed, which imply no promise of payment in themselves, no 
 one but the holder of the bond can maintain an action for the 
 interest. The form of the instruments shows that the interest 
 warrants were not intended to be additional or collateral promises 
 or securities for the payment of interest, but that they were de- 
 vised only as convenient and safe vouchers, furnishing the com- 
 pany evidence of payment, and for the bondholder, superseding 
 the necessity or trouble of presenting the bond itself for the pay- 
 ment of the interest due upon it. 
 
 An interest coupon, or warrant in the form of an order, doubt- 
 less imports a promise, and of itself is a ground of action. 1 
 
 339. When by the terms of a mortgage the coupons are 
 payable only from the net revenues of the company, in a suit 
 upon them it is necessary to allege and prove the existence of 
 such revenues before there can be any recovery. Unless revenue 
 comes into the treasury of the company the bondholders cannot 
 claim its appropriation to the payment of the coupons. A de- 
 mand for payment when, without the company's fault, there are 
 no revenues on hand to meet the coupons, is premature, and prop- 
 erly refused ; therefore in such case interest is not recoverable 
 upon the coupons from the time of such demand ; but only from 
 a demand when there are such revenues and an unjust refusal. 2 
 
 340. The plea of the Statute of Limitations is not a good 
 defence to an action upon coupons, when it would not be a good 
 defence to the bonds from which they were cut. They arc but 
 repetitions, as respects the interest payable at stated times, of the 
 contract which the bond itself makes on that subject, and are a 
 device for the convenience of the holder in the way of collecting 
 the interest. They do not change the nature of the security 
 
 Convertible Bond. For thirty dollars, be- l Town of Queensbury v. Culver, 19 
 
 ing half yearly interest on Bond No. 80 of Wall. 83. 
 
 the New London, Willimantic, and Palmer - Corcoran v, « !hesap< alee 8 I ►bio < laual 
 
 Railroad ' lorporation, payable on the first Co. l Me Arthur ( 1>. ' 
 
 day <>( February, ihjc. John Dickinson, 
 
 Treasurer. 
 
 :;i:;
 
 § 340.] INTEREST AND INTEREST COUPONS. 
 
 given by the bond for the interest. There is really but one con- 
 tract for the payment of interest, and that is contained in the 
 bond. When the coupons are cut off, they still partake of the 
 security of the bond. 1 
 
 But the statute begins to run against actions upon coupons for 
 interest from the time of their maturity, when they have been 
 detached from the bonds and transferred to others than the hold- 
 ers of the bonds. The coupons themselves give a right of action 
 without the bond, and it would be exceptional and illogical to 
 hold that the statute sleeps with respect to claims upon them, 
 while a complete right of action upon them exists in the holder. 
 Therefore where a Statute of Limitations extends the same limi- 
 tation to actions upon all written contracts, sealed or unsealed, it 
 begins to run against coupons from their maturity, so that in such 
 case an action upon the coupons would become barred before an 
 action upon the bonds themselves maturing at a later date would 
 be barred. 2 Referring to the previous decisions by the Supreme 
 Court of the United States upon this point, Mr. Justice Field 
 said : " It was not the intention of the court to decide that an 
 action upon a coupon detached from the bond, and negotiated to 
 other parties, was not subject to the same limitations as an action 
 upon the bond itself ; much less to hold that the coupons re- 
 mained a valid and existing cause of action, not only for the 
 period prescribed for actions on the bond after its maturity, but 
 for the additional period intervening between the maturity of the 
 coupon and the maturity of the bond, however great that might 
 be. The question before the court in those cases was only 
 whether the time the statute had to run against the coupons was 
 the longest or shortest period ; — was it six or twenty years in the 
 Wisconsin case, or was it five or fifteen years in the Kentucky 
 case ; — and the court held that the statute ran for the longest 
 period, because the coupons partook of the nature of the bonds 
 and the statute ran for that period as to them." 
 
 A similar case arose under the Statute of Limitations of Ken- 
 tucky, which prescribed fifteen years as the limitation for actions 
 upon bonds, and only five years for actions on simple contracts. 
 The action was upon coupons of certain bonds issued by the city 
 of Lexington, and the city set up the statute of limitations of five 
 
 1 City v. Lamson, 9 Wall. 477. " Clark v. Iowa City, 20 Wall. 5S3, 
 
 588. 
 
 314
 
 SUITS UPON COUPONS. [§ 340. 
 
 years in defence; but the Supreme Court of the United States 
 answered that bonds are specialties not falling within the period 
 prescribed ; that suits on the bonds might be maintained if com- 
 menced within fifteen years after the cause of action accrued ; 
 and that a suit on a coupon is not barred by the statute unless 
 the lapse of time be sufficient to bar also a suit upon the bond, 
 as the coupon is but a repetition of the bond in respect to the 
 interest for the period of time therein mentioned, and partakes of 
 its nature. 1 
 
 1 City of Lexington v. Butler, 14 Wall. 282 ; McCoy v. Washington Co. 3 Wall. 
 Jan. 381. 
 
 315
 
 CHAPTER X. 
 
 CONTRACTS OF GUARANTY AND INDORSEMENT. 
 
 I. Nature of the contracts of guaranty 
 and indorsement, 341-349. 
 
 II. Corporations cannot enter into the 
 contract without legislative authority, 
 350-356. 
 
 Nature of the Contracts of Guaranty and Indorsement. 
 
 341. The contract of a guarantor is collateral, secondary, 
 and contingent. — It binds him to pay the debt guaranteed, if by 
 the exercise of due diligence it cannot be collected from the prin- 
 cipal debtor. The contract of a surety is on the other hand direct, 
 and makes him responsible at once upon the default of the prin- 
 cipal debtor. The contract of an indorser of a negotiable instru- 
 ment is different from either. He undertakes to pay the obliga- 
 tion, in case of its dishonor, if it is duly presented for payment to 
 the maker at maturity, and due notice is given to him of its dis- 
 honor, but not otherwise. His contract differs from that of a 
 guarantor chiefly in the matter of making demand upon the maker 
 and giving notice of dishonor ; for while punctual presentment 
 and punctual notice of non-payment are requisite to charge an 
 indorser, in the case of a guarantor presentment and notice 
 within a reasonable time is all that is required, and this reason- 
 able time is ordinarily determined by the inquiry whether, by 
 reason of delay, the guarantor has sustained any loss or injury. 
 
 342. Under a guaranty of a coupon bond the degree of 
 diligence required of the holder of a coupon is to be ascertained 
 by reference to the relation of the parties, and to the injury sus- 
 tained by the guarantor from the delay. This point was well con- 
 sidered in a suit against the State of Virginia upon its guaranty 
 of the negotiable bonds of the city of Wheeling, issued to pay the 
 city's subscription to the stock of the Baltimore and Ohio Rail- 
 road Company. A number of coupons for interest due upon these 
 bonds for the years 18G2, 1863, and for January, 1864, were 
 
 316
 
 NATURE OF THE CONTRACTS. [§ 343. 
 
 stolen from the state, and in November of the latter year were 
 bought in Richmond by one who paid full value for them with- 
 out knowledge that they had been stolen. After the close of the 
 civil war, in 1865, the purchaser presented them for payment at 
 the banking house in New York where they were made payable, 
 and also to the city of Wheeling ; but payment being refused, he 
 brought suit against the State of Virginia upon its guaranty. The 
 city of Wheeling was ready to pay the coupons whenever the 
 question of their ownership should be determined. The Court of 
 Appeals of Virginia held that the state was not liable upon its 
 guaranty of these coupons by reason of the delay in presenting 
 them for payment. 1 Mr. Justice Joynes, delivering the opinion of 
 the majority, said : " The state has a right to claim that they shall 
 be presented for payment within a reasonable time after they be- 
 come payable, so that it may be relieved from its liability as guar- 
 antor ; and the coupons on their face give notice of the guaranty. 
 It cannot be supposed that the state would be willing to incur a 
 responsibility wholly indefinite, in point of time, which would be 
 the case if the coupons were designed to circulate, without any 
 limit, after the day of payment. It is no answer to say that the 
 city of Wheeling has provided by a mortgage for the indemnity of 
 the state. The security may be lost, or its value impaired by de- 
 lay ; and the state, by accepting that security, did not abandon 
 the character of guarantor and assume that of principal debtor." 
 
 343. A guaranty of bonds without other designation im- 
 plies a guaranty of the principal sum, and of its incident, the in- 
 terest. 2 
 
 A city having issued bonds to a gas company, under an ordi- 
 nance providing that the company should "guarantee tin; said 
 bonds, and assume the payment of the principal thereof at matu- 
 rity," it was held that the ordinance contemplated two undertak- 
 ings by the company: one to the bondholder to answer lor the 
 city's liability ; the other to the city to pay the bonds at their ma- 
 turity. The indorsement of the president of the company on the 
 bonds, guaranteeing "the payment of the principal and interest 
 thereof," was asubstantial compliance with the ordinance. 8 
 
 i Arcnts v. Commonwealth, 18 Gratt. b Jefferson City Gas Light Co. v. Clark, 
 (Va.) 750, :::.. Sup. Ct. of the I . S. < >cl . T. I s77. 
 
 2 New Orleans v. Clark, 95 U. S. 044. 
 
 817
 
 §§ 844, 345.] GUARANTY AND INDORSEMENT. 
 
 It is a sufficient consideration for a guaranty by one railroad com- 
 pany, of the payment of the interest coupons of another company, 
 that an arrangement has been entered into between the roads to 
 secure a uniform gauge, and thus increase the business of each. 1 
 
 344. The principal creditor is in equity entitled to the 
 benefit of bonds of a corporation received by a surety, or 
 by a person standing in the position of a surety, for his indem- 
 nity, and to discharge the debt he is liable for ; and it makes no 
 difference that the principal creditor did not know of this at the 
 time, or give credit on the faith of it. 2 
 
 A guarantor having paid a part only of the debt of the princi- 
 pal debtor for which the guaranty was given, cannot claim reim- 
 bursement out of the funds of such debtor as against the common 
 creditor until the latter is fully satisfied. 3 
 
 A guarantor of railroad bonds who has paid the debt is en- 
 titled as a creditor to the benefit of a statute authorizing the ap- 
 pointment of a receiver of an insolvent railroad, canal, or turnpike 
 company, upon the application of a creditor, and a sale or lease 
 of the property. 4 
 
 345. A contract of guaranty of a coupon bond transfer- 
 able by delivery is itself in effect negotiable at law with the 
 bond or coupons ; for if not actually negotiable through the ne- 
 gotiability of the bond and coupons, it is assignable with them 
 in equity, and an interest in it passes in equity to each succes- 
 sive holder of the bond or coupons. It is the manifest inten- 
 tion of the parties that the right to enforce the guaranty shall be 
 coextensive with the right to enforce the payment of the debt. 
 The guaranty, as an accessory to the bond or coupon, follows it 
 and adheres to it in equity, and the right to enforce the guaranty 
 must be determined by the right to demand payment of the bond 
 or coupon. Whoever is entitled to enforce the bond or coupon is 
 entitled to enforce the guaranty, and cannot be defeated by any 
 equities that do not affect his claim upon these primary demands. 5 
 
 1 Connecticut Mut. Life Ins. Co. v. i Pennsylvania R. Co. v. Pemberton & 
 Cleveland, Columbus & Cincinnati R. R. N. Y. R. R. Co. 28 N. J. Eq. 338. 
 
 Co. 41 Barb. (N. Y.) 9. 5 Arents v. Commonwealth, 18 Gratt. 
 
 2 Rice's Appeal, 79 Pa. St. 168. (Va.) 750 ; Blakely Ordnance Co. in re,~L. 
 
 3 Virginia v. Chesapeake & Ohio Canal R. 3 Ch. App. 154 ; Agra & Masterman's 
 Co. 32 Md. 501. Bank in re, L. R. 2 Ch. App. 397. 
 
 318
 
 NATURE OF THE CONTRACTS. [§§ 346, 347. 
 
 346. A guaranty is not provable in bankruptcy or in 
 schemes of liquidation without express provision, until the 
 liability becomes absolute by the failure of the principal debtor 
 to pay the obligation at maturity according to its terms. Until 
 the liability becomes absolute, there is no way in law or in equity 
 by which persons holding a guaranty can secure himself out of 
 the property of the guarantor. Neither is the holder of bonds 
 guaranteed by a corporation entitled to share as a creditor in a 
 scheme of reorganization entered into upon the insolvency of 
 the corporation, under which provision is made for the participa- 
 tion only of creditors holding existing liabilities of the corpo- 
 ration. Thus, the Eastern Railroad Company of Massachusetts, 
 having become greatly embarrassed, and practically insolvent, a 
 statute was enacted for its relief, and the securing of its debts 
 ami liabilities. 1 This act authorized the corporation, by a mort- 
 gage of all its property to trustees, to secure an extension of its 
 debts for a period of thirty years at a reduced rate of interest. 
 The existence of the corporation was preserved, but the stock- 
 holders had only the ultimate chance of redeeming the property. 
 A leading purpose of the act was to give to all its actual creditors, 
 without regard to the nature of their claims, an equal participa- 
 tion in the mortgage security. The owners of certain bonds of 
 another railroad company, indorsed and guaranteed by the East- 
 ern Railroad Company, claimed the right to participate in the 
 benefits of this mortgage. The guaranteed bonds had not fallen 
 due, and there had been no default in the payment of the interest 
 upon them. The holders of the guaranteed bonds did not, there- 
 fore, claim immediate participation, but asked to have certificates 
 of indebtedness set aside to an amount sufficient to secure the 
 guaranty of the bonds, and in default of the payment of the in- 
 terest or principal of the bonds, they claimed the right to receive 
 the interest on such certificates, and to share in the security. But 
 the court denied the claim upon the ground that no provision 
 was made tor contingent claims. 2 
 
 347. In the recent case of the Eastern Railroad Company v. 
 Rogers, before the Supreme Court of Massachusetts, 8 the holders 
 
 i Art, 1876, Ch. 236. :1 124 Mass. 527. 
 
 2 Merchants' Nat. Bank '•. Eastern K. 
 B. Co. 1^4 Blau. 518. 
 
 319
 
 § 347.] GUARANTY AND INDORSEMENT. 
 
 of the bonds of a leased road guaranteed by that company sought 
 to add to the value and obligation of a common guaranty a trust 
 to retain and hold the earnings of the leased road for'the pay- 
 ment of the interest on the guaranteed bonds. The Eastern 
 Railroad Company in New Hampshire leased its road for a long 
 terra of years to the Eastern Railroad Company of Massachusetts. 
 Subsequently the Portsmouth, Great Falls, and Conway Railroad 
 Company became a party to the agreement. The scheme of the 
 three companies, as stated by Judge Morton, in delivering the 
 opinion of the court, seems to have been to form a single or con- 
 solidated line of railroads so far as they could without violating 
 the laws of the states in which they were respectively incorpo- 
 rated. The Portsmouth, Great Falls, and Conway Railroad Com- 
 pany was to complete its road and appurtenances out of its capital 
 stock or otherwise, at its own cost and expense. After it was 
 completed the Eastern Railroad Company was to manage the 
 three roads and to pay out of the net earnings of the consolidated 
 line dividends to the stockholders of the several roads pari passu, 
 and these dividends were to be in lieu of and in full for the rent 
 of the leased roads. 
 
 After the agreements were made, it was found that the Ports- 
 mouth, Great Falls, and Conway Railroad Company was not able 
 to perform its contract and to construct and complete its railroad 
 from its capital stock or other resources. To enable it to do so, it 
 borrowed of the Eastern Railroad Company a large sum of money. 
 A part of the sum so borrowed was repaid by issues of stock. 
 The balance, amounting to one million dollars, was repaid by issu- 
 ing to the Eastern Railroad Company bonds of the Portsmouth, 
 Great Falls, and Conway Railroad Company, payable in 1892, 
 with interest at the rate of seven per cent, payable semi-annually. 
 The Eastern Railroad Company negotiated and sold a part of 
 these bonds, and pledged others of them, guaranteeing their pay- 
 ment. The holders of the bonds now claimed that they were 
 entitled to have the interest on them as it accrues paid out of the 
 earnings of the road in priority of the other creditors. They 
 based their claim upon a provision of the lease that out of the 
 gross amount of the tolls and income of the railroads there should 
 be deducted and paid all charges and expenses of the lessee com- 
 pany in maintaining and operating the roads, taxes, rents, repairs, 
 wages, damages being enumerated with other things, " and gener- 
 320
 
 NATURE OF THE CONTRACTS. [§ 347. 
 
 ally all charges that may be incurred in the management of the 
 business or concerns of the said railroads, or any part thereof, and 
 all incidental charges and expenses, and the interest that may 
 accrue on any past or future loans.'' 
 
 Upon the subsequent insolvency of the Eastern Railroad Com- 
 pany and the adoption of the legislation before referred to for its 
 relief, the holders of the guaranteed bonds claimed that either the 
 Eastern Railroad Company took the earnings of the Portsmouth, 
 Great Falls, and Conway Railroad charged with a trust to pay 
 the interest on their bonds, or that the interest on these bonds is 
 to be regarded as in the nature of rentals or operating expenses. 
 The court in reply say : " We cannot concur in this view of the 
 purpose or effect of the article. As we have before said, it was 
 contemplated as a part of the arrangement between the parties 
 that the Eastern Railroad Company should, as rent or in lieu 
 of rent of the leased roads, pay to their stockholders, pari passu 
 with its own stockholders, dividends out of the net earnings of the 
 three roads. It was natural and almost necessary, in order to 
 avoid future misunderstanding and litigation, that the contracts 
 should contain provisions as to the mode of determining what 
 should be deemed to be net earnings. We think this was the 
 purpose of the fourth article, and that it was intended for the di- 
 rection and protection of the Eastern Railroad Company, and not 
 to enlarge its liabilities. It contains no words of covenant or 
 promise on the part of the Eastern Railroad Company. It pro- 
 vides merely that ' from and out of the gross amount of the tolls 
 and income of the railroads owned by the said parties hereto 
 respectively shall be deducted and paid from time to time' the 
 charges, expenses, and payments enumerated, including ' the in- 
 terest that may accrue on any past or future loans.' By this was 
 in 'iiit tin; interest which the Eastern Railroad Company might 
 pay upon its loans. To hold that it was intended as a covenant 
 that it would pay tin; interest on any money which (he Lessor might 
 borrow would be inconsistent with the previous stipulations of the 
 contract, by which the lessor agreed bo complete the. road at its 
 own cost and expense, and by which the only rent to be paid by the 
 ■ • was in the form of dividends. No Language is used in this 
 artie]<- which purports to create any new Liability of the Eastern 
 Railroad < 'ompany. If enumerates various charges and expenses 
 which the company may incur in the management of the roads, 
 21 821
 
 §§ 348, 349.] GUARANTY AND INDORSEMENT. 
 
 but its liability to pay those charges and expenses is not created 
 by this article, but out of other independent contracts or duties." 
 For these plain and sufficient reasons the court necessarily held 
 that the holders of the guaranteed bonds of the Portsmouth, 
 Great Falls, and Conway Railroad Company had no claim upon 
 the earnings of the Eastern Railroad Company ; that the latter 
 company was primarily liable to pay the bonds and the interest 
 as it accrues ; that the only liability of the Eastern Railroad Com- 
 pany was a contingent and a collateral liability, arising from its 
 contract of guaranty. It followed that it was not the duty or 
 the right of the Eastern Railroad Company to apply the earn- 
 ings of its railroad to the payment of the interest on the bonds 
 of the Portsmouth, Great Falls, and Conway Railroad Company, 
 as it might from time to time accrue and become due. 
 
 348. Indorsement of a bond. — A railroad company which 
 has transferred, by indorsement, a negotiable bond issued by a 
 municipal corporation, is bound as an indorser of negotiable paper, 
 if its liability be fixed by a proper demand and notice. It has 
 been suggested that such a liability is not fairly in the contempla- 
 tion of the parties to an indorsement of a bond which may have 
 twenty or even forty years to run ; but whatever force this view 
 might have in case of an indorsement of such an instrument by an 
 individual, it has none in case of a corporation, which does not die. 1 
 
 349. A bona fide holder may presume that an indorsement 
 is regular. — The indorsement by the State of Alabama of the 
 bonds of the Montgomery and Eufaula Railroad Company was 
 claimed to be void, because the statute authorized the indorsement 
 of first bonds only, while, as it was alleged, there was a prior 
 mortgage upon the company's property, and the bonds could not, 
 therefore, be first mortgage bonds. " Let us concede," said Jucjge 
 Woods, of the Circuit Court of the United States, 2 " what defend- 
 ants claim, that there was a prior mortgage on the road at the 
 date of these bonds. Were the holders of the bonds under the 
 necessity of taking notice of that fact, and does the fact make the 
 bonds void in the hands of a bond fide holder for value ? If the 
 governor was without any authority to indorse any bonds, his in- 
 
 1 Bonner v. City of New Orleans, 2 2 Young v. Montgomery & Eufaula R. 
 Woods, 135. R. Co. 2 Woods, 606. 
 
 322
 
 CORPORATIONS CANNOT ENTER INTO WITHOUT AUTHORITY. [§ 350. 
 
 dorsement would be void. If the law authorized him to indorse 
 the bonds of the A. and C. railroad, and he undertook to indorse 
 the bonds of the South and North Alabama Railroad, his indorse- 
 ment would be void. But in this case there is no dispute that 
 the law authorized him to indorse the bonds of the Montgomery 
 and Eufaula Railroad, on the conditions that there should be 
 completed and equipped twenty miles of road before any indorse- 
 ment, and that the indorsement should not exceed $16,000 per 
 mile of completed railroad, and that the bonds indorsed should be 
 first mortgage bonds. The authority of the governor to indorse 
 such bonds on such conditions is not disputed. Now, suppose the 
 governor indorses such bonds of a railroad company before twenty 
 miles of its road are completed and equipped, or indorses the 
 bonds at a rate greater than $16,000 per mile, are the bonds on 
 that account void in the hands of a bond fide holder? The un- 
 broken authority of cases decided by the Supreme Court of the 
 United States is to the effect that such bonds are valid. 1 .... But 
 do these authorities cover the case where an indorsement is author- 
 ized of first mortgage bonds, and the governor indorses bonds of a 
 railroad company whose property is subject to a prior mortgage? 
 After some hesitation I have come to the conclusion that they 
 do The legal authority to make the indorsement is suffi- 
 ciently comprehensive to include the indorsement of the bonds in 
 question ; and the governor having placed his indorsement upon 
 the bonds, and certified in the indorsement itself that it was made 
 in pursuance of the act of the legislature, I think a bond fide 
 holder has the right to presume that all precedent requirements 
 have been complied with, and that there are no prior liens upon 
 the railroad ; and, so far as he is concerned, this presumption can- 
 not be rebutted." 
 
 II. Corporations cannot enter into these Contracts without Legis- 
 lative Authority. 
 
 350. It is no part of the ordinary business of a railroad 
 company or other corporation to undertake the payment of 
 the debts of others;- and therefore, without Legislative au- 
 
 1 Citing Knox County v. Aspinwall, 21 Kern. (N. V.) 309 ; Smead '•. Indianapolis, 
 
 Bow. 539; Mercer Co. v. Hacket, l Wall. Pittsburg & Cleveland R. R. <'"• 11 Ind. 
 
 83; Meyer v. City of Muscatine, lb. 384. 104; Stark Bank v. United States Pottery 
 
 - Bank of Genesee v. Patchin Bank, -'i Co. 84 Vt. 144; Madison < '". v. Water- 
 
 828
 
 § 351.] 
 
 GUARANTY AND INDORSEMENT. 
 
 thority in this behalf, a corporation has no power to enter into 
 the engagement of a guaranty or indorsement of the bonds or other 
 negotiable instruments of another corporation, or of a person ; or 
 to enter into the more indirect engagement of guaranteeing the 
 dividends of another company; 1 or of purchasing the stock of 
 another company; 2 or of completing the line of a railroad com- 
 pany under an agreement to work the line ; 3 or of aiding in the 
 extension or improvement of another railroad company. 4 
 
 Legislative authority to railroad and other corporations to enter 
 into the contract of guaranty is most frequently given by special 
 statute, although there are some general statutes for this purpose. 5 
 
 Neither can corporations, according to the rule adopted in this 
 country, purchase, hold, or deal in the stock of other corporations, 
 unless expressly authorized to do so. 6 
 
 Neither can a railroad company, without special authority guar- 
 antee a certain amount of dividends on its own stock, although 
 such contract be made with a county as an inducement for the 
 county to take stock in the company and pay for it with county 
 bonds. 7 
 
 351. To enable a railroad corporation to enter into a con- 
 town Co. 7 Wis. 59; Central Bank v. or under the general railroad act; and 
 Empire Stone Dressing Co. 26 Barb. (N. may with like assent, become surety for, 
 Y.) 23 ; Bridgeport Bank v. Same, 30 lb. or guarantee the debts of such railroad 
 
 421 ; Farmers' Bank v. Same, 5 Bosw. 
 (N. Y.) 275. 
 
 1 Colman v. Eastern Ry. Co. 10 Beav. 
 1. See Logan v. Courtown, 13 Beav. 22. 
 
 2 Mechanics', &c. Building Asso. v. 
 Meridcn Agency Co. 24 Conn. 159 ; Solo- 
 mons v. Laing, 12 Beav. 339. 
 
 3 Great "Western Ry. Co. v. Preston & 
 Berlin Ry. Co. 17 Upp. Can. Q. B. 477 
 
 company, or in any other manner aid such 
 railroad company in the construction of 
 its railroad or other works or improve- 
 ments. Acts 1877, ch. 88; Acts 1872-3, 
 ch. 88, § 40. In Massachusetts guaran- 
 ties by railroad companies in certain cases 
 are provided for. See § 45. 
 
 6 Zabriskie v. Cleveland, Columbus & 
 Cincinnati R. R. Co. 23 How. 381 ; White 
 
 * East Anglian Rys. Co. v. Eastern v. Syracuse & Utica R. R. Co. 14 Barb. 
 
 Counties Ry. Co. 11 C. B. 775 ; McGregor (N. Y.) 559 ; Connecticut Mut. Ins. Co. 
 
 v. Deal & Dover, &c. Ry. Co. 18 Q. B. v. Cleveland, Columbus & Cincinnati R. 
 
 618. R. Co. 41 Barb. (N. Y.)9; Mayor v. 
 
 5 As in West Virginia, where any Bait. & Ohio R. R. Co. 21 Md. 50; 
 
 railroad or other private corporation, or Mechanics', &c. Building Asso. v . Meriden 
 
 joint stock company may, with the assent Agency Co. 24 Conn. 159 ; Hodges v. New 
 
 of the holders of two thirds of its stock, Eng. Screw Co. 1 R. I. 312, 322; Central 
 
 had by a vote at a stockholders' meeting) R. R. Co. v. Collins, 40 Ga. 582. 
 
 subscribe for or purchase the stock, bonds, 7 Pittsburg & Steubenville R. R. Co. v. 
 
 or securities of any railroad company, Allegheny County, 79 Pa. St. 210. 
 whether incorporated by special charter 
 
 324
 
 CORPORATIONS CANNOT ENTER INTO WITHOUT AUTHORITY. [§ 351. 
 
 tract of guaranty it is not necessary that the authority to do 
 so should be expressly conferred by statute. Under the rail- 
 road act of California, which provided that such a corporation 
 " shall be capable in law to make all contracts .... necessary 
 for the construction, completion, and maintenance of such rail- 
 road ; . . . . and generally shall possess all the powers and priv- 
 ileges, for the purpose of carrying on the business of the corpora- 
 tion, that private individuals and natural persons enjoy," 1 it was 
 held that a railroad company might make a valid guaranty of the 
 bonds of another corporation. The guaranty in this case was 
 entered into as a part of a leasehold agreement whereby the Cali- 
 fornia Pacific Railroad Company leased its road to the Central 
 Pacific Railroad Company for a long term of years, and the 
 latter company stipulated to guarantee the payment of $2,000,- 
 000 of the bonds of the lessor company, payable in thirty years. 
 The court held that this stipulation was not ultra vires. The 
 reasoning of the court was that a natural person might make such 
 a contract, and therefore the exercise of this power by the corpo- 
 ration must be upheld, unless by its very nature it is a power 
 which a corporation cannot exercise ; but that there is no suffi- 
 cient reason deducible from the character of a railroad company 
 and its business, why it may not guarantee the payment of a debt 
 which it might directly contract to pay. 2 
 
 This decision does not seem to be supported by sound legal 
 principles and reasoning. It has been vigorously criticised. A 
 writer in the American Law Register, 3 with reference to the gen- 
 eral power of a railroad corporation to make such a guaranty, 
 says : " In the case of a lease by one railroad corporation to an- 
 
 1 Stats. 1861, p. GOS ; and see to like tiou of the rule always recognized by the 
 
 effect Civil Code, § 354. courts, that the implied or incidental 
 
 3 Low v. California Pacific It. It. Co. 9 powers which may he exercised by a cor- 
 
 Am. Railw. 1!. 366 ; 4 C. L. J. 487. poration shall he ascertained by reference 
 
 McKinstry, J., dissenting, said in refer- to the case of an individual upon whom 
 
 ence to the clause of the statute relied should he conferred limited powers like 
 
 upon as impliedly giving authority to those granted to the corporation bv its 
 
 the guaranty: "This clause gives charter. [£ the claim quoted means more 
 
 no additional primary powers to the cor- than this, what does it mean less than a 
 
 poration. It follows after the enumera- grant to the corporation of every power 
 
 Hon of certain powers specifically con- which may he employed by an individual 
 
 furred, and is hut declaratory of the rule carrying on a private business for his per- 
 
 that powers incidental to the express sonal emolument." 
 powers conferred may he employed by a a Vol. 25, pp. 513, 518. 
 corporation. It is a legislative enuncia 
 
 825
 
 § 352.] GUARANTY AND INDORSEMENT. 
 
 other railroad corporation, the lessee pays its own debt when it 
 pays the rent, which it owes as rent, and which it has agreed to 
 pay as rent ; in the case of a guaranty by the lessee of the bonds 
 of the lessor, should the guarantor be compelled to pay the bonds, 
 principal or interest, or any part thereof, in pursuance of its con- 
 tract of guaranty, it pays an indebtedness of the lessor company, 
 and, consequently, may compel a reimbursement thereof. In the 
 former case it pays as principal ; in the latter, as surety. The 
 former contract, however unwise it might be, the railroad com- 
 pany has the power (by statute) to make ; and, consequently, may 
 agree to pay the rent on the lease, the amount of the rent being 
 simply a question of degree ; the latter species of contract, it seems 
 to us, it has not the power to make, there being no express statu- 
 tory power to that effect, as it is in reality the loaning of the 
 credit of the guarantor, — the guaranty of the debt of another. 
 The contract of guaranty, ex vi termini, implies a loan of the 
 credit of the guarantor." Neither is there any power to guarantee 
 implied in the power to lease, nor is it appurtenant to the power 
 to lease. The power to lease and the power to guarantee are as 
 diverse as powers can well be. The statute confers on railroad 
 corporations the powers of natural persons no further than is nec- 
 essary " for the purpose of carrying on the business of the corpora- 
 tion." The business of a leased railroad may be carried on with- 
 out the lessee's guaranteeing the bonds of the lessor, and there- 
 fore such guaranty is not necessary for the purpose contemplated 
 by statute. If a railroad corporation is to possess all the powers 
 of a natural person in the broadest acceptation of the term, wherein 
 would be the use of legislation seeking to prescribe its powers ? 1 
 
 352. The right to enter into the contract may be implied 
 from authority to aid another company. — A railroad company 
 may guarantee the bonds of another railroad company under the 
 authority of a general statute which authorizes railroad companies 
 to aid other railroad companies by means of subscription to their 
 capital stock or otherwise. If any acceptance of the statute by 
 either of the corporations is necessary, this may be inferred in 
 favor of persons holding guaranteed bonds from the fact that the 
 companies have done the acts authorized by these statutes. 2 
 
 1 25 Am Law Reg. 522. 2 Zabriskie v. Cleveland, Columbus & 
 
 Cincinnati R. R. Co. 23 How. 381. 
 326
 
 CORPORATIONS CANNOT ENTER INTO WITHOUT AUTHORITY. [§§ 353-355. 
 
 353. A corporation may, as a matter of course, indorse ne- 
 gotiable instruments which it has taken in the course of busi- 
 ness or in the payment of debts due it, without special authority 
 to do so. 1 This would be true of corporations which have no 
 power to make instruments such as it receives and indorses. 2 A 
 corporation having the power to create negotiable paper has the 
 same power to indorse it, whether such power be implied or con- 
 ferred. 3 It is within the corporate powers of a railroad company 
 to guarantee bonds taken and held by it in the usual course of its 
 business. 4 But even if the guaranty be made for a purpose not 
 authorized by the charter, as for instance for the accommodation 
 of another road, a bond fide holder^for value without notice is not 
 affected by that fact. 5 
 
 354. A railroad company having power to issue its own 
 bonds may guarantee the bonds of municipal corporations 
 issued in payment of subscriptions to the stock of the com- 
 panjr. The obvious purpose and advantage of such a guaranty 
 are to augment the credit of the bonds in the market, and to fa- 
 cilitate their sale, and the raising of money for the construction 
 of its road. 6 It is, moreover, one of the recognized powers of a 
 private corporation that it may borrow money, or become a party 
 to negotiable paper in the transaction of its legitimate business, 
 unless expressly prohibited ; and until the contrary is shown, the 
 legal presumption is, that its acts in that behalf were done in the 
 regular course of its authorized business. In such case the cor- 
 poration guarantees its own property, and not merely the debt of 
 another. 
 
 355. A railroad company may be bound by consenting to 
 
 1 Olcott v. Tioga R. R. Co. 27 N. Y. & Cleveland R. R. Co. 11 Ind. 104, where 
 540, 549, 561. it was attempted to draw a distinction be- 
 
 2 Srnitli v. Johnson, 3 II. & N. 222. tween paper executed beyond the power 
 '■' See Prescott v. Flinn, 9 Bing. 19, per and that executed within the power of tho 
 
 Tindall, C. J.; Frye V. 'linker, 24 111. corporation, but by an abuse of the power 
 
 180; Buckley v. Briggs, .'so Mo. 452; in that particular instance, and declare 
 
 Hardy v. Merriweather, 14 Ind. 203. that as applied to commercial paper, legal 
 
 * Madison & Indianapolis R. K. Co. v. on its face, it is difficult to sustain Buch a 
 
 Norwich Savings 8oc, 24 I ml. 457. distinction on any sound principle of law 
 
 6 Madison & Indianapolis R. R. Co. v. or reason. 
 
 Norwich Sav. Soc fupra. The court re- ° Railroad Co. v. Howard, 7 Wall. 392. 
 fer to Smead P. Indianapolis, rittsburg 
 
 827
 
 § 355.] GUARANTY AND INDORSEMENT. 
 
 a representation of guaranty contained in the bonds of an- 
 other company, as for instance that the former company had, 
 in consideration of a lease to it of the road of such other com- 
 pany, guaranteed the payment of the interest on its bonds. The 
 Pacific Railroad Company of Missouri was upon this ground held 
 liable in an action brought directly against it by a holder of cou- 
 pons due upon bonds issued by the St. Louis, Lawrence, and 
 Denver Railroad Company. 1 The only promise made by the de- 
 fendant company was one contained in a lease to it of the other 
 railroad company, for an annual rental. The Pacific Railroad 
 Company was interested in the construction and completion of 
 the St. Louis, Lawrence, and Denver Road, and executed the lease 
 in order to enable that company to negotiate its bonds and raise 
 money to build the road, and the rental was appropriated specifi- 
 cally to the payment of the interest on such bonds. The bonds 
 contained a statement that the payment of the interest was guar- 
 anteed by the Pacific Railroad of Missouri. In form, the St. 
 Louis, Lawrence, and Denver Company furnished the considera- 
 tion for the promise of the defendant company, rather than the 
 bondholders. In reality, however, the bondholders furnished the 
 means to build the road, the use of which, under the lease, con- 
 stituted the consideration of the defendant's promise. The plain- 
 tiff, however, did not bring his suit upon the promise contained 
 in the lease, but upon the implied promise contained in the rep- 
 resentation in the bonds which the defendant company had caused 
 to be issued in this form, or had consented to. " If this allega- 
 tion can be proved," said Judge Dillon, " our opinion is that the 
 defendant is bound to make good the guaranty, and that this 
 guaranty attaches to, and follows the bonds, and is available to 
 every holder of them who relied upon it. In this view the 
 promise by the defendant is a direct one to whoever becomes the 
 holder of bonds on the faith of it, and, although the facts are 
 different, the case falls within the principle of morality, fair deal- 
 ing, and enlightened justice asserted by the Supreme Court of the 
 United States in the cases of Lawrason v. Mason? Woodruff v. 
 Trapnall? Curran v. Arkansas f- Furman v. Nicols. b If the fore- 
 
 1 Opdyke v. Pacific R. R. Co. 3 Dill. 3 10 How. 190, 206. 
 55. 4 15 How. 304 
 
 2 3 Cranch, 492 ; 2 Am. Lead. Cases, 5 8 Wall. 44, 50. 
 334-362. 
 
 328
 
 CORPORATIONS CANNOT ENTER INTO WITHOUT AUTHORITY. [§ 356. 
 
 going is a correct view of the legal relations and rights of the 
 parties, it follows that the contract between the defendant and 
 the plaintiff was complete when the plaintiff bought the bonds 
 upon the strength of the promise or representation which the de- 
 fendant authorized, as it is alleged, to be made, and that the 
 plaintiff's rights are in no wise dependent upon whether the Law- 
 rence Company kept its contract in respect to taxes, fences, &c, 
 and could not be affected by a subsequent rescission of the con- 
 tract, and surrender of the road by the defendant to the Law- 
 rence Company." 
 
 356. When a corporation is estopped to claim that its in- 
 dorsement or guaranty was ultra vires. — Although the in- 
 dorsement by one railroad company of the bonds of another com- 
 pany be ultra vires as in violation of the rights of the stockhold- 
 ers, both the corporation as an entity and the stockholders as 
 such, may be estopped from repudiating it, either by express rati- 
 fication or by such acquiescence and enjoyment of the benefits 
 of the contract as would make it a fraud to permit it to be set 
 aside. 1 If the holders of the indorsed bonds can enforce them 
 against the railroad company, individual stockholders cannot re- 
 strain the company from voluntarily discharging its liability. To 
 show assent and acquiescence it is not necessary to prove the ac- 
 quiescence of each individual stockholder. It is enough to show 
 circumstances from which it may be reasonably inferred that the 
 contract to be ratified was within the knowledge of all who chose 
 to inquire, and the stockholders had full opportunity and means 
 of inquiry. 
 
 A railroad company which has guaranteed the payment of the 
 interest coupons of another road, and afterwards, upon coming 
 into possession of the bonds, has sold and transferred a portion 
 of them for value, is estopped to claim that the guaranty was ultra 
 . The guaranty was additional security for the same debt 
 evidenced by the bonds, and the guaranty passed with the bonds 
 to the purchaser withoul special mention. Even if the guaranty 
 
 was inoperative when it, was made, because supported b) no valid 
 
 consideration, or made for no authorized purpose, it became • p ir- 
 
 ative when issued by the guarantor. The guaranty may linn l>e 
 1 Cozart v. Georgia R. B. & Banking Co. 54 Qa. 879. 
 
 329
 
 § 356.] GUARANTY AND INDORSEMENT. 
 
 treated as written at the time of the transfer, and as resting 
 upon the consideration the npassing. 1 
 
 When a railroad company has the general power to make a 
 guaranty it is immaterial to a purchaser of the guaranteed secu- 
 rities whether its action in this respect be ratified by a vote of 
 the stockholders, although such ratification is provided for by 
 statute, if the provisions in this respect are intended for the pro- 
 tection of the shareholders, and relate chiefly to the mode or 
 manner of the execution of the power. Holders of such coupons 
 have the right to presume that the guarantors have done their 
 duty, and have proceeded regularly in the execution of the power. 2 
 
 i Arnot v. Erie Ry. Co. 67 N. Y. 315; Cleveland, Columbus & Cincinnati R. R. 
 aff. 5 Hun, 608. Co. 41 Barb. (N. Y.) 9. 
 
 2 Connecticut Mut. Life Ins. Co. v. 
 
 330
 
 CHAPTER XL 
 
 THE DUTIES AND EIGHTS OF MORTGAGE TRUSTEES. 
 
 I. Nature of the trust assumed by mort- 
 gage trustees, 357-362. 
 
 II. Effect of notice to mortgage trustees, 
 363, 364. 
 
 III. Rights of mortgage trustees in posses- 
 sion, 365-370. 
 
 IV. Removal of trustees and filling of va- 
 cancies, 371-374. 
 
 V. Statutory provisions regulating the 
 duties of mortgage trustees, and the 
 choosing of new trustees, 377-382. 
 
 I. Nature of the Trust assumed by Mortgage Trustees. 
 
 357. The nature and character of the trust assumed by one 
 to whom a railroad mortgage is made for the benefit of bond- 
 holders depend not merely upon the express terms of the mort- 
 gage deed, but upon the implications which arise from the rela- 
 tions of the parties and the condition of the trust property. As 
 these circumstances change from time to time, the obligations of 
 the trustee change also. Immediately upon the execution of the 
 deed, and so long as no active duty is demanded of the trustee, 
 the trust is little more than nominal ; it is what is termed a dry, 
 naked trust. Generally the trustees have nothing to do with the 
 negotiation of the bonds, and so long as the interest is promptly 
 paid so that no forfeiture occurs, their office is silent. But when 
 a forfeiture has occurred through the non-payment of the interest 
 or principal secured, or through the breach of any other condition 
 of the mortgage, new and important duties arise. The mortgage 
 in terms generally requires the trustee to take possession of the 
 mortgaged property and to sell it for the benefit of the bondhold- 
 ers. The fulfilment of these express trusts in behalf of the bond- 
 holders is tli • primary and most obvious duty of the trustee. But 
 in the performance of these trusts, other trusts arise by implica- 
 tion in favor of others besides the bondholders, and particularly 
 in favor of subsequent incumbrancers and the mortgago . I lie 
 duties of the trustees then become not only active, bul responsible 
 and delicate. They are then railed upon to elect between delay 
 
 881
 
 §§ 358, 359.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 and action ; between, on the one Land, taking possession of the 
 road and its fixtures, and thereby assuming at once the vast pub- 
 lic and private burdens and responsibilities of a great public 
 work ; and on the other, delay, and consequent complication and 
 loss ; or they must undertake the ulterior and final remedy of 
 foreclosure. 1 
 
 358. It is the duty of a mortgage trustee to protect the 
 security he has taken for the bondholders to the utmost of his 
 ability. It is hardly consistent that such trustee should at the 
 same time occupy the position of construction agent of the com- 
 pany. It is at any rate fraudulent for such trustee to confederate 
 with the company in disposing of a large amount of iron rails 
 bought by the company for its use and embraced in the mortgage 
 as after-acquired property. To warrant such a diversion of the 
 property solemnly appropriated to the construction of the road 
 and the security of the bondholders who advanced money to build 
 it would at least require the proof of an urgent and clear neces- 
 sity that could not be financially provided for in any other way. 2 
 The utmost good faith is required in transactions of this nature 
 resulting in the sale of any portion of the mortgage property. If 
 the trustee be remiss in his duty to protect the security, the bond- 
 holders may themselves maintain an action to prevent a diversion 
 of the property. 
 
 For the same reason a mortgage trustee in possession of a rail- 
 road cannot make a valid contract for the leasing of the road to 
 another railroad corporation in which he is a stockholder and 
 director. 3 
 
 359. The trustees have no power to assent for the bond- 
 holders that an unsecured debt may be paid in preference to 
 their secured bonds. The fact that a floating debt of a railroad 
 company has been contracted for the payment of interest on its 
 bonds, and for supplies and repairs for the benefit of the com- 
 pany's property, gives the court no power without the consent of 
 the bondholders to direct the application of the income of the road 
 
 i Sturges v. Knapp, 31 Vt. 1, 55, per 3 Ashuelot R. R. Co. v. Elliot, 57 N. H. 
 Redfield, C. J. 397. 
 
 2 Weetjen v. St. Paul & Pacific R. R. 
 Co. 4 Hun (N. Y.), 529. 
 
 332
 
 NATURE OF THE TRUST ASSUMED BY. [§ 860. 
 
 to the payment of it, although the trustees of the bondholders in 
 a suit to foreclose the mortgage apply for authority to make such 
 payment, and it appears that such debt could be paid on favorable 
 terms, and that the payment of it would be equitable, and proba- 
 bly for the interest of the bondholders in the way of facilitating 
 their reorganization of the company. 1 The court said that these 
 were doubtless strong considerations when addressed to the bond- 
 holders themselves. " But can this waive the rights of bond- 
 holders because we might think it would turn out to their advan- 
 tage ? Can we make a contract for them because we think it 
 would be a good contract ? Have we the power to take money 
 which belongs to them and give it to others without their consent, 
 because we think it would be for their interest ? They have not 
 consented to this diversion of their money, and no one who is au- 
 thorized to do so has consented for them. For the trustees to 
 undertake to give assent for the bondholders is clearly outside of 
 their powers and duties, which are plainly prescribed in the deed 
 of trust. This court is, in my judgment, without any power to 
 make the decree recommended by the report of the master. To 
 undertake to do it would be to invade the legal rights of the bond- 
 holders, and if established, as within the power of a court of 
 equity, would shake the credit of railroad securities throughout 
 the world." 
 
 360. A mortgage trustee while in possession of a railroad 
 under the mortgage is a trustee of the corporation, as well as 
 of the bondholders. It is inconsistent with the duties which such 
 trustee owes to the corporation to deal in the bonds which the 
 mortgage was given to secure for his own private gain. This doc- 
 trine of the trust obligations of a mortgage trustee while engaged 
 in the active discharge of his trust is strongly brought out in the 
 case of the Ashuelot Railroad Company v. Elliot, before the Su- 
 preme Court of New Hampshire. 2 While the defendant was the 
 treasurer and clerk of the corporation, a mortgage of its road was 
 executed to him as trustee, to secure; the bonds of the company. 
 For ten years afterwards the corporation remained in possession o\ 
 the mortgaged property, and the defendant continued to ad as its 
 clerk and treasurer. So long as the interest on the bonds was 
 
 i Dnncaii v. Mobile & Ohio B. K. Co. 2 2 r»7 N. H. 897. 
 Woods. 542. 
 
 888
 
 § 3G0.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 paid there was no breach of condition, and nothing for hiin to do 
 in the way of an active performance of any trust under the mort- 
 gage. Thus far, of course, it was a dry and naked trust. But 
 the bonds not being paid at maturity, it thereupon became, by the 
 terms of the mortgage, the right and duty of the trustee to enter 
 and hold possession of the property for the purpose of realizing 
 upon the security and enforcing payment of the debt. He did 
 this, and soon after an act of the legislature was obtained, which 
 it was supposed on all hands had the effect to foreclose the mort- 
 gage, and to invest the bondholders with the absolute ownership 
 of the road and franchise, with the substantial attributes of a cor- 
 poration. The conduct of the trustee in the management of the 
 property was based upon this supposition for ten years and more, 
 until the Supreme Court of the state held that the statute was in- 
 effectual to foreclose the mortgage; but the legal result of this 
 decision was that the defendant during all this time had been in 
 possession, not as the agent of the absolute owners of the road, 
 but as the trustee of the bondholders under and by virtue of the 
 mortgage. During this period he had purchased from time to 
 time, at their market price, bonds secured by this mortgage to the 
 amount of $46,000; and the value of these bonds having finally 
 about doubled, he was required to account to the corporation for 
 the profits actually realized by such purchase. Mr. Justice Ladd, 
 upon the point of his accountability for these profits, said : " What 
 was his relation to the corporation and the stockholders after he 
 took possession of the road ? Undoubtedly he was the represent- 
 ative of the beneficial mortgagees. In his relative character of 
 trustee, he was mortgagee, and in all matters arising between him 
 in that capacity and the corporation, he is to be regarded as a 
 mortgagee in possession. But it is as trustee of the bondholders, 
 and not otherwise, that he is mortgagee in possession. He does 
 not act as an individual at all. The question we are to decide 
 does not arise between the bondholders and the corporation, or 
 between Mr. Elliot, as trustee of the bondholders, and the cor- 
 poration, but between Mr. Elliot in his individual capacity and 
 the corporation ; and I do not see how it is affected one way or 
 the other by the fact that as trustee of the bondholders he was a 
 mortgagee in possession. Grant that in that capacity his interest 
 and duty were antagonistic to that of the mortgagors, it is only in 
 protecting and enforcing the rights of his cestuis que trust that his 
 334
 
 NATURE OF THE TRUST ASSUMED BY. [§ 360. 
 
 conduct is to be governed by the duty thus imposed. Pie cer- 
 tainly cannot justify an individual act, otherwise inadmissible, on 
 account of his relations with the plaintiffs, on the ground that 
 such act would have been admissible had it been done in his rep- 
 resentative capacity. Suppose, as is said, a mortgagee in posses- 
 sion may buy in other incumbrances on the same property, or 
 other demands secured by the same mortgage, for less than their 
 face, and then hold them against the mortgagor at par ; what ap- 
 plication has that to this case ? What other incumbrances were 
 there to be bought ? Mr. Elliot, as trustee of the bondholders, 
 and so mortgagee in possession, represented all the bondholders. 
 It is plain that, as such trustee, he could not buy in any other in- 
 cumbrances for a variety of reasons, among which, in addition to 
 the one already given (that there were no others), may be men- 
 tioned the fact that he had no authority, express or implied, from 
 his cestuis que trust to do so, and none of their money with which 
 to make the purchase. The simple statement of the matter is, 
 that Elliot, in his representative capacity of trustee and mort- 
 gagee, bought no bonds. He bought them as an individual, and 
 as an individual he was not mortgagee. So this is not the case of 
 a mortgagee dealing in the incumbrances upon the estate. 
 
 " What duties, if any, towards the corporation and the stock- 
 holders, did Elliot's act in taking possession of the road impose 
 upon him? It was the deed of the corporation that made him 
 trustee and agent of the bondholders, and clothed him with the 
 character of mortgagee. It must be very clear that he cannot, as 
 an individual, or as mortgagee in trust, owe any duties to the 
 mortgagors inconsistent with the duty he owes under the deed to 
 the bondholders. Full elfect must be given to the deed through 
 him, and the legal rights of the beneficial mortgagees are not to 
 be impaired by any act done by him, whether in the interest of 
 the mortgagors or in his own individual interest. It may be ad- 
 mitted that, as trustee of the bondholders, he owes the mort- 
 gagors no duties except those which the law imposes upon mort- 
 gagees in possession ; but, a1 bhe same time, I think it cannot be 
 denied that as an individual he stands in a relation to them of 
 great delicacy as well as responsibility. Without any personal 
 interest he is in possession of their property and franchise, holding 
 under the deed, primarily, for the benefit of Hie bondholders, 
 ultimately, when the bonds are paid, for the corporation and the
 
 § 3G0.] THE DUTIES AND EIGHTS OF MORTGAGE TRUSTEES. 
 
 stockholders. The corporation created the trust in favor of the 
 bondholders. He was selected and appointed by them, and in 
 view of the very important duties that all knew might eventually 
 arise, he must have been chosen on account of his known or sup- 
 posed ability to do well what by the provisions of the deed might 
 in the end be required of him. Such a selection on the face of 
 it implies high personal confidence and trust. By accepting the 
 position and entering upon the active performance of its duties, 
 he took upon himself, as it seems to me, an implied obligation to 
 protect and preserve the interests and rights of the corporation, 
 just as much as he did to enforce the rights of the bondholders 
 under the mortgage ; nor were his duties to these parties really 
 at all repugnant or incompatible. With respect to the manage- 
 ment of the property, which was in reality the main thing to be 
 attended to, their interests were identical. The legal interest of 
 the bondholders was that the bonds be paid; the interest of the 
 mortgagors was clearly the same. Each interest alike called for 
 a wise and efficient management of the road. The legal rights 
 of the mortgagors were the exact counterpart and complement of 
 the rights of the mortgagees. His duty to one commenced just 
 where his duty to the other ended. There was no clashing, but 
 still no open ground which any other interest could be permitted 
 to invade. Nothing was called for but a just and disinterested 
 administration of the affairs intrusted to him, with a single eye to 
 the rights of the two parties whose interests were thus placed 
 in his care. Any act done by him in this situation of things, 
 whereby his own private interest as an individual should be 
 brought into antagonism and hostility to the interests of the mort- 
 gagors, would, in my judgment, be just as much a renunciation of 
 his implied obligations to them, just as much a breach of the duty 
 and trust he had undertaken on their behalf, as would an act 
 bringing his individual interest into hostility to those of the bond- 
 holders be a breach of his duty to them It is true, as the 
 
 defendant says, that the legal liability of the corporation upon 
 the bonds has all the time been to pay their full amount, with in- 
 terest, to the holders. It is at the same time true, that when the 
 bonds are selling in the market or otherwise at fifty cents on a 
 dollar, the debt might be extinguished by the corporation for one 
 half the amount they are legally liable to pay. The actual value 
 of the bonds was all the time measured by the amount for which 
 336
 
 NATURE OF THE TRUST ASSUMED BY. [§ 361. 
 
 they could be sold, and this would depend upon the understood 
 ability of the corporation eventually to pay them in full. Now, 
 when Mr. Elliot, after he had taken possession of the road under 
 the mortgage, became the owner of $46,000 of the bonds secured 
 thereby, his individual interest lay strongly in the direction of en- 
 hancing their salable value, and so of increasing the amount for 
 which the corporation might procure the extinguishment of the 
 debt and remove the mortgage. The master finds that his buy- 
 ing up the bonds was in part the cause of advancing their price 
 from about fifty per cent, to about par. His duty to the bond- 
 holders did not call for any such private speculation for such a 
 purpose ; and even though it should be said that a legal wrong 
 was not thereby done the mortgagors, inasmuch as their under- 
 taking was to pay the full face of the bonds, the proceeding, 
 nevertheless, strikes my mind as quite inconsistent, in an equi- 
 table point of view, with the relation of confidence and trust in 
 which he stood to them." 
 
 361. The trustees represent the bondholders in suits affect- 
 ing the mortgage security. — The rule of chancery pleading, 
 which allows some parties to sue or be sued in behalf of all, 
 where their right is the same and their number is so large as to 
 render it difficult to bring them all before the court, is especially 
 applicable in all suits for the foreclosure of railroad mortgages. 
 Such mortgages are almost invariably made to trustees; and ordi- 
 narily the trustees represent the bondholders in all matters of 
 litigation respecting their common and general rights. Whether 
 they are plaintiffs seeking a foreclosure, or as subsequent mort- 
 gagees are made defendants, they represent the bondholders for 
 whom the trusts are held, and a decree is ordinarily ;is binding on 
 such bondholders as if they had been made parties. The bond- 
 holders are in such case quasi parties to the suit, and have the 
 right at any time to intervene and become actual parties. 3 They 
 may come in under the decree and take the benefit of it, or, so 
 long as the proceedings are not definitely closed, they may obtain 
 a hearing, and show the proceedings to be erroneous. " Where 
 complainants are allowed to dispense with parties on account "I 
 their numerousness, any one of whom would have a right to come 
 in by petition and be made a party, if necessary, to protect their 
 
 i Campbell v. Railroad Co. i W( 
 22
 
 § 362.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 interests, they ought to proceed with the utmost fairness and good 
 faith, and not resort to anything like sharp practice in procuring 
 a final decree, which is to be binding on all. Any deviation from 
 this requirement would be a proper ground to be considered on 
 the question of opening or setting aside the decree at the instance 
 of such an omitted party. The court would not tolerate any 
 conduct of the complainants calculated to lull such parties into 
 security and induce them to remit any degree of watchfulness in 
 regard to their interest which they would have otherwise exer- 
 cised." 1 
 
 The trustees of a railway mortgage have sufficient authority 
 and interest to enable them to maintain a bill in equity to enjoin 
 an alleged illegal proceeding which will seriously depreciate the 
 value of the bonds secured, or to maintain a bill to contest a 
 claim of priority made in behalf of another mortgage under which 
 the road and its property are about to be sold ; especially when 
 the bondholders are numerous and widely scattered, the trustees, 
 as representing them and holding the title to the road and prop- 
 erty, have a right to apply for judicial intervention to have the 
 question of priority settled before any sale is attempted. 2 
 
 362. If in any case the trustees, to whom a corporation 
 mortgage is made, fail or refuse to act, any of the bondhold- 
 ers, for themselves and in behalf of the rest, may step forward 
 and put in motion the machinery of the law, making the trustees 
 parties defendant. Especially if in any case the bondholders can 
 show that some fraud has been practised or connived at by the 
 trustees, or that they have been made the victims of fraud, the 
 bondholders may apply to the court for such relief as a party to 
 the suit would be entitled to ; or they may institute such other 
 auxiliary, revisory, or supplemental proceedings as a party to the 
 suit might institute ; thus, they might bring a bill of review, or a 
 bill for relief against a fraudulent decree, or conjoin both in one. 
 
 There can be no doubt of the right of bondholders to main- 
 tain an action to restrain a fraudulent diversion of a portion of 
 property mortgaged for their security, when one of the mortgage 
 trustees is in collusion with the company in effecting such diver- 
 sion of the property ; as where, for instance, the company, after 
 
 i Per Mr. Justice Bradley, in Campbell 2 Murdock v. Woodson, 2 Dill. 188. 
 v. Railroad Co. supra. 
 
 338
 
 EFFECT OF NOTICE TO MORTGAGE TRUSTEES. [§ 363. 
 
 purchasing a large amount of iron rails for the use of the road, 
 which, as after-acquired property, were covered by the mortgage, 
 authorized one of the trustees, who was also the construction 
 agent of the company, to pledge, sell, or dispose of the iron, for 
 the purpose of raising money to meet the construction account of 
 the road. If the bondholders could not do this, their rights and 
 interests would be wholly without protection ; for the directors of 
 the company authorized the disposition of the iron in violation of 
 the plain terms of the mortgage, and under the circumstances of 
 the case, it might well be inferred that the other trustees acquiesced 
 in the acts of the trustee who was the construction agent, and to 
 whom the active management of the business was intrusted. 1 
 
 II. Effect of Notice to Mortgage Trustees. 
 
 363. Notice to trustees under an ordinary mortgage deed 
 of a railroad company is notice to the holders of the bonds 
 secured by the mortgage. Such trustees are considered in the 
 light of agents for the negotiating of the loan. They act for those 
 who lend their money on the security of the mortgage. They are 
 charged with the duty of protecting the interests of the bond- 
 holders, who are unconnected individuals, having no ready moans 
 of acting together except through the trustees, whom the law 
 appoints to act for them. 2 Notice to the trustees is held to affect 
 the title in their hands with reference to incumbrances upon the 
 trust property. Actual notice to the trustees of a prior equitable 
 morto-ac-e is notice of it to the bondholders, who therefore take 
 their bonds subject to the legal consequences of the incumbrance. 3 
 "The fact that the bonds are treated as negotiable, and pass from 
 hand to hand like bank bills, does not affect the question of the 
 agency of the trustees in reference to the security provided by the 
 mortgage. Such bonds purport to be secured by a mortgage in 
 trust to trustees who are designated and known. They are nego- 
 tiated and purchased upon the security thus existing. Thai secu- 
 rity consists in the property and title which exist in the tru itees. 
 By the purchase of the bonds, the purchaser voluntarily adopts 
 the security as it exists in the trustees, ami becomes cestui que 
 
 i Weetjen v. St. Paul & Pacific B. B. :| Miller v. Rutland <S Washington EL 
 Co. 4 Hun (N. V.), 529, S B. Co. 30 Vt. 452. 
 
 - Pierce v. I -y, 32 N. II. 484, 5'Jl, 
 
 per Chief Justice Perley. 
 
 889
 
 § 363.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 trust under them, thereby adopting said trustees as his agents for 
 holding the existing title, and. administering the property held 
 thereby to the intents specified in the creation of the trust. The 
 question is not as to how cestuis que trust would be affected, by 
 notice to trustees of transactions subsequent to the creation of the 
 trust, or to their becoming cestuis under the trust, but as to how 
 they are affected by notice to the trustees which, as to them per- 
 sonally, affects the legal estate at the time, and in the act of their 
 becoming trustees. 
 
 " The notice, which the law regards as effectual to charge a 
 subsequent purchaser, is such as, if duly heeded and properly pur- 
 sued, would lead to a knowledge of the true character, in point of 
 fact, of the prior incumbrance, and thus charges him with the legal 
 consequences of such prior incumbrance, however he may judge 
 of the validity, in point of law, of such incumbrance, or of the 
 legal consequences that may flow from it. By the fact of such 
 notice, being charged with a knowledge of such incumbrance, if 
 in fact it existed, the law regards the taking of a subsequent con- 
 veyance, in prejudice to such incumbrance, as being in bad faith 
 on the part of the purchaser, even though in truth he took such 
 conveyance, either in heedless disregard of the notice, or upon the 
 supposition that the prior claim was invalid, or in doubt whether 
 it was valid or not, and thought best to take his chances in that 
 respect; and not with any wish or design to defraud anybody. In- 
 deed, the true idea of fraud, as involved in this subject, is not so 
 much that there is fraudulent intent on the part of the subsequent 
 purchaser in taking the conveyance, as that, to permit it to be 
 set up and enforced, as against the prior equitable title, would 
 operate a fraud as against that title. This is the elemental idea 
 of an estoppel in pais, in its ordinary application ; to which the 
 principle upon which a subsequent purchaser is charged by a 
 notice of a prior equitable title is strikingly analogous, if not 
 precisely identical with it." 1 
 
 " Then as to the practicableness of a contrary doctrine. The 
 very fact that the bonds pass from hand to hand, and without any 
 record or notice, and are changing hands every day to a greater or 
 less extent, shows that the matter of fixing an equity by notice 
 would be practically impossible. It cannot be known in whose 
 hands all, or any considerable portion, of the bonds are at any 
 1 Per Barrett, J., in Miller v. Rutland & Washington R. R. Co. supra. 
 
 340
 
 EFFECT OF NOTICE TO MORTGAGE TRUSTEES. [§ 364. 
 
 given time, nor in whose bands they will be the next clay, or next 
 month. Of course notice would affect only the party to whom it 
 was given, as there is no joint interest, or representative relation, 
 between the different holders of the bonds. Nor would notice to 
 a holder of specific bonds to-day affect a person who without no- 
 tice should, in good faith, be the holder of the same bonds to-mor- 
 row. The result must necessarily be, that however well grounded 
 an equity a party might have against the corporation, and against 
 the trustees personally, attaching upon the legal title held by such 
 trustees, it would prove barren and futile to any beneficial intent, 
 by reason of the impossibility of knowing and notifying the ever- 
 shifting parties who have an interest, and claim an equity, sub- 
 sequently created and subsequently accruing. On the other hand, 
 it would be easy, comparatively, for persons desirous of investing 
 in railroad mortgage bonds to apply to the trustees holding the 
 security, and elicit the true state of the title. We think it no 
 hardship that they should be required to do so, if they would 
 avoid the hazard of finding their security subject to prior incum- 
 brances, when it might be too late to save themselves from the 
 consequences of such a state of the title." 
 
 364. Notice, however, to trustees who take a conveyance 
 for the mere purpose of upholding an estate, without having 
 any previous connection with the title, is not always regarded as 
 notice to the cestuis que trust. 1 Yet in a case where ili<' only 
 trust expressed in a mortgage by a railroad company to trustees 
 was to hold the property to secure the payment of* the bonds 
 nam I'd, it was In 'Id that an active, administrative trust was created, 
 under which, even alter a foreclosure, the trustees were author- 
 ized to make a lease of the road and property lor n term of ten 
 . against the protesl and remonstrance of a large majority in 
 amount of the bondholders; and the objecting bondholders hav- 
 ing obtained an Injunction against the use of the road by the 
 lessees, they were compelled to pay heavy damages for the injury 
 done to both the Lessors and the lessees by the injunction. 2 
 
 Notice to one mortgage trustee of irregularities in a county 
 
 ription dors not operate to destroy the bond fide holding of 
 
 bondholders under a deed of trust which includes, with the tnort- 
 
 1 Pierce v. Emery, ••;_' \. H. 484, 521, - Bturgea ». Knapp, 31 \'i. L, 54; S. C. 
 per Chiel Ju tice Pei ley. 86 Vi. 139. 
 
 841
 
 § 365.] THE DUTIES AND EIGHTS OF MORTGAGE TRUSTEES. 
 
 o-ao-ed property, county bonds issued under such subscription, but 
 the trustees may enforce in behalf of the bondholders the pay- 
 ment of bonds given in payment of such subscriptions, and the 
 bondholders are just as much entitled to the character of bond 
 fide holders without notice as if no notice had ever come to any 
 of the trustees. 1 They are not to be regarded as the agents of 
 the purchasers of the bonds but merely assignees, coupled with no 
 interest, of the legal title of the property in trust for whoever 
 may become purchasers of the bonds. 2 
 
 III. Rights of Mortgage Trustees in Possession. 
 
 365. Mortgage trustees on taking possession can use the 
 franchise so far as necessary. — Authority to a railroad company 
 to issue bonds and " secure the payment of the same by mortgage, 
 or deed of trust, on the whole or any part of the road, property, 
 and income of the company, then existing or thereafter to be ac- 
 quired," implies the authority to clothe the grantees with all 
 needful powers to use the thing conveyed, in a proper and bene- 
 ficial manner. Under such a deed, transferring the whole prop- 
 erty to trustees and empowering them upon default to take pos- 
 session of the road and to hold and manage it for the uses of the 
 trust, the inquiry arose whether the trustees upon taking posses- 
 sion could exercise the franchises of the company in this manner. 
 It was held that the trustees were not limited to using and oper- 
 ating the road as the agents of the company to which the franchise 
 was granted, but might use and operate it in their own name and 
 right, and enjoy the franchises granted to the corporation so far 
 as necessary for the enjoyment of the property mortgaged to 
 them. 3 As to the intention of the legislature in authorizing the 
 construction of the road, and afterwards the borrowing of money 
 by mortgage to enable it to construct and equip the road, Chief 
 Justice Caton said : " If it was the intention that the road should 
 not be taken up and destroyed for the payment of the mortgage 
 debt, but that it should be sold subject to the duty towards the 
 public of continuing and operating it as a road, it follows neces- 
 sarily, that it was the intention of the legislature that those into 
 whose hands the road might fall, and upon whom this duty to 
 
 i Commissioners of Johnson County v. 2 Curtis v. Lcavitt, 15 N. Y. 9, 194, 
 Thayer, 94 U. S. 631. 195. 
 
 3 Palmer v. Forbes, 23 111. 301, 302. 
 
 342
 
 RIGHTS OF MORTGAGE TRUSTEES IN POSSESSION. [§ 366. 
 
 the public of running and operating the road would devolve, 
 should possess all the necessary rights and powers to enable them 
 
 to perform this duty Perhaps it is not too much to say, 
 
 that the extent of right conferred upon the company for the pur- 
 pose of enabling it to finish, repair, and operate the road, was de- 
 signed to be impliedly conferred upon the mortgagees in possession 
 or purchasers under the mortgage, to enable them to accomplish 
 the same object; but it is not necessary now to say this, but we 
 do say unhesitatingly, that the trustees or purchasers are endowed 
 with sufficient powers, which are undoubtedly in the nature of a 
 franchise, to enable them to discharge the duty which the public 
 have a right to demand of them, by keeping in repair, maintain- 
 ing, and operating the road, and to demand and receive a suitable 
 reward therefor, and for this purpose they may use their own 
 proper names, or adopt any other convenient business name, as 
 any other individual or company may do, and they are under no 
 necessity of adopting the name of the company to whose rights 
 in the property they have succeeded." 
 
 When mortgage trustees have taken possession of a railroad 
 upon default under authority given by the mortgagee, they are en- 
 titled to retain possession until the whole debt is paid, unless the 
 mortgage provides that they shall surrender possession upon re- 
 ceiving payment of the instalment then due. 1 
 
 366. In like manner when mortgage trustees obtain an 
 absolute foreclosure by writ of entry and possession for three 
 years, they hold this absolute title in trust for the bondholders 
 and for no other parties, and unless the bondholders organize a 
 new company, the trustees execute their trust by disposing of the 
 property and distributing the proceeds among the bondholders, 
 pro rata. After the title lias become absolute in this manner, the 
 mortgagors and their privies in estate cannot be heard to object 
 that the mortgage was not properly sealed, or that, on a true ^in- 
 struction of its terms, an absolute judgment of foreclosure should 
 not have been entered. The title of the trustees rests upon the 
 judgment of foreclosure, and they may have a, decree declaring 
 their rights as against all parties claiming under the mortgagors 
 by titles acquired subsequently to the mortgage. 3 
 
 i Wood v. Goodwin, 49 Mi Depol Co. 12 Allen (Magi.), 837. And 
 
 2 Haven p. Grand Junction B. K. & sec Kennebec & Portland B. B. Co. n. 
 
 343
 
 § 367.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 367. The trustees may lease a road the title to which they 
 have gained by strict foreclosure. — The Western Vermont 
 Railroad Company executed a mortgage of its road and franchise 
 to trustees, which contained no provisions in regard to the rights 
 and duties of the trustees, either before or after foreclosure. In 
 consequence of a default, the mortgage was foreclosed by a decree 
 of strict foreclosure in the ordinary form, simply declaring that, if 
 certain specified sums were not paid on or before certain specified 
 times, the mortgagors should be foreclosed from all equity of re- 
 demption in the mortgaged property. Payment not being made 
 in accordance with the decree, the title became absolute in the 
 trustees. The bondholders were numerous, and widely scattered, 
 and had no legal organization. No statute then existed in the 
 state under which such bondholders, or the purchasers at a fore- 
 closure sale, were authorized to organize themselves into a new 
 corporation. The trustees had no rolling stock for the road, and 
 no means of purchasing any. For a short time the trustees oper- 
 ated the road through an agent, but at a material loss. Shortly 
 after acquiring full title to the property the trustees leased the 
 road to the Troy and Boston Railroad Company, a corporation 
 created by the State of New York, owning a connecting road, for 
 a period of ten years, for a satisfactory rent. The lease provided 
 that if a majority in amount of the bondholders should, within 
 ninety days from the date of the lease, unite in giving notice in 
 writing to the lessees of their desire to terminate the lease at the 
 expiration of one year, the lease should so terminate. The lessees 
 went into immediate possession, and within ninety days from the 
 date of the lease a committee, representing the holders of a ma- 
 jority of the bonds, instead of giving the notice provided for, gave 
 notice that they denied the power of the trustees to make the 
 lease, and that they regarded the lessees as trespassers in the use 
 of the road. The lessees still retaining possession, certain bond- 
 holders, in behalf of themselves and all other bondholders, who 
 should come in to prosecute the suit, brought a bill praying for a 
 decree, that after the foreclosure the trustees had no right to 
 make any disposition of the road except to convey it to the bond- 
 holders, and that the lease was null and void. But the court dis- 
 missed the bill, holding the lease to be valid. 1 Chief Justice 
 
 Portland & Kennebec R. R. Co. 59 Me. 9, * Sturges v. Knapp, 31 Vt. 1 ; and see 
 47. S. C. 33 Vt. 486; 36 Vt. 439. 
 
 344
 
 RIGHTS OF MORTGAGE TRUSTEES IN POSSESSION. [§ 367. 
 
 Redfield delivered the opinion of the court and fully examined the 
 nature of the estate in the trustees created by the mortgage, the 
 forfeiture, and the foreclosure. This was regarded as depending 
 almost exclusively upon the implications growing out of the state 
 of the property, the purposes desired to be accomplished, and the 
 mode provided for that end. The chief inquiry was, whether 
 the functions imposed by the trust ceased upon the foreclosure, 
 and there remained nothing further to be done except to convey 
 the estate to the bondholders. " When we look at the position of 
 affairs at this time," said the learned judge, " it seems difficult 
 to come to any such conclusion. The powers and duties of the 
 corporation, in regard to the road and its franchises, under such a 
 mortgage and foreclosure, must be regarded as effectually termi- 
 nated for all practical purposes. The trustees and the cestuis que 
 trust, one or both, had effectually become the corporation, or had 
 acquired all its essential rights, and assumed all its duties, so far 
 as the public was concerned. And these were important and 
 pressing. Delay for the shortest interval might be attended with 
 disastrous consequences to the continuance of the franchise even, 
 and must be so, in every view, to the interests of the cestuis que 
 trust. The road could not, in strict propriety, be allowed to stop 
 for a single day ; and it could not be allowed to cease operation 
 for any considerable time, with any safety to the interests of those 
 to be affected by the depreciation of the property, and the inter- 
 vention of counter-interests and influences. The cestuis que trust, 
 the holders of these bonds, were a changing, unorganized body, 
 having no common bond of union, and no recognized principle of 
 action, unless by unanimity of consent, which is practically im- 
 possible. It would not be expected under such circumstances 
 that there should be an immediate surrender of the property to 
 this heterogeneous and chaotic mass of men, women (single and 
 married), and infants, many of whom wore under such disabilities 
 that they could not act for themselves, and where consequent de- 
 lay must ensue in providing the means of obtaining their consent 
 Legal form, which must be fatal to the enterprise. All this 
 musj be regarded as in the contemplation of the parties at the 
 time of entering into the contract, by which the bonds were is- 
 B ued. It inn rded in looking for the true construction 
 
 of the contract, for in that we are attempting to obtain the 1 
 
 and will of the parties at the time of making the contract in re- 
 
 845
 
 § 868.] THE DUTIES AND EIGHTS OF MORTGAGE TRUSTEES. 
 
 gard to the state of facts which has now intervened ; and it will, 
 perhaps, fairly tost this, to ask ourselves, what would have been 
 their probable response, had the inquiry been put to the parties : 
 What shall be done with this property, and how shall it be man- 
 aged, in case of foreclosure? Shall the trustees continue to man- 
 age it for the time being, and until the order of the Court of 
 Chancery, as in the case of other trusts ? It seems to us there 
 can be but one response to this question. The trustees seem to 
 have been selected for this very office, among others, of control- 
 ling and managing the property in case of forfeiture and sur- 
 render, as trustees, for the benefit of the cestuis que trust, in order 
 to make it available for the payment of the bonds, both interest 
 and principal. This must be so until some organization of the 
 bondholders, and the acquiring of some capacity to act, by a ma- 
 jority, or in some such way, as to enable them to discharge this 
 new class of duties thrown upon them by the forfeiture of the 
 condition of the mortgage, and the surrender of the road with its 
 incidents and fixtures." 
 
 A strict foreclosure is now very rarely had ; but it is conceived 
 that the duties of trustees who purchase mortgaged property at a 
 foreclosure sale for the benefit of the bondholders would be pre- 
 cisely the same as those of trustees who acquire the title by a 
 decree of strict foreclosure. Provision, however, is now quite 
 generally made by statute for the organization of purchasers at 
 such a sale into a corporation, so that the management by trus- 
 tees after foreclosure need be only temporary, and until such 
 organization is completed. 
 
 338. No right of set-off can accrue against the trustees 
 under a mortgage after they have entered into possession of 
 the mortgaged road. Thus the Wallkill Valley Railway Com- 
 pany having made default, the trustees entered into possession 
 and received the rents and tolls for the benefit of the bondholders. 
 They subsequently brought suit against an agent of the road for 
 mone}'' collected by him from the post-office department of the 
 United States for carrying the mails upon the road after the trus- 
 tees had taken possession, and the agent claimed to be entitled to 
 set off a note given by the company to him while in their service, 
 before the default, and which had not matured at that time. The 
 right of the trustees to the earnings of the road was declared to 
 846
 
 RIGHTS OF MORTGAGE TRUSTEES IN POSSESSION. [§§ 369, 370. 
 
 be absolute from the time they took possession, and therefore the 
 agent could not make any offset of such note. 1 
 
 369. Trustees for bondholders retain their trust so long as 
 it has not been fulfilled, and any part of the subject matter of 
 the trust remains to be disposed of, unless they have been dis- 
 charged or in some way incapacitated from executing their trust. 
 The trustees of the Western Vermont Railroad, having by a strict 
 foreclosure gained an absolute title in trust for the bondholders, 
 leased the road for a term of years, and at the expiration of the 
 lease brought suit upon the covenants of the lease. It was ob- 
 jected, however, that before the expiration of the lease a new cor- 
 poration was organized by a majority of the bondholders of the 
 defunct corporation, under the laws of Vermont, who had con- 
 verted their bonds into stocks, and that the new corporation was, 
 by the provision of the statute under which it was formed, substi- 
 tuted as trustee for the other bondholders in place of the plain- 
 tiff in error, and had thus become the real party in this suit. 2 
 " Manifestly," said Mr. Justice Davis, of the Supreme Court of 
 the United States, " it is not in the power of a state legislature, 
 without the consent of the cestuis que trust, to substitute a new 
 trustee in place of the persons named in the mortgage. This 
 would impair the obligation of the contract. The salability of 
 railroad bonds depends in no inconsiderable degree upon the char- 
 acter of the persons who are selected to manage the trust. If 
 these persons are of well-known integrity and pecuniary ability, 
 the bonds are more readily sold than if this were not the case. 
 It is natural that it should be so, and on this account the trustees 
 usually appointed in this class of mortgages are persons of good 
 reputation in the cities where these bonds are likely to sell. To 
 change them is to change the contract in an important particular, 
 and this cannot, be done without the consent of the parties for 
 whoso benefit the trust was created." 
 
 370. Mortgage trustees in possession are liable as common 
 carriers to the same extent that the corporation itself would be 
 liable. Unlike receivera in possession they are liable for the neg- 
 ligence of t ho le employed in operating the road, \\ hereby damages 
 occur to property or injuries happen to persons. They are merely 
 
 » Murrav v. Deyo, io Hun (N. Y.), 8. 2 Enapp v. Railroad Co. 20 Wall. 117. 
 
 847
 
 § 371.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 the agents of the bondholders, and can claim no immunity by 
 reason of holding an official position. 
 
 Trustees in possession under a mortgage of a railroad, its prop- 
 erty and franchises, for a breach of condition are liable in dam- 
 ages, under a statute making railroad corporations responsible for 
 injuries to land upon the line of the railroad from fire caused by a 
 locomotive engine. When such a mortgage is duly made with 
 legislative authority, the trustees to whom it is executed stand in 
 the place of the corporation vested with all the rights, and subject 
 to all the liabilities incidental to the exercise of the franchise and 
 the operation of the railroad. 1 
 
 The mortgage trustees of a railroad company in possession and 
 operating the road in the name of the company are liable to be 
 sued for matters occurring under their management in that name. 
 When such trustees have defended a suit brought in the corporate 
 name of the company, and have given no public notice of any 
 change in the name by which they carried on the business, it is 
 too late for them to say that they had another name. 2 The trus- 
 tees have an undoubted power in the nature of a franchise to dis- 
 charge their public duty by keeping the road in repair and oper- 
 ating it, and for this purpose they may use their own names or 
 adopt any other convenient business name ; and they are under 
 no necessity of adopting the name of the company ; and if they do, 
 they cannot object to a suit against them by the name they use. 3 
 
 IV. Removal of Trustees and Filling of Vacancies. 
 
 371. A court of equity may remove a non-resident trustee 
 of a railroad mortgage and appoint another in his stead, by an ex 
 parte proceeding, when service upon the absent trustee is impos- 
 sible, and the action of the court is invoked for the purpose of 
 preserving the mortgaged property ; and the fact that the absent 
 trustee is within the territory of a country at war with the country 
 in which the court is sitting not only does not prevent the exer- 
 cise of this power, but furnishes a good reason for its exercise. 4 
 The Mobile and Ohio Railroad Company, incorporated under the 
 laws of the State of Alabama, in 1853, executed a mortgage to 
 three trustees, two of whom resided in New York and the other 
 
 1 Daniels v. Hart, 118 Mass. 543. 4 Ketchum v. Mobile & Ohio R. R. Co. 
 
 2 Wilkinson v. Fleming. 30 111. 353. 2 Woods, 532. 
 
 3 Palmer v. Forbes, 23 111. 301, 318. 
 
 348
 
 REMOVAL OF TRUSTEES AND FILLING OF VACANCIES. [§ 371. 
 
 in Alabama, of its railroad and franchises in trust to secure bonds 
 to the amount of 66,000,000. The mortgage also covered a land 
 grant of one million oi^e hundred and fifty-six thousand six hun- 
 dred and fifty-eight acres of land. The deed provided that the 
 trustees should have control of these lands, should invest the pro- 
 ceeds of all sales of them as a sinking fund for the payment of the 
 bonds, and should render an account of their doings on or before 
 the first clay of January in each year. The deed also provided that 
 if either of the trustees should die, or become incapacitated from 
 any cause, or resign his office, then the said company, or the other 
 trustees or trustee, might select some other person to fill the va- 
 cancy. In 1862, two of the trustees having died, the company filed 
 a bill in the Court of Chancery for the County of Mobile, in Ala- 
 bama, against the other trustee, Morris Ketchum, who was a citizen 
 of New York, and was not a bondholder, stockholder, or officer of 
 the railroad company, charging that lie had neglected his duty as 
 trustee, and refused to unite with the company in the appointment 
 of new trustees; that the trust property was entirely within the 
 Confederate States, and that he was an alien enemy; that the 
 trust property was suffering for want of a trustee capable of act- 
 ing, and that the interests of the holders of bonds, secured by the 
 trust deed, imperatively demanded the appointment of trustees 
 residing within the territory of the Confederate States, who could 
 perform the duties incident to the trust. The bill prayed that 
 this trustee might be removed, and that the court would lill the 
 three vacancies by appointing new trustees. Notice of the pro- 
 dings was given by publication according to the Code of tin; 
 state, and a decree was made as prayed for. The new trustees 
 entered upon their duties and into the possession and management 
 the lands, and continued the trust without challenge or question 
 until the nineteenth day of April, 1875, when two of the trustees 
 resigned, and the remaining trustee and the railroad company, in 
 with the provisions of the deed of trust, appointed two 
 other trustees, who entered upon the duties of the office. In Maj , 
 look full possession of all the property of the 
 railroad company for a breach of the condition of the mortga 
 and filed a bill in equity to be confirmed in their possession and 
 for foreclosure. On the fourteenth day of March, L876, Morris 
 Ketchum, who had in L865 Learned of In removal, but had hith- 
 erto made no claim to the oilier, filed a bill in which he all< 
 
 349
 
 § 371.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 that lie was the sole surviving trustee, and prayed that the prop- 
 erty might be sold for the benefit of the bondholders, and that a 
 receiver be appointed to take charge of the property in the mean 
 time. Mr. Woods, the circuit judge, delivered the decision of the 
 court, 1 in which he said : " I think this case is clearly distinguish- 
 able from those cited by complainant. Ketchum was a naked trus- 
 tee. He had no personal interest in the property conveyed to 
 him by the trust deed. It was a property which, according to the 
 record, cost $20,000,000, and the cestuis que trust of this immense 
 estate were scattered all over the United States and Europe. 
 Ketchum's co-trustees were both dead, and the war which existed 
 between the United States and the Confederate States rendered 
 Ketchum as impotent to discharge the duties of the trust as if 
 he also had been dead. The interest of the cestuis que trust im- 
 peratively demanded the services of a trustee. In this condition 
 of things the settler of the trust, namely, the railroad company, 
 applied to a court of competent jurisdiction, alleging neglect of 
 duty on the part of the surviving trustee, and stating such facts 
 regarding the trustee as showed that it was impossible for them to 
 discharge the duties of his trust by reason of the war then raging. 
 The filing and averments of this bill, and the subsequent proceed- 
 ings and decree, were in strict conformity with the statute law of 
 Alabama, which had been enacted and was in force when the 
 trust deed was executed." The learned judge further said that 
 the proceedings of the court were not at any rate absolutely void 
 by reason that service was not made upon the absent trustee, 
 whom it was impossible to reach by notice ; that the court might 
 doubtless have acted in an ex parte proceeding for his removal and 
 the appointment of a new trustee; that the action of the court was 
 at least effectual for the valid appointment of trustees to act dur- 
 ing the disability of the surviving trustee, even without notice to 
 him, and that the long inaction of the complainant after he learned 
 of the decree removing him from his trust, without any attempt to 
 assert his rights to the property, was an abandonment of any title 
 he may have had to the office of trustee, and an acquiescence in 
 the order of things established by the Mobile Chancery Court. 
 
 A decision inconsistent with the foregoing was rendered in Vir- 
 ginia, but it can hardly be regarded as authority. A deed of trust 
 of the Alexandria and Washington Railroad Company provided 
 1 Ketchum v. Mobile & Ohio R. R. Co. suj»a. 
 
 350
 
 REMOVAL OF TRUSTEES AND FILLING OF VACANCIES. [§ 372. 
 
 that in case of the death, incapacity, or resignation of the trustee, 
 the vacancy might be filled by an appointment to be made by any 
 court of record in the county of Alexandria on the application of 
 the holders of three fifths of the bonds secured, and notice to the 
 president or one of the directors of the company. During the 
 War of the Rebellion the trustee, president, and directors of the 
 company went within the lines of the Confederate forces and re- 
 mained there during the war. In the mean time an application 
 was made to a court of said county to appoint a new trustee ; and 
 a trustee was accordingly appointed without giving notice, but 
 upon affidavit that no officer or agent of the company could be 
 found upon whom notice could be served. The new trustee pro- 
 ceeded to sell the property under the trust deed. The Military 
 Court of Appeals of Virginia held the appointment void for want 
 of proper notice. 1 
 
 372. A trustee under a railroad mortgage who voluntarily 
 removes to a foreign country and becomes a resident there 
 incapacitates himself from discharging the duties of his office, 
 and may be enjoined from acting as such trustee, and from fur- 
 ther prosecuting an action in that capacity. The Milwaukee and 
 St. Paul Railway Company executed a mortgage to two trustees, 
 one of whom died, and the duties of the trust, by the terms of 
 the deed, devolved upon the surviving trustee. The deed pro- 
 vided for the removal of the trustees, or either of them, by a vote 
 of a majority in interest of the holders of the bonds, at any meet- 
 ing called for that purpose; and in case of the death, removal, 
 resignation, incapacity, or inability of both or either of the trus- 
 tees, it was further provided that a majority of the holders of the 
 bonds might designate and select, in writing, one or more com- 
 petent persons to fill the vacancy. The Farmers' Loan and 
 Trust Company was accordingly so selected in place of the sur- 
 viving trustee, upon the assumption that he had permanently re- 
 moved from the state and become a resident of France, he hav- 
 ing resided there for upwards of ten years with the exception oi 
 slight intervals spent in this country. The evidence established 
 the charge of non-residence. The trust conferred was personal 
 and incapable of delegation. Such a trustee is generally cted 
 
 i Washington, Alexandria & Georgetown K. B. Co. ia&waehi 
 
 K. B, Co. l'J Gratt. (Va.) vri. 
 
 8 I
 
 § 373.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 because of confidence in his integrity and capacity, and especial 
 fitness for the duties imposed by the trust. The duties of a 
 trustee under such a mortgage are : " First, those which will 
 arise in the event of the non-payment of interest, and of fore- 
 closure, namely : To enter into and upon and to take actual pos- 
 session of all the property, real and personal, and rights and fran- 
 chises of the railway company, and to hold, use, and enjoy the 
 same ; to make repairs, etc. ; and to collect and receive all tolls, 
 freight, income, rents, issues, and profits of the same, and of every 
 part thereof. Jn the contingency of foreclosure, there are also 
 these further duties to discharge, namely : To sell at public auc- 
 tion, to the highest bidder, the entire property, real and personal, 
 of the railway company ; to give the proper notices of sale ; to 
 execute the necessary conveyances ; and after such sale, to distrib- 
 ute the moneys derived from operating the railway, and the pro- 
 ceeds of sale, in their proper order, among the parties entitled 
 thereto, or, at the request of a majority of the bondholders secured 
 by the mortgage, to buy in the property, real and personal, of 
 the railway company, at the foreclosure sale, and thereupon to 
 organize a new corporation, and to convey the premises purchased 
 to such new corporation." With these obligations resting upon 
 him the court declared that a permanent residence abroad, or even 
 a temporary residence which rendered the full discharge of the 
 duties of the trust uncertain, would revoke the trust, and therefore 
 held that his removal was, primd facie, authorized, and that he 
 should be restrained from acting as trustee, and from prosecuting 
 any action in his name as trustee. 1 
 
 373. A trustee under two railroad mortgages will not be 
 removed, for the reason that he declines to employ counsel for 
 the foreclosure of the first mortgage, selected by a majority of 
 the bondholders under that mortgage, and also declines to elect 
 to act as trustee under one of the mortgages only, and to resign 
 his trusteeship under the other. It does not avail that the appli- 
 cation is made by a majority of the bondholders, for they have no 
 absolute right to demand a removal. A removal will not be made 
 without sufficient grounds. 2 Such complaints do not affect the 
 character of the trustee for integrity. It may be that he is acting 
 
 1 Farmers' Loan & Trust Co. v. Hughes, 2 Beadleson v. Knapp, 13 Abb. (N. Y.) 
 11 Hun (N. Y.), 130. Pr. N. S. 335. 
 
 352
 
 REMOVAL OF TRUSTEES AND FILLING OF VACANCIES. [§ 374. 
 
 with sound judgment in declining to act separately in foreclos- 
 ing either of the mortgages upon the default which has occurred. 
 The question whether the road shall be sold under foreclosure in 
 parcels, according to the portions included in the two mortgages, 
 is probably one of nice discretion, to be judicially determined by 
 the court with reference to the effect of the sale upon the inter- 
 ests of the bondholders under both mortgages, and upon the stock- 
 holders as well. 
 
 374. A statute providing that in case a railroad be in pos- 
 session of trustees under a mortgage, the bondholders may 
 annually nominate a board of five trustees, and present their 
 proceedings to a chancellor for the purpose of obtaining a decree, 
 confirming the nomination of the new trustees, and of transferring 
 the property from the old to the new trustees, impairs the obliga- 
 tion of contract contained in a mortgage made prior to the stat- 
 'ute, which provides for a succession of trustees by empowering 
 the surviving trustee to fill any vacancy, and upon his failure so 
 to do gives the railroad company a right to apply to a court of 
 chancery for the appointment of trustees ; and consequently such 
 a statute is in this respect repugnant to the provision of the Con- 
 stitution of the United States, which prohibits a state from pass- 
 ing any law impairing the obligation of a contract. 1 The effect 
 of the act was to confer upon the chancellor the right to control 
 not only the equitable interests of the bondholders, as well as of 
 • the railroad corporation, but also the legal title in the trustees; 
 and this is while the trust is still an active one, involving active 
 duties on the part of the trustees, and while they have personal 
 claims upon the trust property for indemnity for advances made 
 and liabilities incurred. It was, moreover, a matter of election 
 with the bondholders that they have become such, with the trus- 
 tees the railroad company had constituted, and with the trusts 
 specified in the deed, including the power of perpetuating the 
 board of trustees. The bondholders, too, had an interest in the 
 personal administration of the trust by the trustees named in the 
 mortgage, and those who should 1m- appointed in pursuance of the 
 power therein contained. The trustees themselves had certain 
 vested rights secured to them by the <h-rA, and a Legal interest 
 in their office, and they cannot be divested except by due course 
 i Fletcher o. Rutland & Burlington It. B. <'<> ;;'.i Vi. 638. 
 
 as 858
 
 §§ 375, 376.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 of law. The railroad corporation itself had an interest in the 
 administration of the trust ; and the law will not be allowed to 
 impair their vested rights. 
 
 375. Where it is provided that any vacancies in the board 
 of trustees under such a mortgage shall be filled from the 
 bondholders, an election of persons who have qualified them- 
 selves for the purpose, by procuring bonds, is valid unless fraud 
 was intended. 1 Neither does such a trustee discharge himself or 
 disqualify himself from executing the trust by subsequently part- 
 ing with the bonds required as a qualification. 2 He cannot, after 
 acceptance of the trust, disqualify himself by his own act. He 
 can only be discharged by virtue of a special provision in the deed 
 creating the trust, or by decree of a court of competent jurisdic- 
 tion ; unless, perhaps, it be with the general consent of all persons 
 interested in the execution of the trust. 
 
 376. When a trust mortgage provides that any vacancy 
 occurring in the board of trustees shall be immediately filled, 
 and the intention is apparent that the board shall always be kept 
 full, no proceedings can be taken by the trustees or any of them 
 while there is a vacancy in the board ; they cannot take posses- 
 sion of the mortgaged property, or bring suit to foreclose the mort- 
 gage. If a suit has already been commenced when a vacancy 
 occurs, it does not thereupon abate, but must be postponed until 
 the vacancy is filled. 3 
 
 V. Statutory Provisions regulating the Duties of Mortgage Trustees 
 and the Choosing of New Trustees. 
 
 In the New England States there are statutes which prescribe 
 more or less fully the duties of trustees under railroad mortgages, 
 and provide for the choice of new trustees at stated times, or 
 upon the happening of vacancies. The principal provisions of 
 these statutes are given, as they are essential and important parts 
 of the law in these states governing railroad mortgages. 
 
 i Richards v. Merrimack & Conn. River 3 Shaw v. Norfolk County R. R. Co. 5 
 R R. Co. 44 N. H. 127. Grayf Mass.), 162. 
 
 2 Richards v. Merrimack & Conn. River 
 R. R. Co. supra. 
 
 354
 
 STATUTORY PROVISIONS REGULATING. [§ 377. 
 
 377. Maine. 1 — When a railroad corporation mortgages its 
 franchise for the payment of its bonds or coupons, and trustees 
 are appointed by it, or by special law, or by the mortgage, the 
 bondholders, at a regular meeting called for the purpose, may 
 from time to time elect by ballot new trustees to fill vacancies, 
 or take the place of others holding the trust ; but no trustee can 
 be thus removed until he is paid for all that is due him, and 
 secured against all liabilities assumed by him as such trustee. 
 Any party interested may present the proceedings of such meet- 
 ing to the Supreme Judicial Court, or to a justice thereof in vaca- 
 tion, who thereupon appoints a time of hearing, and orders such 
 notice to parties interested as he deems proper, and may affirm 
 such elections, and make and enforce any decrees necessary Eor 
 the transfer of the trust property to the new trustees. All such 
 decrees are filed with the clerk of the court where the hearing is 
 had, and recorded by him. 
 
 The neglect of the coi*poration to pay any overdue bonds or 
 coupons secured by such mortgage, for ninety days after present- 
 ment and demand on the treasurer or president thereof, is a 
 breach of the conditions of the mortgage ; 2 and thereupon the 
 trustees are required to call a meeting of the bondholders, by pub- 
 lishing the time and place thereof three weeks successively in the 
 state paper, and in some paper in the county where the road lies, 
 the last publication to be one week at least before the time of the 
 meeting, if they so determine, the trustees take possession of 
 such road and all other property covered by the mortgage, and 
 have all the rights and powers, and are subject to all the obliga- 
 tions of the directors and corporation of such road, and may also 
 prosecute and defend suits in their own name as trustees. They 
 are required to keep an accurate account of all receipts and ex- 
 penditures of such road, and exhibit it on request to any officer 
 .,t' tie- corporation or other person interested; from the receipts, t<> 
 keep tlw road, buildings, and equipments in repair, mid to fur- 
 nish such new rolling slock as is necessary ; and the balance, after 
 paying the running expenses, to apply according to the rights <>f 
 parties under th- mortgage, and to the paymenl of any damages 
 arising from misfeasance in the managemenl of the road. They 
 are not personally liable except for malfeasance or fraud. When 
 
 i \i. S.1871,ch.51, ' R. 8. 1871, ch. 51, §§ 48, 50, 51, 52. 
 
 And bcc A.CI L878, cta.68. 
 
 865
 
 § 378.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 all overdue bonds and coupons secured by the mortgage are paid, 
 they must surrender the road and other property to the parties 
 entitled thereto. The bondholders may fix the compensation of 
 the trustees, and may instruct them to contract for the running of 
 the road, or give them any other instruction they deem advisable ; 
 and the trustees must conform thereto, unless inconsistent with 
 the terms of the trust. 
 
 The trustees, on application of one third of the bondholders in 
 amount to have such mortgage foreclosed, are required immedi- 
 ately to give notice thereof, by publishing it three weeks succes- 
 sively in the state paper, and some paper, if any, in each county 
 in which the road extends, therein stating the date and conditions 
 of the mortgage, the claims of the applicants under it, that the 
 conditions thereof have been broken, and that for this reason they 
 claim a foreclosure ; and to cause a copy of such notice, and the 
 name and date of each newspaper containing it, to be recorded in 
 the registry of deeds in each such county, within sixty days from 
 the first publication ; and unless, within three years from the first 
 publication, the mortgage is redeemed by the mortgagors or those 
 claiming under them, or a bill in equity as in cases of the redemp- 
 tion of mortgaged lands is commenced, founded on payment or a 
 legal tender of the amount of overdue bonds and coupons, or con- 
 taining an averment that the complainants are ready and willing 
 to redeem on the rendering of an account, the right of redemption 
 is forever foreclosed. Each holder of overdue bonds or coupons 
 must present them to the trustees at least thirty days before the 
 right of redemption expires, to be by them recorded ; but such 
 right is not lost by the non-payment of any claims not so pre- 
 sented ; and the parties having the right to redeem have free 
 access to the record of such claims. 1 
 
 378. New Hampshire. 2 — The trustees, to whom any railroad 
 has been assigned or conveyed in mortgage for the benefit of the 
 creditors, are required to call a meeting of the creditors whose 
 claims are secured by such mortgage, once a year, to be holden 
 at some place on or near such railroad, by publication in two 
 daily papers published in Boston, and one paper in each county 
 in which such railroad is located. If such trustees, on application 
 of such creditors, to the amount of one third of the whole sum 
 
 i R. S. 1871, ch. 51, §§ 53,54. * G. S. 1867, ch. 151, §§1-8; G. S. 1878, 
 356 ch. 165.
 
 STATUTORY PROVISIONS REGULATING. [§ 379. 
 
 secured, do not within fourteen days call such meeting, five or 
 more such creditors holding the like amount of claims may call 
 such meeting in the same manner. At such meeting, the trus- 
 tees are required to make a report of the state of the trust prop- 
 erty, and of their proceedings and management in relation there- 
 to, according to the usual custom of directors of railroads, to the 
 stockholders. The creditors at such meeting may elect by ballot 
 three or five trustees, being creditors, and a majority at least resi- 
 dents of the state ; each creditor being entitled to one vote for 
 each hundred dollars of his debt, and having the same right 
 to vote by proxy as stockholders of railroads at their meetings. 
 Upon the election of new trustees, the interest of the former trus- 
 tees must be transferred to and vest in such new trustees ; and 
 the former trustees render and settle an account of their trust to 
 and with such successors, and pay and transfer to them the mort- 
 gaged estate, and any balance of funds in their hands ; and if a 
 balance is due said retiring trustees, the assets of the trusts are 
 charged therewith. No trustees or assignees of any railroad mort- 
 gage, who have the railroad in their charge, are, as such, and 
 without their own default, personally responsible for any damage, 
 by collision or force, occurring to any passenger or to freight upon 
 such railroad. In case of such damage, the company assigning or 
 mortgaging the railroad is liable ; and the assets in the hands of 
 the trustees are holden for such damage as part of the expenses 
 of the trust, in preference to the claims of the general creditors 
 of the company. The Supreme Court has summary power to 
 make all orders and decrees necessary to carry such trusts into 
 effect. 
 
 379. Vermont. 1 — It is the duty of trustees, so long as they 
 continue in possession of any railroad under a mortgage, to call 
 a meeting of the bondholders or creditors for the security of whose 
 claims they hold Buch property in trust, at some convenient place 
 on or near the line of such road, in the month of January in each 
 year, by giving notice of BUCh meeting at least, twenty days pre- 
 vious thereto, in two or more daily papers, published in each of 
 the cities of Boston and New York, and in at least, one paper 
 published in each county through which the said road is Located, 
 if any such there be; and at such meeting the said trustees must 
 
 1 O. SI 1870. cli. 28,8 103. 
 
 857
 
 § 379.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 submit a report of the whole earnings of, and expenditures upon 
 and for, the trust property and estate for the year, and also of their 
 business and proceedings, according to the usual custom of rail- 
 road directors, to the stockholders. 
 
 Whenever the owners or holders of notes, bonds, or obligations, 
 secured by a railroad mortgage, to an amount of not less than fifty 
 thousand dollars, and in number, five or more, deem any trustee 
 of such mortgage to be an unsuitable person to administer such 
 trust, they may apply by petition to any chancellor for the re- 
 moval of such trustee, setting forth in a general manner the 
 grounds and reasons for such removal. 1 The court, thereupon, 
 appoints some early day for hearing such petition, and gives due 
 notice thereof to the trustees of such mortgage, and to all other 
 persons interested, taking especial care to give notice of such ap- 
 plication, and of the time and place of hearing, to all persons in- 
 terested who reside out of this state, by publication in one or more 
 daily newspapers published in Boston and New York. Upon the 
 hearing, the petitioners and trustees, and all other witnesses, may 
 be examined orally before the chancellor ; or in his discretion the 
 chancellor may appoint a special master or masters to take the 
 testimony and report the same to the court. The witnesses are 
 examined as to all alleged breaches of trust, or neglect, or omis- 
 sions of duty ; as to the fitness and competency of the trustees ; 
 as to their holding any other offices, or having any interests, either 
 of a public or private nature, inconsistent in any way with the 
 true interests of the cestuis que trust, or interfering in any way 
 with the prompt, fair, and impartial discharge of the duties of 
 such trusts ; and as to all circumstances or conduct of the trus- 
 tees which render it improper for the interests of the trust to 
 continue them in office. If, upon the hearing, the chancellor finds 
 that such trustee ought to be removed, he decrees his removal, 
 appoints a new trustee or trustees, and makes such orders and 
 decrees as to the transfer and conveyance of the trust property 
 from the old to the new trustees, as to ascertaining the debts 
 and liabilities of the old trustees and the payment of the same, 
 as to the future management of the trust and the accounting 
 thereon, and generally as to all other matters and things con- 
 nected with such trust, as the exigencies of the case, the protec- 
 
 l G. S. 1870, ch. 28, §§ 113, 114. 
 
 358
 
 STATUTORY PROVISIONS REGULATING. [§ 380. 
 
 tion of the old trustees, and the security and welfare of the trust 
 fund may require. 
 
 380. Massachusetts. 1 — When a corporation, having executed 
 a mortgage of its property, rights, and privileges, or any part 
 thereof, to trustees, for the benefit of its general creditors or of 
 any particular class of creditors, has made default in the perform- 
 ance of the condition so that the trustees or their successors are 
 entitled to the actual possession and usufruct of the property, 
 rights, and privileges, therein conveyed in trust for the purposes 
 specified in the mortgage, the trustees, instead of retaining in 
 their own hands the actual possession of the mortgaged premises 
 and running the trains under their own direction and on their 
 own responsibility, may contract with the corporation to take and 
 retain for them the possession and use of the mortgaged prem- 
 ises, and use and operate the same on its own responsibility under 
 the direction of its officers, accounting with the trustees for the 
 earnings and income, and paying over the net income and profits 
 periodically when, and as far as the same may by the terms of the 
 mortgage be necessary for the fulfilment of its conditions, pro- 
 vided, that all liabilities incurred by the corporation or other 
 party in operating the road under such contract be held as claims 
 against and paid out of the income in the same manner and to 
 the same extent as if the property had remained in the actual 
 possession of the trustees, and been operated by them ; and pro- 
 vided, that at a meeting of the bondholders or creditors under the 
 mortgage duly notified in two or more daily newspapers pub- 
 lished in the city of Boston, and in one newspaper at least in each 
 county through which the road is located, ten days before said 
 meeting, a majority in amount of those present or represented 
 shall vote in favor of such contract, each bondholder or creditor 
 casting one vote personally or by proxy for every hundred dollars 
 held by him. 
 
 Trustees in possession of a railroad under a mortgage must an- 
 nually notify a meeting, to be held in December, of the bond- 
 holders or creditors for whose security they hold (lie road in trust, 
 such notice to be published at least ben days previously to the 
 time of holding such meeting, in two or more daily newspapers 
 
 i G S 18G0 ch. G3, §§ 124-128. For original Btatutesce An, 1857, ch, its. 
 
 859
 
 § 380.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 in Boston, and in one paper at least in each county through which 
 the road is located ; and at such meeting they must submit a 
 report of their doings for the year, similar to the annual report 
 of railroad directors to stockholders. On or before the thirty-first 
 day of December, annually, they are required to transmit to the 
 Secretary of the Commonwealth the same returns of their acts, 
 doings, receipts, and expenditures, as are required of railroad cor- 
 porations, and are subject to the same forfeitures and penalties 
 for any default. Upon failure of the trustees to call the meeting 
 as required, five or more bondholders or creditors, whose claims 
 secured by the mortgage amount to not less than ten thousand 
 dollars, may in the same manner call such meeting to be held in 
 the January following said December. At the annual meeting 
 held under either of these two provisions, the bondholders or cred- 
 itors may elect three trustees under the mortgage for the ensuing 
 year, and until others are chosen and qualified, each bondholder or 
 creditor casting in person or by proxy one vote for each hundred 
 dollars due, and secured to him under the mortgage. And the 
 trustees, or either of them, or any bondholder or creditor, may in 
 a summary manner present the proceedings of the meeting to a 
 justice of the Supreme Judicial Court, in court or at chambers, 
 the party presenting such proceedings giving notice thereof, and 
 of his intention to move for the affirmation, to the former trustees 
 under the mortgage, to the trustees of every other existing mort- 
 gage upon the road, and to the corporation giving the mortgage, 
 seven days at least before the hearing thereon ; which notice may 
 be served by any officer or indifferent person. The justice may 
 hear the parties and ratify the election, and make such order and 
 decree as he may deem necessary and just to transfer the prop- 
 erty to the new trustees ; which order and decree are filed in such 
 clerk's office of the court as the justice may direct. The Su- 
 preme Judicial Court, and each of the justices thereof, have full 
 equity jurisdiction, according to the usage and practice of the 
 courts of equity, of all cases arising under these proceedings, and 
 of all questions arising out of railroad mortgages, and may in a 
 summary manner remove any trustee under a railroad mortgage, 
 whether such trustee is in possession of the railroad or not, and 
 appoint a new trustee in his stead, whether such trustee is elected 
 by the bondholders or creditors as provided by statute or not. 
 360
 
 STATUTORY PROVISIONS REGULATING. [§§ 381, 382. 
 
 381. Rhode Island. 1 — Whenever any railroad corporation mort- 
 gages or conveys in trust its railroad or railroad property, or any 
 part thereof, to trustees, for the security of its bondholders or 
 other creditors, or for the security of any class of such bondhold- 
 ers or other creditors, and such trustees take possession of any 
 railroad or railroad property, in pursuance of any authority con- 
 tained in their mortgage or deed of trust, and take charge of, and 
 operate, such railroad or railroad property for the benefit of the 
 creditors for whom such trust was created, such trustees having 
 the assent of the bondholders are not personally liable for any 
 cause or injury arising from the opei-ation of such road, or while 
 they may operate the same, except for their wilful mismanage- 
 ment, or for any contracts made by them as such trustees ; but all 
 such railroad property, the bondholders having assented thereto, 
 is liable for the acts and proceedings of such trustees in the exe- 
 cution of their trusts, to the extent of the interest of the said trus- 
 tees of the bondholders or creditors for whose benefit such trustees 
 may act ; and any action or other proceeding therefor must be 
 brought against such trustees, describing them as such. 
 
 382. In Connecticut, 2 it is provided by statute that when any 
 railroad company has mortgaged its property, or any part thereof, 
 to any person, in trust, for the security of its creditors, or for the 
 security of any class of them, and has made default in the pay- 
 ment of principal or interest, due to such creditors, any such cred- 
 itor may prefer his petition to the Superior Court, in any county 
 in which such railroad, or any part thereof, is located, setting 
 forth such fact, and praying that such trustee may be placed in 
 the possession of such property, for the benefit of such creditors ; 
 and such petition is heard and determined at the first term of 
 the court to which it is returnable, unless continued tor reason- 
 able cause; and if the allegations therein are found (rue, such 
 court decrees that the said company and its president and direc- 
 tors, under a suitable penalty, shall surrender such mortgaged 
 property to tin- trustee, Eor the benefit of such creditors. 
 
 When any such trustee has taken possession of any property, 
 in pursuance "f an order of court, or in pursuance "I any authority 
 contained in the mortgage or deed of trust, he fakes oharg 
 and operates such railroad, or railroad property, Eor the benefil "t 
 
 i G. S. 1872, eh. 1G7,§ 11. - <!• 8. 1875, pp. 833,834. 
 
 861
 
 § 382.] THE DUTIES AND RIGHTS OF MORTGAGE TRUSTEES. 
 
 the creditors for whom such trust was created, and is not person- 
 ally liable for any cause or injury arising from the operation of 
 such road, or while he may operate it, except for his wilful mis- 
 management, or for any contracts made by him as such trustee ; 
 but all such property is liable for the acts and proceedings of such 
 trustee, in the execution of his trust, to the extent of the interest 
 of the creditors, for whose benefit he may act; and any proceed- 
 ing, for the purpose of making said property liable, must be 
 brought against such trustee, describing him as such. 
 
 The trustee is required to file an inventory of the property 
 taken possession of in the office of the secretary of state ; where 
 also he is required to file quarterly accounts of the moneys re- 
 ceived and paid by him in the course of his agency. He is au- 
 thorized to proceed at his discretion in the Superior Court in 
 any county in which the railroad, or any part of it, is located, to 
 foreclose for the use of the bondholders, or other creditors for 
 whom he acts ; and the court may limit the time for the redemp- 
 tion of the mortgaged property, as in ordinary proceedings for the 
 foreclosure of real property. The trustee may be removed for 
 cause, such as neglect or delay in the performance of his duties, 
 and a new one appointed in his place. 
 
 The rights of prior incumbrancers are not affected by these 
 proceedings. A trustee in possession has the same rights, powers, 
 and privileges as are conferred upon railroad companies ; and all 
 expenses and damages incurred in good faith to improve the road 
 ai'e reimbursed from the earnings of the road. All reasonable 
 expenses of the trustee, and damages for injuries sustained during 
 the time of his trust, and payments of prior incumbrances which 
 have matured, and also a reasonable compensation to be allowed 
 by the court, are deducted from the earnings of the road before 
 any part is paid to the creditors. 
 362
 
 CHAPTER XII. 
 
 PAYMENT AND REDEMPTION. 
 
 I. Stipulation for payment in gold or cur- i III. Payment of lost bonds, 3S9. 
 rency, 383, 384. IV. Subrogation, 390-394. 
 
 II. Changes in form and amount of debt, V. Redemption, 395-397. 
 385-388. | 
 
 I. Stipulation for Payment in Gold or Currency. 
 
 383. It is well settled that a provision for the payment of 
 bonds or coupons in gold coin is valid, and may be enforced. 1 
 
 The State of Alabama, by an act of its legislature in 18G7, au- 
 thorized its governor " to indorse in behalf of the state the first 
 mortgage bonds of any railroad company in the state having 
 completed and equipped twenty continuous miles of railroad, at 
 the rate of $12,000 per mile, for each section so completed and 
 equipped." The bonds of the company bearing interest at a rate 
 not exceeding eight per cent., so indorsed by the governor, are de- 
 clared to have priority in favor of the state over any and all other 
 liens whatsoever. The Montgomery and Eufaula Railroad Com- 
 pany took advantage of this act, but did not execute any trust 
 deed or mortgage of its property to secure its bonds, the state re- 
 lying upon its statutory lien. The indorsement by the governor 
 referred to the act providing for it as his authority. The company 
 having defaulted its interest, the holders of a part of the bonds 
 brought a suit in behalf of themselves and all other bondholders 
 who might come in, praying that they might be subrogated to 
 the lieu and rights of the state upon the property of the company, 
 that the lien might be established and the property and franchise 
 of the company sold. It was, however, claimed that the indorse- 
 ment was void, and consequently that there was no statutory lien, 
 because while tie- statute only authorized the indorsement of bonds 
 bearing eight per cent, interest, the bonds issued and indorsed in 
 
 1 Trebilcock v. Wilson, L2 Wall. 687; 195; State of Missouri v, Bays, 50 Mo. 
 Pollard v. City of Pleasant Hill, 8 Dill. 34. Sec 2 Jones on Mori-. § 901. 
 
 363
 
 § 384, 385.] PAYMENT AND REDEMPTION. 
 
 this case bore eight per cent, interest in gold; that the agreement 
 to pay the interest in gold was an agreement to pay more than 
 eight per cent, interest. But the court held the fair construction 
 of the statute to be that the interest might be made payable in 
 any Legal tender currency ; and that whether gold might be at a 
 premium or at a discount in respect to the treasury notes of the 
 United States was immaterial, as both are equally lawful money. 1 
 
 384. Under the legal tender acts, an undertaking to pay in 
 gold must be either express or implied from the contract ; the 
 implication cannot be gathered from the mere expectations of the 
 parties. 2 The State of Maryland, having a large interest in the 
 Baltimore and Ohio Railroad Company, to enable it to finish its 
 road, loaned it sterling bonds of the state, with interest at five per 
 cent, per annum, payable in London. This interest the state was, 
 of course, obliged to pay in gold. The railroad company, by way 
 of indemnity, agreed to pay interest to the state out of the profits 
 of the road at a specified rate, and in parts of the contract it ap- 
 peared that a complete indemnification was specifically and care- 
 fully provided for. At the time the contract was made, there was 
 no difference existing or anticipated in the value of currency and 
 coin, but after the passage of the legal tender acts, the interest 
 which the railroad company stipulated to pay, if paid in legal 
 tender notes, would fall very much short of indemnifying the 
 state for its payment of the interest upon its bonds in gold. 
 The question, therefore, arose whether, by the contract between 
 the parties, the state was entitled to demand in gold what was 
 payable to her, or whether it might be satisfied in legal tender 
 notes. The Supreme Court of the United States held that no 
 implication of an undertaking to pay in gold could be drawn from 
 the fact that unless the contract should be so interpreted there 
 was no complete indemnification of the state. 3 
 
 II. Changes in Form and Amount of Debt. 
 
 385. A change in the form of the mortgage debt, such as 
 the substitution of new bonds for those originally secured by it, 
 
 1 Young v. Montgomery & Eufaula R. 2 Knox v. Lee, 12 Wall. 457. 
 
 R. Co, 2 Woods, G06. And see Butler v. 3 Maryland v. Railroad Co. 22 Wall. 
 
 Horwitz, 7 Wall. 258 ; Meyer v. City of 105. 
 Muscatine, 1 Wall. 384, 391. 
 
 864
 
 CHANGES IN FORM AND AMOUNT OF DEBT. [§ 386. 
 
 does not extinguish or affect the lien. 1 A railroad company hav- 
 ing executed a mortgage to secure a limited amount of bonds, 
 afterwards executed another mortgage of the same property to 
 secure a larger amount of bonds, and the deed recited that the 
 holders of the bonds secured by the original mortgage had agreed 
 to surrender the same, and receive in their place new bonds to be 
 secured by the original mortgage as modified by the second mort- 
 gage. Accordingly, all the bonds secured by the first mortgage, 
 except twenty, were exchanged for bonds secured by the second. 
 Upon the foreclosure of this mortgage, the holders of these twenty 
 bonds claimed to have priority over all the new bonds issued to 
 take up the original bonds, and that they should be paid in pref- 
 erence out of the proceeds of the sale. They based their claim 
 upon the theory that the new bonds issued in lieu of the original 
 bonds were in no way secured by the original trust deed, but were 
 a lien upon the property only by virtue of the second deed. But 
 the court declared that the provisions of the latter deed clearly 
 revealed the purpose of the parties, that the bondholders surren- 
 dering their original bonds for the new ones should not lose any 
 right or estate granted by the first deed, except so far as that was 
 modified by the second ; and that the bondholders consented to 
 give up their old bonds and take the new ones upon this express 
 condition ; and therefore, the court held that the holders of these 
 twenty bonds were not entitled to be paid out of the proceeds of 
 the sale in preference to the holders of the substituted bonds ; but 
 that they could not be prejudiced by the increase of the number 
 of bonds secured by the second mortgage, and consequently were 
 entitled to the same proportion of the proceeds of the mortgaged 
 property that they would have had if the second mortgage had not 
 been executed. 2 
 
 386. When the amount of a mortgage is limited to a defi- 
 nite sum this cannot be enlarged either by the mortgagor, or 
 by the trustees of the bondholders, or by a court of equity, so as 
 to make it security for an additional sum. The La Crosse and 
 Milwaukee Railroad Company executed a mortgage to secure 
 84,000,000 of its bonds which were all issued. Upon a fore- 
 closure of the mortgage, many of the bonds having been issue I ;it 
 
 1 Stevens v. Mid-Hants By. Co. L. It. 2 Ames v. N. < >., Mobile & Texas R. B 
 Ch. App. 1064. Co. ii Woods, 2O0. 
 
 o'Go
 
 § 38G.] PAYMENT AND REDEMPTION. 
 
 a large discount, a decree was entered for only the amount which 
 had been actually given for the bonds, namely, about $2,800,000. 
 A party, who had sold to the company a large amount of railroad 
 iron and had received in payment for it bonds at eighty percent., 
 with an agreement that if the company should at any time sell 
 other bonds at a less rate, he should have as many additional 
 bonds as would pay him for the iron in full, estimating the bonds 
 already given and those to be given at the lowest rate at which 
 any bonds had been sold, claimed that inasmuch as the company 
 had sold bonds at forty per cent., he had a right to have his out- 
 standing equity with the company adjusted in the foreclosure 
 suit, and his demand attached to the mortgage. His petition was, 
 however, denied by the Supreme Court of the United States ; and 
 Mr. Justice Davis, delivering the opinion of the court, and stating 
 the reasons for not adjusting his claim in this way, said : * " To do 
 this, there must be a power somewhere to enlarge the mortgage, 
 and where is it lodged ? Certainly not with the trustees, for their 
 duty is to see that the security held by them for their cestuis 
 que trust is enforced according to the terms of the deed. They 
 could neither enlarge the mortgage, nor consent to its enlarge- 
 ment. The court could not do it, nor the La Crosse Company, as 
 it had covenanted with the trustees in behalf of the bondholders 
 that it would only issue four millions of dollars in bonds. The 
 rio'hts of the bondholders were fixed by the terms of the mort- 
 gage. The value of the bonds as an investment depended in a 
 great measure on the number to be issued, and, doubtless, each 
 purchaser before he bought had information of the character of 
 the security on which he relied. The property might be very 
 well a safe security for four millions of dollars, and very unsafe 
 for any additional amount. The doctrine contended for would 
 utterly destroy the marketable value of all corporate securities. 
 No prudent man would ever buy a bond in the market, if the 
 provisions made for its ultimate redemption could be altered with- 
 out his consent. But it is said, as the court rendered a decree 
 for less than the face of the bonds, equity will step in and allow 
 the appellant to apply the vacuum of principal secured by the 
 mortgage to liquidate his claim. The answer to this is, that it 
 does not concern the appellant whether the court rightfully or 
 otherwise reduced a portion of the bonds. The bondholders, 
 1 Vose v. BronsoD, 6 Wall. 452. 
 
 366
 
 CHANGES IN FORM AND AMOUNT OF DEBT. [§ 387. 
 
 whose bonds were thus reduced, are the only parties in interest 
 who could have just cause of complaint against the action of the 
 court, and if they did not feel aggrieved, no other person has any 
 right to complain. The security of the mortgage extended to 
 four millions of bonds only, and whatever amount the court should 
 ascertain was due on those four millions was the amount secured, 
 and no more." 
 
 387. The debt secured cannot be increased as against sub- 
 sequent incumbrancers without their consent. 1 The trustees of a 
 subsequent mortgage could not bind the bondholders by giving 
 such consent, nor would the consent of a majority of the bond- 
 holders bind the minority. Any one bondholder can insist upon 
 his right that the prior incumbrance shall remain unchanged. 
 
 The Atlantic and Great Western Railway Company, incorpo- 
 rated under the laws of the States of Ohio, Pennsylvania, and 
 New York, and owning a railway extending through portions of 
 each of these states, made a first mortgage of the division of its 
 road situate in Ohio, and afterwards a second mortgage of all its 
 property situate in the three states. Under the latter mortgage 
 a foreclosure suit was brought in each of the three states. An 
 agreement was afterwards made between the trustees of the first 
 mortgage sanctioned by a majority of the bondholders under it, 
 with the trustees of the second mortgage, extending the time of 
 payment of the first mortgage for three years, and changing the 
 interest payable during such extended term from currency to gold. 
 This agreement expressly provided that it was not to take effect 
 until it was confirmed by the courts in each of the three states. 
 It was confirmed in Ohio, but when it was presented for confir- 
 mation to a judge of the Supreme Court of New York, he held 
 that he had no power to sanction any change in the effect or 
 terms of the first mortgage. 2 " The court has no authority which 
 would permit it to take that difference (between interest in cur- 
 rency and in gold), for a period of three years, from the holders of 
 the second mortgage bonds and give it to the more fortunate own- 
 of the first, against the objections of those resisting the pro- 
 ding. The same principle which would sanction a small in- 
 crease of the prior incumbrance would sustain one which might 
 
 1 Si.c l Jones on Mortgages, §§357, - Taylor v. Atlantic & Greal Western 
 3C1. By. Co! 55 How. (N. V.) Pr. 278. 
 
 367
 
 § 388.] PAYMENT AND REDEMPTION. 
 
 prove entirely destructive to those designed to be protected by the 
 succeeding incumbrance ; and if the court had the power over the 
 agreement of the parties to change it in any material respect it 
 could entirely destroy its value. The point involved is one of 
 principle solely, for if the power exists it can be limited in its ap- 
 plication only by the subject to be affected by it. Every bond- 
 holder is equally entitled, by the agreement made with him and 
 with the trustees for his benefit, to be protected in all the advan- 
 tages legally secured by it ; and for that reason the courts cannot 
 disregard the principle protecting him, because the amount due to 
 him and the extent to which he may be entitled to participate in 
 the advantages of the security may be, comparatively speaking, 
 not very significant. It is enough that a material right may be 
 prejudiced, and the party deprived of the full advantage of his 
 contract and security, to require that the court shall not interpose 
 to his manifest injury ; and such a right has been clearly shown 
 in this case." 2 It may be observed, moreover, that no confirma- 
 tion of such agreement could give it any validity as against a 
 bondholder who did not himself consent to it. 
 
 388. An extension of the time of payment of a prior mort- 
 gage does not impair the security of subsequent incumbrancers. 2 
 A change in the time of payment of the interest of the prior mort- 
 gage, so long as the rate is not increased, does not have this effect. 
 Thus, a trustee under a railroad mortgage, being about to apply 
 for an order to sell the property under the mortgage, a receiver in 
 possession of the property, in behalf of second mortgagees, agreed 
 to pay the interest quarterly instead of semi-annually, and thus 
 obtained an extension of the mortgage. A holder of receivers' cer- 
 tificates, which were by agreement and order of court made a lien 
 subject to the first mortgage, could not object to the payment of 
 the interest as agreed. 3 
 
 1 Per Daniels, J., in Taylor v. Atlantic pendente lite. Reinach v. Meyer, 55 How. 
 
 & Great Western Ry. Co. supra. An in- (N. Y.) Pr. 283. 
 
 junction against the carrying into effect of 2 2 Jones on Mortgages, § 942. 
 
 this agreement was granted by another 3 In re United States Rolling Stock Co. 
 
 judge of the same court, and continued 55 How. (N. Y.) 286. 
 
 368
 
 SUBROGATION. [§§ 389, 390. 
 
 III. Payment of Lost Bonds. 
 
 389. The loss of a bond is no objection to the payment of 
 it by the company that issued it, provided proper indemnity be 
 furnished against its being enforced in the hands of others. 1 Re- 
 lief is given in equity. Equity jurisdiction in the case of lost 
 bonds originates in the doctrine of profert at common law, it 
 being a rule of pleading in the common law courts, that they 
 could give no remedy for a debt secured b}*- bond unless the 
 creditor offered to produce his bond in court. If the bond were 
 lost, profert was impossible, and the remedy at law was gone. A 
 court of chancery, however, on proof that the bond was lost, en- 
 tertained jurisdiction to compel its reexecution and payment of 
 the money secured. Now, although profert is dispensed with the 
 equity jurisdiction survives. 2 
 
 Relief for the loss of negotiable bonds will only be given upon 
 the condition that full and secure indemnity be given against all 
 risk. The difficulty of seeuring full and complete indemnity to 
 meet all the contingencies that may occur when the bonds have a 
 very long time to run, may be great, but it does not prevent the 
 granting of the relief. The court has full control of the matter. 
 Indemnity should be furnished upon each payment of interest, as 
 well as upon the payment of the principal sum ; and then, if at 
 any time before final payment, it be made to appear that the in- 
 demnity for past payments was insufficient, or had become inse- 
 cure, the court might properly make it a condition precedent to 
 the receipt of further payments that additional indemnity be given 
 in respect to payments previously made. With proper precau- 
 tion all risk may be provided against ; and if the bonds should be 
 discovered, or be presented by a bond fide holder, of course, the 
 obligations issued in their place will cease to be of value. 3 
 
 IV. Subrogation. 
 
 390. Subrogation arises by operation of law, as a general 
 rule, whenever the mortgage debt is paid by one entitled In re- 
 deem, other than the debtor. It is an equitable right, and of 
 
 1 Miller v. Rutland & Wnsliin^ton It. 560; and see Lawrence v. Lawrence, 49 
 
 R. Co. 40 Vt. 399. See § 219. N. II. 109. 
 
 ' l NewOrlean , Jack on 6 GreatNorth- 3 Chesapeake & Ohio Canal Co. v, Blair, 
 
 cm R. It. Co. v. Miss. College, 47 Miss. 45 Mil. 102. 
 
 24 869
 
 R 391.] PAYMENT AND REDEMPTION. 
 
 course there is no chance for its operation when there is a legal 
 ri«-ht to the security, such as exists when a legal assignment of the 
 security is taken by the person paying the mortgage debt. Sub- 
 rogation proceeds upon the theory that the mortgage debt has 
 been paid, and paid by one who has a right to redeem, and under 
 circumstances which entitle him, as an equitable assignee of the 
 security, to hold it as a subsisting charge upon the property. It 
 does not matter whether the creditor who pays such debt does so 
 voluntarily or for his own protection. It is an essential condi- 
 tion, however, of his right to substitution that he is himself under 
 no obligation to pay such debt ; that it is not in any way a debt 
 of his own. This principle is often available for the protection of 
 one who has paid off an incumbrance upon property to which he 
 erroneously supposed he had good title, enabling him, upon the 
 failure of his title to the equity of redemption, to hold the mort- 
 gage title as an equitable assignee. 1 
 
 391. Relief can be had by one who has paid a prior mort- 
 gage under the belief that he had good title to the mortgaged 
 property only when he has made the payment under a mistake 
 of fact, and when he has not acted in bad faith towards any par- 
 ties interested in the property. The La Crosse and Milwaukee 
 Railroad Company, having made a first and second mortgage, was 
 sold on execution at the suit of certain creditors, and was bought 
 in by the bondholders secured by the second mortgage. The pur- 
 chasers, as they were authorized to do by statute, organized them- 
 selves into a new corporation, and worked the road for their own 
 profit. Subsequently the mortgagees under the senior mortgage 
 pressed their claim to a decree of foreclosure, when the new cor- 
 poration, in order to prevent a sale, paid into court the amount of 
 the decree, and the money was distributed among the bondholders. 
 A bill was then pending against the new corporation in behalf of 
 certain judgment creditors of the La Crosse and Milwaukee Rail- 
 road Company, alleging that the sale under which the new cor- 
 poration claimed was fraudulent and void, and praying that it 
 might be set aside ; and a decree was afterwards made in accord- 
 ance with the prayer, and directed that the property should be 
 resold, and the proceeds applied, after payment of prior liens, to 
 the satisfaction of the judgments on which the creditor's bill was 
 
 1 See Jones on Mortgages, §§ 874-885. 
 370
 
 SUBROGATION. [§ 391. 
 
 founded. The new corporation then filed a bill in equity against 
 the mortgagees under the first mortgage, asking to have the 
 money returned to them on the ground that it had been paid un- 
 der a mistake of fact, or as an alternative relief to be subrogated 
 to the benefit of the first mortgage ; but the Supreme Court of 
 the United States held that the bill would not lie for either form 
 of relief. 1 Mr. Justice Bradley, delivering the opinion of the court, 
 said : " The bare statement of the claim, even presenting it in the 
 language of the bill itself, seems to us sufficient to condemn it. 
 Who are the complainants ? Are they not the very bondholders, 
 self-incorporated into a body politic, who, through their trustee 
 and agent, effected the sale which was declared fraudulent and 
 void, as against creditors, and made the purchase which has been 
 set aside for that cause ? Was it ever known that a fraudulent 
 purchaser of property, when deprived of its possession, could re- 
 cover for his repairs or improvements, or for incumbrances lifted 
 by him whilst in possession ? If such a case can be found in the 
 books, we have not been referred to it. Whatever a man does to 
 benefit an estate, under such circumstances, he does in his own 
 wrong. He cannot get relief by coming into a court of equity. 
 By the civil law, the possessor, even in bad faith, may have the 
 value of his improvements, if the real owner choose to take them. 
 The latter has an option to take them or to require their removal. 
 But this rule has never obtained in the common law, nor in the 
 system of English equity. One of the maxims of the latter sys- 
 tem is, ' He that hath committed iniquity shall not have equity.' 
 And various illustrations of it are furnished by the books. But 
 the complainants are wrong in asserting that the property was not 
 theirs. It was theirs. Their purchase was declared void only as 
 against the creditors of the La Crosse and Milwaukee Railroad 
 Company. In other words, it was only voidable, not absolutely 
 void. By satisfying these creditors they could have kept the 
 property, and their title would have been good as against all the 
 world. The property was theirs; but by reason of the fraudulent 
 salt-, was subject to the incumbrance of the debts of the La Crosse 
 Company. This was the legal effect <»f the decree declaring their 
 title void. Therefore, they were, in fact, paying off an incum- 
 
 1 Railroad Company v. Soutter, IS previous atages of the litigation, Bronson 
 Wall. r,i7. Chief Justice Chase and Jus- v. La Crosse R. R. Co, i.' Wall. 283; 
 tices Miller and Field dissenting. Bee, fur James v. Railroad ('<>. 6 Wall. 753. 
 
 871
 
 §§ 392, 393.] PAYMENT AND REDEMPTION. 
 
 brance on their own property when they paid into court the money 
 which they are now seeking to recover back. They are wrong 
 also in asserting that they made the payment under a mistake of 
 fact. If it was made under any mistake at all, it was clearly a 
 mistake of law. They mistook the legal effect of transactions of 
 which they were chargeable with notice. They were the persons 
 for whose benefit the purchase was made, which was declared to 
 be fraudulent. They were the principal defendants in the credit- 
 ors' bill upon which this decree was rendered. All the evidence 
 in that suit had been taken when they made the payment in ques- 
 tion. The cause was pending, on appeal, in this court. There 
 was not a fact, therefore, of which they were ignorant. They had 
 full and actual notice of all the transactions, and all the evidence 
 on which the decree was ultimately founded." Moreover, as 
 against those who had in the mean time purchased the property, 
 under the proceedings had in favor of the judgment creditors, there 
 would be no equity in subjecting the property to an incumbrance 
 from which it was free when their purchase was made. 
 
 392. Subrogation to rights of a state. — The holders of 
 bonds of a railroad company which a state has indorsed under a 
 statute giving a lien upon the company's property as security, 
 may upon a default of the company be subrogated to the rights 
 of the state in respect to this security, and may in a suit to en- 
 force the lien obtain a sale of the property and application of the 
 proceeds to the payment of the bonds. 1 
 
 Although bondholders who have purchased bonds of a railroad 
 company indorsed by a state may be subrogated to a mortgage 
 taken by the state for its security, after the state has repudiated 
 its indorsement as illegal, yet there can be no such subrogation 
 by one who has taken the bonds without such indorsement, but 
 issued to an officer of the company as collateral security for ad- 
 vances by him. 2 
 
 393. The difficulty in the way of subrogation to the secu- 
 rity taken by a state is illustrated in a recent case before the 
 Circuit Court of the United States for the Fifth Judicial Circuit. 3 
 
 1 Young v. Montgomery & Eufaula R. 2 Clews v. Brunswick & Albany R. R. 
 R. Co. 2 Woods, 606. Co. 54 Ga. 315. 
 
 3 Branch v. Macon & Brunswick R. R. 
 g™ Co. 2 Woods, 385.
 
 SUBROGATION. [§ 393. 
 
 The State of Georgia, under the authority of an act of the legis- 
 lature passed in 1866, indorsed the bonds of the Macon and Bruns- 
 wick Railroad Company, to the amount of ten thousand dollars 
 per mile, upon the express condition that such indorsement should 
 vest in the state the title of all property purchased with the pro- 
 ceeds of said bonds, and should give the state a first lien on all 
 the property of the company ; and that upon failure of the com- 
 pany to pay the interest or principal of the bonds, the governor 
 should take possession of all its property and sell the same for the 
 purpose of paying the bonds. Bonds to the amount of $1,950,000 
 were issued and indorsed by the state in accordance with this act. 
 In 1868, the people of the state adopted a Constitution, by which 
 it was provided that the credit of the state should not be granted 
 or loaned to aid any company, except under certain conditions. 
 In 1870, the legislature passed an act amending the Act of 1866 
 above referred to, so as to authorize the governor to indorse the 
 bonds of the company to the extent of three thousand dollars per 
 mile in addition to the ten thousand first authorized. Under the 
 latter act the company issued bonds which were indorsed by the 
 state to the amount of $600,000. Two years afterwards the legis- 
 lature, by resolution, declared the state's guaranty on these bonds 
 binding upon the state. In 1873, the interest on the bonds not 
 having been paid, the governor seized and took possession of the 
 railroad on behalf of the state, and appointed an agent or receiver 
 to manage it. In 1875, the legislature passed a resolution, de- 
 claring the first issue of bonds valid and binding on the state, but 
 the second issue of $600,000 unconstitutional, null, and void, and 
 also declaring that the road ought to be sold. According^, the 
 governor caused the road to be advertised for sale, whereupon a 
 holder of bonds of the last issue filed a bill, in which he prayed 
 for an injunction to prevent the sale, and asked for the appoint- 
 ment of a receiver to take possession of and sell the road under 
 the direction of the court ; but the court refused this relief, be- 
 cause it could not be granted without adjudicating the rights of 
 the state, which ought not to be done unless the state were a 
 party, and the state could not be made a party. Mr. Justice 
 Bradley, delivering the opinion t of the court, said: "The great 
 difficulty in this ease arises from the fact that the surety is the 
 State of Georgia, and that the state is, by its agents and officers, 
 in possession of the property given by way of indemnity. In 
 
 o I •>
 
 § 394.] PAYMENT AND REDEMPTION. 
 
 order to effect the object of this bill, the state must not only be 
 displaced and the bondholders subrogated in its stead, in refer- 
 ence to the property in question, but the courts must dispossess 
 
 the state of the actual possession of that property The court 
 
 is called upon, therefore, to adjudicate directly upon the state's 
 liability on the guaranty without having any jurisdiction over it 
 as a party, and having decided in favor of that liability, it is 
 then called upon to dispose of the fund which the state has taken 
 for its indemnity. The case, therefore, involves a direct adjudi- 
 cation of the rights and liabilities of the state, and an ultimate 
 execution of property in its possession, the state, at the same time, 
 denying its liability and insisting upon its right to maintain its 
 lawfully acquired possession. It seems to us that this is asking 
 the court to go further than any court has ever gone yet, except 
 where, legislation has been adopted authorizing the state to be 
 sued in the same manner as a private party. At all events the 
 right of the complainant is, to our view, so doubtful that we do 
 not feel authorized to exercise the extraordinary powers of this 
 court sought to be put into operation. Without attempting, there- 
 fore, to point out to the complainant what other remedy he has, 
 except to rely upon the good faith of the State of Georgia, we 
 feel compelled to deny the motion for an injunction and appoint- 
 ment of a receiver." 
 
 394. But there can be no subrogation as between a state 
 which has issued its own bonds to a railroad company to aid 
 its construction, and a holder to whom the company has trans- 
 ferred the bonds. The state is then the principal debtor, and 
 primarily liable, and the holder of such bonds cannot on the prin- 
 ciple of subrogation claim to have lands conveyed to the state as 
 security against loss upon such bonds applied to the payment of 
 the bonds held by him. The State of Minnesota issued its bonds 
 to the Southern Minnesota Railroad Company, which transferred 
 to the state as security certain lands it had received, as a grant 
 in aid of the construction of the road, and also executed a first 
 mortgage of all its property. The company partially graded and 
 constructed its road, and received bonds from the state, nearly all 
 of which, amounting to half a million dollars, it transferred to a 
 contractor who had built the road. The company made default 
 under its mortgage to the state, which foreclosed the mortgage, and 
 374
 
 REDEMPTION. [§ 395. 
 
 purchased the property at the sale. Several years afterwards, the 
 state transferred to a new corporation the property acquired un- 
 der the foreclosure, together with the lands conveyed to it by the 
 original company. The state, however, directly after the default 
 of the Southern Minnesota Railroad Company, proved recreant to 
 its good faith and honor by refusing to pay the interest or princi- 
 pal of its bonds. The contractor, after a delay of twelve years, 
 brought a bill in equity against the new corporation, which had 
 then completed the road, seeking to charge the lands in its posses- 
 sion before mentioned with the payment of the bonds. The Su- 
 preme Court of the United States decided that he had no equity 
 which could be enforced, and that if he had had any such equity, 
 his long delay in presenting the claim would deprive his suit of 
 favorable consideration. 1 Mr. Justice Field said : " Whatever 
 right the plaintiff had to compel the application of the lands re- 
 ceived by the state to the payment of the bonds held by him, it 
 was one resting in equity only. It was not a legal right arising 
 out of any positive law, or any agreement of the parties. It did 
 not create any lien which attached to and followed the property. 
 It was a right to be enforced, if at all, only by a Court of Chan- 
 cery against the surety. But the state being the surety here, it 
 could not be enforced at all, and not being a specific lien upon 
 the property, cannot be enforced against the state's grantees. 
 Where property passes to the state, subject to a specific lien or 
 trust created by law or contract, such lien or trust may be en- 
 forced by the courts whenever the property comes under their ju- 
 risdiction and control. Thus, if property held by the government, 
 covered by a mortgage of the original owner, should be trans- 
 ferred to an individual, the jurisdiction of the court to enforce 
 the mortgage would attach, as it existed previous to the acquisi- 
 tion of the government. But where the property is not affected 
 by any specific lien or trust, in the hands of the state, her trans- 
 fer will pass an unincumbered estate." 
 
 V. Redemption. 
 395. It is not often that the subject of the right of re- 
 demption from foreclosure sales under railroad and other corpo- 
 rate mortgages is a matter of litigation in the courts. Especially 
 when a railroad company has become so embarrassed as to allow 
 
 i Chamberlain v. St. Paul & Sioux City U. II. Co. 92 (J. 8. 299. 
 
 376
 
 § 395.] PAYMENT AND REDEMPTION. 
 
 its property to be sold to satisfy a mortgage upon it, there is 
 generally nothing worth redeeming, even if the corporation, or 
 any assignee or creditor of it, should be in condition to effect a 
 redemption requiring such a large sum of money as railroad mort- 
 gages usually represent. There are general laws in several states 
 al lo wing redemption after foreclosure sales, but they are not gen- 
 erally applicable to sales made by virtue of powers in trust mort- 
 gages, such as railroad mortgages usually are, although they may 
 be applicable to sales under such mortgages when they are enforced 
 by a bill in equity. 1 These statutes relating to redemption be- 
 come a part of the contract of mortgages affected by them, made 
 while the statutes are in force ; they confer substantial rights, and 
 become a rule of property, binding upon the federal courts sit- 
 ting in equity in states where such statutes exist ; and the fed- 
 eral courts must conform to such statutes in decrees foreclosing 
 mortgages affected by such rights of redemption. 2 
 
 But it seems that such statutes are not binding upon the fed- 
 eral courts when they are called upon to decree a foreclosure sale 
 of a railroad mortgage which covers as an entirety the rights, 
 franchises, and road of the company existing in several states. 
 This was the view taken by Mr. Justice Harlan of the Supreme 
 Court, holding a recent term of the Circuit Court for the Seventh 
 Circuit. In the Indianapolis, Bloomington, and Western Railway 
 case a final decree of sale was rendered in 1877. The sale had 
 not taken place when the Supreme Court of the United States de- 
 cided the case of Brine v. Insurance Company, where it was held, 
 as to a lot of land in Chicago which had been mortgaged, that 
 the right of redemption within fifteen months given by the Illi- 
 nois statute was part of the contract which the federal court was 
 bound to recognize. In the Indianapolis, Bloomington, and West- 
 ern case the decree had directed the sale of the railroad prop- 
 erty, rights, and franchises, as an entirety without redemption, 
 and a motion was made to correct the decree, so as to recognize 
 the right of redemption given by the statutes of Indiana and Illi- 
 nois in sales of real estate. Mr. Justice Harlan decided that the 
 redemption statutes of Indiana and Illinois did not embrace rail- 
 road mortgages which covered as an entirety the property, rights, 
 and franchises of a railroad, and that the original decree should 
 
 1 See Jones on Mortgages, chapters 2 Brine v. Insurance Co. 96 U. S. 627. 
 xxii., xxix., xxx. 
 
 376
 
 REDEMPTION. [§§ 396, 397. 
 
 stand. These views, he held, were not at all in conflict with the 
 case of Brine v. Insurance Company, or with any decision in the 
 Indiana and Illinois Supreme Courts. 1 
 
 396. A vested right to redeem under the general law can- 
 not be destroyed or impaired by a special statute enacting that 
 the mortgage has been foreclosed, or that it shall be foreclosed in 
 case the debt be not paid within one year from the passage of the 
 act. 2 
 
 397. In New York 3 it is provided by statute that whenever 
 default shall be made by any railroad or plank road company in 
 the payment of principal or interest of any bonds of such com- 
 pany, which are secured by a mortgage of the property of such 
 company, it shall be lawful for each and every stockholder of said 
 company, at any time during the process of such foreclosure, to 
 pay to the mortgagees named in such mortgage, for the use and 
 benefit of the holder and holders of such bonds, such a proportion 
 of the sum clue and of the sum secured to be paid by the whole of 
 the bonds secured by such mortgage, as such stockholder's stock 
 shall bear to the whole stock of said company; and on so paving 
 such stockholder shall, to the extent of such payment, become and 
 be interested in said mortgage and protected thereby. 
 
 In case of the foreclosure of any mortgage given by any railroad 
 or plank road company to secure the payment of any bond of such 
 company, any stockholder of such company shall, for the period of 
 six months after the sale under such foreclosure, have the right, on 
 paying to the purchaser or purchasers at or under such sale, or to 
 the mortgagees in such mortgage, for the use and benefit of said 
 purchaser or purchasers a sum equal to such proportion of the 
 price paid on such sale, and the costs and expenses thereof, as 
 such stockholder's stock in said company shall bear to the whole 
 capital stock of said company ; and on so paying such stockholder 
 shall be entitled to have the same relative amount of stock or in- 
 terest in said rail road or plank road company, and its road, fran- 
 chises, and other property. 4 It shall be lawful for any mortgagee 
 
 1 Boston Daily Advertiser, October 8 2 R. S. 1875, p. 553, § 108. Original 
 9th, 1S78. Judges Drummond ami lilud- Act, Laws 1853, c. 502. 
 
 gett concurn.l. * 2 B. S. 1875, p. 553, §§ 109, 110. 
 
 2 Ashuelot H. H. Co. v. Elliot, 52 N. II. 
 387. 
 
 377
 
 R 397.1 PAYMENT AND REDEMPTION. 
 
 of any railroad and the franchises thereof to become the purchaser 
 of the same, at any sale thereof under the mortgage, upon fore- 
 closure by advertisement, or under a judgment or decree, or oth- 
 erwise, and to hold and convey the same, with all the rights and 
 privileges belonging thereto or connected therewith. 1 
 i 2 R. S. 1S75, p. 553 ; Laws 1857, c. 444, § 1. 
 
 378
 
 CHAPTER XIII. 
 
 REMEDIES AND JURISDICTION OF COURTS FOR ENFORCEMENT 
 OF CORPORATE SECURITIES. 
 
 I. The several remedies to enforce cor- 
 porate securities are cumulative, 398- 
 405. 
 
 II. Jurisdiction of state and federal 
 courts of suits against corporations, 
 406-414. 
 
 III. Effect of consolidation of railroad 
 
 corporations upon the jurisdiction of 
 suits against them, 415-420. 
 
 IV. In cases of concurrent jurisdiction 
 the court which first assumes jurisdic- 
 tion retains it, 421, 422. 
 
 V. Sale of franchise or property of rail- 
 road company on execution, 423-430. 
 
 I. The Several Remedies to enforce Corporate Securities are 
 
 Cumulative. 
 
 398. General Statement. — Although for the reasons stated 
 mortgages by railroad companies, and other corporations having 
 property of great value widely scattered, are almost -always fore- 
 closed by suits in equity, yet other methods of foreclosure are not 
 wholly disused. Thus, in Massachusetts, such mortgages have 
 been foreclosed by writ of entry and possession ; l and in Maine 
 by notice and possession in the manner used for the foreclosure 
 of ordinary mortgages. 2 
 
 The general rule, that the several remedies upon a mortgage 
 by suits at law and in equity, and by entry and possession, may be 
 used together or successively, 3 is applicable to mortgages by rail- 
 way companies. 
 
 A holder of bonds issued by a railroad company and guaran- 
 teed by the trustees of an internal improvement fund acting in 
 behalf of a state, and having a statutory lien upon the railroad as 
 security, on the default of the company, has three remedies : first, 
 upon the personal liability of the company; second, upon the 
 guaranty of the internal improvement fund ; and, third, upon the 
 
 1 I f:iv< ii v. Grand .Junction R. R. & De- 
 pot Co. 12 Allen (Mass.), 337. 
 
 2 Kennebec & Portland R. R. Co. v. 
 Portland & Kennebec R. R. Co. 59 Me. 9. 
 a 2 Joins on Mortgages, § 1215. 
 879
 
 § 399.] REMEDIES AND JURISDICTION OF COURTS. 
 
 statutory lien on the railroad. He cannot avail himself of the 
 latter directly, as he could if it were a mortgage given to secure 
 the bonds alone ; but he must induce the trustees to act in the 
 mode pointed out by the statute ; or compel them to act by man- 
 damus ; or he may seek relief by a bill in equity. 1 
 
 399. Although a mortgage itself provides no remedy other 
 than a power of sale, the jurisdiction of a court of chancery to 
 enforce it is not ousted. The power of sale is only a cumulative 
 remedy. 2 Although a mortgage provides several remedies, as for 
 instance that the mortgagee may, upon default, take possession 
 and apply the income of the property to the payment of the debt 
 secured, or may sell the property under a power, or may enforce 
 payment of the debt by suit at law, or may enforce the security 
 by proceedings in equity, the mortgagee is not confined to any 
 particular order of priority in resorting to one or all of the rem- 
 edies conferred by the mortgage. 3 
 
 Whether a provision in a mortgage making a sale by the trus- 
 tees under the power given them, exclusive of all other methods 
 of sale, would exclude a resort to proceedings in equity by bond- 
 holders for that purpose, is perhaps an undecided question ; but 
 a suit at law upon overdue coupons has been sustained, 4 although 
 the mortgage securing them prescribed that in case the coupons 
 were not paid when due, the trustees, at the request of one fourth 
 of the bondholders, should enter into possession of the railroad, 
 and sell it for the benefit of the creditors ; " it being further ex- 
 pressly understood and agreed (any law or usage to the contrary 
 notwithstanding) that neither the whole nor any part of the 
 property .... shall be sold under proceedings either at law or 
 in equity for the recovery .... by the holder or holders of the 
 bonds .... of the whole or any portion of the principal or in- 
 terest of the said bonds, it being the intention and agreement of 
 the parties, for the better securing of the largest possible price, 
 .... that the method of sale hereinbefore provided shall be ex- 
 clusive of all others." 
 
 In Pennsylvania the courts formerly had no general jurisdiction 
 
 1 State of Florida v. Anderson, 91 U. 3 McAllister v. Plant, 54 Miss. 106. 
 
 S. 667. 4 Widener v. R. E. Co. 1 Weekly Notes 
 
 2 Jones on Mortgages, § 177 ; Eaton & of Cases, 472. 
 Hamilton R. R. Co. v. Hunt, 20 Ind. 457. 
 
 380
 
 REMEDIES ARE CUMULATIVE. [§§ 400, 401. 
 
 in equity, and therefore, until a recent statute * gave such jurisdic- 
 tion in cases of corporation mortgages, there could be no decree 
 for the sale of mortgaged property at the instance of the mort- 
 gagee. 2 A power of sale in such a mortgage might be executed 
 according to the terms of the appointment ; but the court could 
 not direct the execution of it except at the suit of a party standing 
 in the relation of cestui que trust, and for the purpose of adminis- 
 tering the trust. 3 Now the Supreme Court may decree a sale un- 
 der a railroad mortgage, and the act giving the court jurisdiction 
 in such case applies to mortgages made before its passage, as it 
 merely provides a new remedy for a breach of contract. 4 When 
 the mortgage creates a trust, and provides that a power of sale 
 may be executed by the trustee on certain contingencies, the court 
 may in equity control and regulate the exercise of the power at 
 the suit of a cestui que trust ; and when it has once decided that 
 the contingency has arisen to give it jurisdiction, its decision can- 
 not be impeached collaterally. 5 
 
 400. Suit at law upon the bonds. — The fact that a railroad 
 mortgage empowers the trustees, upon the written request of not 
 less than $100,000 in amount of the bonds secured, after breach 
 of the condition, to sell the property, is no defence to a suit at 
 law upon the bonds after a breach of the condition. The bonds 
 are the principal debt, and the mortgage is only an incidental 
 security. The remedies at law and in equity do not clash and 
 destroy each other, but exist together. 6 
 
 401. Recovery of possession. — A court of equity has juris- 
 diction to order a specific performance of a stipulation in a railroad 
 mortgage, authorizing the trustees to take possession of the mort- 
 gaged property for the non-payment of the bonds secured, and a 
 bill in equity is the projjer form of proceeding to compel the com- 
 pany and its agents to deliver possession to the trustees. 7 When 
 
 1 April 11,1862,1 Brightly's Purdon's c Youngman v. Elmira & Williamsport 
 
 Dig. 593. R. R. Co. G5 Pa. St. 278. 
 
 - A ihhurst v. Montour Iron Co. 35 Pa. ° Philadelphia & Baltimore Central K. 
 
 8t.30. B. Co. v. Johnson, 54 Pa. St. 127. The 
 
 8 Bradley & Chester Valley R. II. Co. action in this case was upon six bonds 
 
 36 Pa. St. 141. amounting together to H,400. 
 
 4 McElrath i;. Pittsburg & Steubenville 7 Shepley v. Atlantic & St. Lawrence 
 
 R. R. Co. 55 Pa. St. 189 ; McCurdy's Ap- It. R. Co. 55 Me. 395 ; Shaw v Norfolk 
 
 peal, 05 Pa. St. 290. County It. R. Co. 5 Gray (Mass.), 102. 
 
 ;;si
 
 § 401.] REMEDIES AND JURISDICTION OF COURTS. 
 
 foreclosure is sought by a bill in equity, delivery of possession to 
 the trustees or to a receiver is obtained by the same bill ; and a 
 separate bill for this purpose is necessary only when foreclosure is 
 Bought by some other method, such as a power of sale, or by entry 
 and possession. 
 
 Liens are enforcible in equity only, unless the law has provided 
 for another mode. This is true of vendors' liens, equitable and 
 other mortgages, and all statutory liens, except in all cases where 
 the lien is in the nature of a pledge, and possession accompanies 
 the lien. A court of law does not possess the means of enforcing 
 such liens. 1 
 
 A power in a mortgage authorizing the mortgagee, upon de- 
 fault of payment, to take possession of the railroad and the prop- 
 erty connected therewith, and use or sell the same, must be ex- 
 ercised upon all the property mortgaged as an entire thing ; and 
 it does not authorize the mortgagee to take possession of particular 
 portions of the property, leaving the residue in the possession of 
 the corporation. If this could be done the road might be rendered 
 useless to both creditors and stockholders ; and what is of greater 
 importance, neither the mortgagee nor the corporation would be 
 able to discharge the public obligation to use the road as a high- 
 way for which the charter of the company was granted. There- 
 fore the mortgagees of a railroad have no authority, before taking 
 possession of the entire property, to replevy a portion of the mort- 
 gaged property from an officer who has levied an execution upon 
 it. 2 
 
 The mortgagee in such case stands upon no higher ground in 
 respect to an officer who has legally levied an execution upon the 
 property than the corporation itself. The mortgagee must either 
 take possession of the whole property, or obtain an injunction 
 against the sale and removal of the property levied upon. But 
 when the mortgage debt exceeds the value of the property covered 
 by the mortgage, the whole equitable interest in the property is in 
 the mortgagee, and consequently a creditor acquires no substantial 
 interest by a levy upon a portion of the property ; and in such 
 case, although the mortgagee has in vindication of his rights re- 
 covered in replevin the property levied upon, yet the creditor is 
 entitled only to nominal damages. 3 
 
 1 Cairo & Vincenncs R. R. Co. y.Fack- 2 Coe v. Peacock, 14 Ohio St. 187. 
 ney, 78 111. 116. 8 Coe v Peacock, supra. 
 
 382
 
 REMEDIES ARE CUMULATIVE. [§§ 402, 403. 
 
 402. A threatened injury to mortgaged property may be 
 restrained by injunction. Thus, the receivers of a railway ap- 
 pointed in a suit for the foreclosure of a mortgage upon it were 
 allowed this relief against another railway company, which threat- 
 ened to lay their track on a part of the mortgaged premises, and 
 thereby inflict a serious damage, without allowing compensation, 
 although they claimed the right to do so by virtue of an agree- 
 ment made with the mortgagors or their grantees. The agree- 
 ment, however, was made subsequently to the mortgage, and 
 therefore could not affect the rights of the mortgagees under it. 1 
 
 The possession of mortgage bonds, and their production in the 
 cause, is sufficient to give the holder a standing in court and en- 
 title him to relief by injunction against the interference with the 
 mortgage property by a judgment creditor. It is no valid objec- 
 tion that he has pledged some of the bonds to other persons as 
 collateral security, for he has not thereby lost his title as owner. 
 Being a bondholder entitled to priority over a judgment creditor 
 he is entitled, in the absence of any action by the mortgage trus- 
 tees, to maintain for himself and all other bondholders a suit to 
 restrain such judgment creditor from enforcing his execution. 2 
 
 The owner of bonds secured by a lien upon the lands of a rail- 
 road company may bring a suit to enjoin another corporation 
 from obtaining such lands by the wrongful use of the name of the 
 corporation whose bonds he holds. It should first appear, however, 
 that the company had refused to take proper measures to protect 
 its corporate rights. 3 
 
 403. A general creditor of a corporation cannot obtain an 
 injunction against its executing a mortgage of its property. 
 If the claim be a lien upon the property, in the form of an attach- 
 ment, judgment, execution, or otherwise, this will not be affected 
 by a subsequent mortgage ; and if it be not a lien by reason that 
 the company is a foreign corporation, and is beyond the jurisdic- 
 tion of the court, the mortgage, if executed, will not obstruct or 
 prejudice the creditor's rights, because he has in such ease no 
 ground of preference over other creditors either as :i judgment or 
 attaching creditor, or upon the ground of the insolvency "I' the 
 
 i Coe r. X. J. Midland Ry. Co. 28 N.J. n Newby v. Oregon Cent. Ry. Co. 1 
 Eq. 27. Sawyer, 03. 
 
 2 Butler .-. Ranm, 46 M.I. 541. 
 
 883
 
 §§401,405.] REMEDIES AND JURISDICTION OF COURTS. 
 
 corporation. Even if the court had jurisdiction of the property 
 without such lien, it would be authorized to interfere by injunc- 
 tion only in an action by all the creditors, or for the benefit of all 
 the creditors. 1 
 
 404. A railroad company has no right as against its mort- 
 gagee to take up any part of the mortgaged road, and it may 
 be enjoined from doing so, although that portion of the road 
 which it is taking up is not self-sustaining, but an expense to the 
 company ; or although it would be an injury and loss to the com- 
 pany to permit the rails to remain on the street and be destroyed ; 
 or although the mortgagee has ample security left for the bonds 
 he claims, and the company is willing to appropriate the proceeds 
 of the sale of the rails taken up in liquidation of the mortgage. 
 The company, by giving the mortgage, has parted with the right 
 to decide the question of the expediency of giving up a part of 
 its road. It has no right to touch the road except in the ordi- 
 nary use and proper repair of it. The mortgagee has the right to 
 hold all the property mortgaged until he is fully satisfied. His 
 rights cannot be preserved if the mortgagor has the right to de- 
 stroy the security by inches. Full effect can be given to the con- 
 tract of the parties only by preserving the whole property intact. 2 
 
 405. A state cannot be sued except in cases where it has 
 authorized the bringing of suits against it. But the mere fact 
 that a state officer, whatever may be his grade, is a party, does not 
 necessarily defeat the jurisdiction of the court, although the state 
 may be the real party in interest, and cannot as such be brought 
 before the court. Thus, when the governor and attorney general 
 of a state, under the authority of an act of the legislature, pro- 
 ceed to sell a railroad and its franchises in satisfaction of a statu- 
 tory lien claimed in behalf of the state, these officers do not act in 
 their political or executive capacity, but simply as agents, in obe- 
 dience to the power committed to them by the legislative act, 
 which might have conferred the same power upon any other per- 
 son as well. 3 
 
 1 Rogers v. Mich. South. & N. Ind. R. mount Passenger R. R. Co. 1 Brew. (Pa ) 
 R. Co. 28 Barb. (N. Y.) 539. 418 ; S. C. 6 Phila. 386. 
 
 2 Watt i\ Hestonville, Mantua & Fair- s Murdoch v. Woodson, 2 Dill. 188. 
 
 See State v. McKay, 43 Mo. 594, 599. 
 384
 
 JURISDICTION OF STATE AND FEDERAL COURTS. [§ 406. 
 
 II. Jurisdiction of State and Federal Courts of Suits against 
 
 Corporations. 
 
 406. A corporation is not amenable to process, except in 
 the state in which it is established, and in which its corporate 
 functions are exercised. It has no legal existence in any other 
 state. 1 This rule applies not only to state courts, but also to the 
 United States courts. Thus, Mr. Justice McLean, of the Supreme 
 Court of the United States, in a case before him, as judge of 
 the Circuit Court sitting in Indiana, in which an injunction was 
 asked for against the Michigan Central Railroad, a corporation 
 of the State of Michigan, which had constructed a part of its road 
 in the State of Indiana, said : 2 " I know of no process which can 
 reach a corporation of Michigan from the Circuit Court sitting 
 in Indiana. It is amenable to no process out of the state. The 
 Circuit Court of the United States, sitting in a state, has no juris- 
 diction beyond the limits of the state, except in criminal cases. 
 Subpoenas may be issued for witnesses throughout the United 
 States. In every other particular, the federal court acting in a 
 state is as limited in its jurisdiction as any state court whose 
 jurisdiction extends throughout the state." 
 
 The service of process upon the treasurer or other officer of a 
 foreign corporation, although the corporation has an office and 
 place of business within the state, does not give the courts juris- 
 diction. An attachment of the property of a foreign corporation 
 would, in Massachusetts and some other states, have this effect ; 
 jurisdiction may also be given by express statute ; 3 and accord- 
 ingly in several states suits against foreign corporations having 
 agents within the state conducting the general business for which 
 the corporations were organized may be commenced by service of 
 process upon such agents. But generally a corporation which does 
 not exercise it3 corporate franchises in a foreign state, and which 
 
 1 Bank of Augusta v. Earle, l.'i Peters, stone Canal Corp. l Sumner, 46; Clevc- 
 
 519,588; .Mar-hall u.Baltimore & Ohio land & Pittsburg K. II. Co. v. Speer, 56 
 
 R. I:. Co. 16 Bow. 314, 328; Lafayette J'a. St. 325. 
 
 Ihb. Co. v. French, 18 [b. 404; Ohio & a Northern Indiana R. B. Co. v. Michi- 
 
 Miss. B R. Co v. Wheeler, 1 Black, 286, gan Cent. B. B. Co. 5 McLean, 444. 
 
 297 ; Lathrop o. I nion Pai ific Ry. < !o. l 3 Andrews v. Michigan Cent. It. It. Co. 
 
 MaeArlliur(I). C .),234 ; Farnumv. Black- 99 Ma B. 534 
 
 -'■• 385
 
 §§ 407, 408.] REMEDIES AND JURISDICTION OF COURTS. 
 
 has no business agency established there, cannot be sued in its 
 courts. 1 
 
 Jurisdiction of a suit against a non-resident corporation cannot 
 be taken upon the ground that the defendant corporation has 
 property within the state, when that property is only the unissued 
 bonds of the company in the hands of its agents for sale. Such 
 bonds are not property within the legal signification of the term. 2 
 
 407. A corporation is foreign to any state only when it 
 owes its corporate existence in no part to the legislation of 
 that state. A corporation is domestic in any state in which cor- 
 porate powers and franchises have been conferred upon it, or upon 
 an original corporation which has been united in the new one by 
 consolidation. It may have a corporate entity in each of two or 
 more states, and be both foreign and domestic in each. In a suit 
 by or against such consolidated corporation, it must be treated as 
 domestic in each of the states under whose laws it is established 
 as a corporation. 3 But a railroad company incorporated under 
 the laws of one state, and operating its road in another state by 
 the assent of the legislature of the latter, is liable to process in 
 that state as a domestic corporation. 4 
 
 Yet a foreign corporation, upon which the legislature of another 
 state has conferred the power to purchase and hold lands in that 
 state, does not by reason of such legislation acquire a domestic 
 character. It can properly be said to exist only in the state that 
 created it. 5 
 
 An averment that a company is a corporation under and by the 
 laws of a certain state is a sufficient averment that it is a citizen 
 of that state. 8 
 
 408. It is competent, however, to provide by legislation 
 that a foreign corporation having an agency in a state for the 
 
 1 Lathrop v. Union Pacific Ry. Co. 1 Wheeler, 1 Black, 286 ; People v. Lake 
 MacArthur (D. C), 234. Shore & Mich. South. R. R. Co. 11 Hun 
 
 2 Barnes v. Mobile & North Western (N. Y.), 1. 
 
 R. R. Co. 5 N. Y. "Weekly Dig. 191 ; Cod- * Pennsylvania R. R. Co. v. People, 
 
 dington v. Gilbert, 17 N. Y. 489. Sup. Ct. of Ohio, Dec. T. 1877, 6 Cent. 
 
 8 Sprague v. Hartford, Providence & L. J. 436. 
 
 Fishkill R. R. Co. 5 R. I. 233 ; McGregor 5 State v. Delaware, Lackawanna & 
 
 v. Erie Ry. Co. 35 N. J. L. 115; Mary- Western R. R. Co. 30 N. J. L. 473. 
 
 land v. Northern Central Ry. Co. 18 6 Keep v. Mich. Lake Shore R. R. Co. 
 
 Md. 194; Ohio & Miss. R. R. Co. v. 6 Chicago L. News, 101. 
 386
 
 JURISDICTION OF STATE AND FEDERAL COURTS. [§ 409. 
 
 transaction of business, or making contracts there, may be held to 
 answer suits in such state commenced by the service of process 
 upon the president, secretary, treasurer, or other agent of the 
 corporation within the state. Thus a railroad company incor- 
 porated in Virginia borrowed money in New York through the 
 agency of its treasurer, an and action was commenced, in accord- 
 ance with a statute, against the company in a court of the latter 
 state, by service of process upon its secretary, who was found in 
 the state, and judgment rendered. Upon a transcript of this judg- 
 ment suit was brought against the corporation in the District of 
 Columbia, where it had an office ; and it was held that the corpo- 
 ration having contracted the debt in New York, its court obtained 
 complete jurisdiction bj^ the service made in the suit, and that the 
 judgment was entitled to the same conclusiveness elsewhere that 
 it had in the state where it was rendered. 1 
 
 409. Citizenship of corporations. — For the purposes of fed- 
 eral jurisdiction a corporation is conclusively considered as if it 
 were a citizen of the state which ci'eated it. In the case of a com- 
 pany organized under the laws of one state, and afterwards ex- 
 tending its line of road into another state, under whose laws the 
 company is licensed to act, but is not re-incorporated, the com- 
 pany remains a citizen of the state in which it was originally or- 
 ganized. 2 Without the sanction of the legislature a domestic cor- 
 poration lias no power to sell out to another company all or a part 
 of its road and franchise ; and a foreign company without such 
 sanction would have no authority to purchase or operate the road 
 of a domestic corporation. Legislation of a state designed to en- 
 courage the building of railroads and to facilitate the making of 
 continuous or connected lines, by authorizing, so far as possible, 
 its own companies to extend their roads into other states, and by 
 conferring upon the companies of other states the right to lease 
 or to buy, and to build and operate roads within its limits, does 
 not ordinarily constitute new corporations of such foreign corpo- 
 rations as may take the benefit of such legislation, but simply 
 
 1 Weymouth v. Washington, George- ville, Cincinnati & Charleston R. R. Co. v. 
 
 town & Alexandria B. B. Co. 1 -Mac- Leteon, 2 How. 197 ; Marshall u. Balti- 
 
 Arthur (D. C.), 19. more & Ohio B. R. Co. 16 [b. 814; New 
 
 > Mailer <• Dowb, 94 Q. 8. 444; Bail- York ft Erie B. K. Co. v. Bhepard, 5 
 
 ■ v. Harris, 12 Wall. 65; Bailway McLean, 455; McElrath v. Pittsburg ft 
 
 Co. v. Whitton, 13 Wall. 270, 2-:.; Louis- Steubenville B. B Co 55 Pa, St. L89. 
 
 887
 
 § 410.] REMEDIES AND JURISDICTION OF COURTS. 
 
 gives them, on the conditions stated, certain specified rights, pow- 
 ers, and immunities. 1 
 
 This doctrine of the citizenship of corporations is based upon 
 the presumption which cannot be contradicted, that the individual 
 members of a corporation having a legal existence in a state are 
 citizens of that state. 2 Prior to 1844, it was held necessary to 
 aver that the corporators were citizens of the state ; but the Su- 
 preme Court of the United States then reexamined the subject of 
 the jurisdiction of the federal courts, and held that a corporation 
 created by the laws of a state, and having its place of business 
 within that state, must, for the purj)ose of suit, be regarded as a 
 citizen within the meaning of the Constitution giving jurisdiction 
 founded upon citizenship. 3 It is now the settled construction 
 that an allegation, that a defendant corporation was incorporated 
 by a state other than that of which the plaintiff is a citizen, is a 
 sufficient averment of jurisdiction. 
 
 The stockholders of a corporation are conclusively presumed to 
 be citizens of the state which created it, for the purposes of a suit 
 by or against it in a court of the United States. A corporation 
 itself is not a citizen, and therefore the bill should allege the fact 
 of incorporation, and incorporation by a state whereof the adverse 
 party is not a citizen ; but a defective averment of citizenship 
 may be cured by subsequent pleadings. 4 
 
 410. The federal courts have jurisdiction of suits against 
 counties and municipalities under the same conditions that it 
 has jurisdiction of private corporations. It has been objected as 
 regards counties that they are only quasi corporations, and really 
 only subordinate political divisions of a state, and not citizens 
 within the meaning of the Constitution or acts of Congress. In a 
 suit upon bonds in aid of a railway in the Circuit Court of the 
 United States against Washington County, Pennsylvania, 5 Mr. 
 
 1 Williams v. Mo., Kansas & Texas Ry. 3 Louisville, Cincinnati & Charleston 
 Co. 3 Dill. 267, where Judge Dillon states R. R. Co. v. Letson, 2 How. 497. 
 
 the law and examines the authorities. * Muller v. Dows, 94 U. S. 444 ; La- 
 
 2 Ohio & Miss. R. R. Co. ?;. Wheeler, fayette Ins. Co. v. French, 18 How. 404. 
 
 1 Black, 286; National Park Bank of 5 McCoy v. Washington County, 7 Am. 
 
 N. Y. i'. Nichols, 4 Biss. 315; Hatch v. Law Reg. 193. See, also, to same effect, 
 
 Chicago, Rock Island & Pacific R. R. Co. Lyell v. Supervisors of Lapeer County, 6 
 
 6 Blatchf. 105; Hobbs v. Manhattan Ins. McLean, 446; Cowles v. Mercer County, 
 
 Co. 56 Me. 417. 7 Wall. 118 ; McPike v. Lincoln County, 
 
 388 C. C. U. S. E. D. of Mo. 7 Cent. L. J. 264.
 
 JURISDICTION OF STATE AND FEDERAL COURTS. [§ 411. 
 
 Justice Grier, in answer to this objection, said : " Though the met- 
 aphysical entity called a corporation may not be physically a cit- 
 izen, yet the law is well settled that it may sue and be sued in 
 the courts of the United States, because it is but the name under 
 which a number of persons, corporators and citizens, may sue and 
 be sued. In deciding the question of jurisdiction, the courts look 
 behind the name to find who are the real parties in interest. In 
 this case the parties to be bound by the judgment are the people 
 of Washington County. That defendant is a municipal corpora- 
 tion, and not a private one, only furnishes a stronger reason why 
 a citizen of another state should have his remedy in this court, and 
 not in a county where the parties against whom the remedy is 
 sought would compose the court and jury to decide their own 
 case." 
 
 411. The federal courts have no jurisdiction of actions be- 
 tween states and their own corporations; but that jurisdiction 
 extends "to all controversies between a state and the citizens of 
 another state." J In a suit by the Commonwealth of Pennsylva- 
 nia against a corporation, an averment that the defendant is a 
 " body politic in the law of, and doing business in, the State of 
 California," was held to be insufficient to establish the jurisdiction 
 of the courts of the United States, because it did not necessarily 
 import that the corporation was not created by the laws of the 
 State of Pennsylvania. 2 
 
 Inasmuch as the Judiciary Act 3 provides that the United States 
 Circuit Court shall have jurisdiction only of suits between a citi- 
 zen of the state in which the suit is brought and a citizen of an- 
 other state, and that suit shall be brought in the district in which 
 the defendant is an inhabitant, or in which he shall be found at 
 the time of serving the writ, if a corporation or person necessary 
 to the litigation, but not belonging to such district, be joined as 
 defendant witli other defendants belonging to such district, the 
 court has no jurisdiction of such non-resident party. But in a suit 
 to foreclose a mortgage given by a corporation the bondholders 
 are not necessary parties; and if some of them are joined as de- 
 
 1 I5y Ani<lc xi. of Amendments to 2 Pennsylvania v. Quicksilver Co. 10 
 
 tin- Constitution, a state cannot be sued Wall. 553. 
 
 by citizens of another state. 8 Judiciary Act of 1789. 
 
 389
 
 § 412.] REMEDIES AND JURISDICTION OF COURTS. 
 
 fendants it is not necessary that their citizenship should appear to 
 be such as to entitle them to be parties. 1 
 
 A corporation which has a legal existence in any one state can 
 sue in the federal courts within any other state. 2 
 
 412. Where a railroad company which maintains a con- 
 tinuous line of road through several states holds charters from 
 each of the states in which any part of its road is located, it is, 
 for the purpose of giving jurisdiction to the courts of the United 
 States, a citizen of each of the states under whose laws it exists. 
 Thus, the Philadelphia, Wilmington, and Baltimore Railroad Com- 
 pany, owning a line of road from Philadelphia to Baltimore, run- 
 ning through parts of the States of Pennsylvania, Delaware, and 
 Maryland, and incorporated in each, is a corporation of each of 
 these states, and a citizen of each within the meaning of the Ju- 
 diciary Act. The fact that only a small portion of its road is in 
 the State of Delaware does not prevent its being sued in that dis- 
 trict. 3 With reference to the Ohio and Mississippi Railroad Com- 
 pany, Taney, C. J., said : 4 "It is true that a corporation by the 
 name and style of the plaintiff's appears to have been chartered 
 by the States of Indiana and Ohio, clothed with the same capaci- 
 ties and powers, and intended to accomplish the same objects, and 
 it is spoken of in the laws of the states as one corporate body, ex- 
 ercising the same powers and fulfilling the same duties in both 
 states. Yet it has no legal existence in either state except by the 
 law of the state, and neither state could confer on it a corporate 
 existence in the other, nor add to or diminish the powers to be 
 there exercised. It may, indeed, be composed of and represent 
 under the corporate name the same natural persons. But the 
 legal entity or person which exists by force of law can have no ex- 
 istence beyond the limits of the state or sovereignty which brings 
 it into life or endues it with its faculties and powers. The Ohio 
 and Mississippi Railroad Company is therefore a distinct and sep- 
 
 1 Keep v. Michigan Lake Shove R. R. tional Bank of Chicago v. Baack, 8 
 Co. 6 Chicago Le^al News, 101 ; and see Blatchf. 137. 
 
 Hervey v. 111. Midland Ry. Co. 7 Biss. 3 Minot v. Phila., Wilmington & Balti- 
 
 103, as to merely nominal parties having more R. R. Co. 2 Abbott's C. & D. Ct. R. 
 
 no actual interest. 323 ; Circuit Court for the District of 
 
 2 National Park Bank of N. Y. v. Delaware, before Strong, J. 
 
 Nichols, 4 Biss. 315; Manufacturers' Na- * Ohio & Miss. R. R. Co. v. Wheeler, 1 
 
 Black, 286. 
 390
 
 JURISDICTION OF STATE AND FEDERAL COURTS. [§§ 413, 414. 
 
 arate corporate body in Indiana from the corporate body of the 
 same name in Ohio." 
 
 413. When two or more states have by concurrent legisla- 
 tion united in creating one and the same railroad corporation, 
 as they may do, a court in either state may exercise jurisdiction 
 over the entire line. 1 By executing a mortgage as one body cor- 
 porate of the entire line of road and property, the corporation 
 would be estopped in a suit upon such mortgage from setting up 
 its separate existence under the charters it has secured from the 
 different states. 2 Moreover, if in a suit to foreclose such a mort- 
 gage the corporation be served with process in the state in which 
 the suit is brought, and it enters its appearance and answers the 
 bill by its common name, the court would have jurisdiction through 
 such appearance of the separate corporations which have joined 
 under such common name if it be conceded that the corporations 
 are separate and distinct ; 3 for a corporation may waive its right 
 to be sued only in the state in which it is found or resides, and 
 enter its appearance in any other jurisdiction it pleases. 4 
 
 Where a railroad company owning a railroad lying in two dif- 
 ferent states, and chartered by each of these states, mortgages 
 the whole road and franchise, whether there are two distinct cor- 
 porations, or one only, under these charters there is but one mort- 
 gage, and that embraces the whole road ; and therefore if the right 
 of redemption in one state be sold on execution, the purchaser is 
 entitled to redeem the whole road from the mortgage. He cannot 
 redeem the part lying in one state alone, if he would ; for the 
 mortgagees have a lien upon every part of the road to secure 
 every part of the debt. 5 
 
 414. When a mortgage, executed by a railroad corporation 
 organized under the laws of two or more states, covering its 
 entire road and franchises, is foreclosed, by suit in a court hav- 
 ing jurisdiction in one. state only, but having jurisdiction of the 
 mortgagor and of the mortgage trustees, a valid decree of sale 
 
 1 Wilmer v. Atlanta & Richmond Air - Wilmer v. Atlanta & Richmond Air 
 
 Line Ry. Co. -i Woods, 109; S. ' . lb. 447, Line Ry. Co. 2 Woods, 447, 455. 
 
 454; E on, Hartford & Erie It. * Northern Ind. R. R. Co. v. Michigan 
 
 R. Co. 107 Mass. I. Cent. R. R. Co. i"> How. 242. 
 
 > Wilmer v. Atlanta & Richmond Air 6 Wood v. Goodwin, 49 Me. 260. 
 Line Ity. Co. 2 Woods, 447,454. 
 
 391
 
 § 415.] REMEDIES AND JURISDICTION OF COURTS. 
 
 of the entire mortgaged property may be made, although a part 
 of the property he situated beyond the court's jurisdiction. 1 
 While the court cannot send its process beyond its own state, 
 and cannot deliver possession of land in another jurisdiction, it 
 may command and enforce a transfer by process against the de- 
 fendant. It may, moreover, in a proper case, effect the transfer 
 by the agency of the trustees when they are complainants, by de- 
 creeing that they shall sell and convey all the mortgaged property 
 in the several states. 2 
 
 It is true that independent suits may be prosecuted for the 
 foreclosure of a railroad mortgage in each of the several states in 
 which a line of railroad exists ; and in such case one suit may 
 be regarded as the principal action and the others merely as 
 auxiliary or subsidiary; or each suit may be prosecuted with the 
 intention of affecting the property within the limits of the state 
 where it is brought. In the latter case the proceedings in the 
 different courts should be uniform, if, as generally would be the 
 case, the interests and the end to be attained are the same, and 
 a sale of the property as a whole is desired. 3 
 
 III. Effect of Consolidation of Railroad Corporations upon the 
 Jurisdiction of Suits against them. 
 
 415. When two or more corporations organized under the 
 laws of the same state are consolidated, the old corporations are 
 extinguished and their powers merged in the new. The consoli- 
 dated corporation, for the purpose of answering for the liabilities 
 of the old corporations, is deemed the same as each of its constitu- 
 ents, and may be sued under its new name for their debts as if no 
 change had been made in the name or organization of the original 
 corporation. 4 When the original corporations were incorporated 
 by the laws of different states, and by concurrent legislation of 
 these states these corporations are consolidated into one company, 
 different views have been entertained not only as to the result of 
 the consolidation upon the original companies, but as to the effect 
 
 1 Mailer v. Dows, 94 U. S. 444. Am. Railw. R. 467 ; Indianapolis, Cin- 
 
 2 McElrath v. Pittsburg & Steubcnville cinnati & Lafayette R. R. Co. v. Jones, 
 R. R. Co. 55 Pa. St. 189; Muller v. Dows, 29 Ind. 465; McMahan v. Morrison, 16 
 supra. Ind. 172. See Piatt v. N. Y. & Boston R. 
 
 3 In re United States Rolling Stock Co. R. Co. 26 Conn. 544 ; Zimmer v. State, 
 55 How. Pr. (N. Y.) 286. 30 Ark. 677; Lauman v. Lebanon Valley 
 
 1 Meyer v. Johnston, 53 Ala. 237 ; 15 R. R. Co. 30 Pa. St. 42. 
 392
 
 EFFECT OF CONSOLIDATION UPON JURISDICTION. [§ 416. 
 
 of it upon the new. Upon the one hand it is claimed that the 
 consolidated company is one corporation, while upon the other it 
 is claimed that this is in fact two corporations having the same 
 name, the same officers and stockholders, and a unity of interest. 
 Under the one view, the old corporations no longer exist ; while 
 under the other view, they still exist as separate entities, but hav- 
 ing the same name. As a practical matter it is generally of no 
 consequence which view is taken. A suit by or against the con- 
 solidated company is well brought, whether it be one corporation 
 or two, for the necessary party is in either case before the court. 1 
 
 Two or more states through which a railroad runs may, by con- 
 current legislation, unite in creating the same body corporate. 2 
 The Supreme Court of the United States has declared that there 
 is no reason why several states cannot, by competent legislation, 
 unite in creating the same corporation, or in combining several 
 preexisting corporations into a single one. 3 The effect of the con- 
 solidation of several corporations may be to dissolve the old corpo- 
 rations, and at the same instant to create a new one with the 
 property and stockholders of those passing out of existence. 4 But 
 the dissolution of the old corporations does not necessarily follow 
 from their consolidation. Whether such is the result of their 
 union is a question to be determined by the intent of the legis- 
 lature authorizing the consolidation, and that of the parties unit- 
 ing in it, as well as by considerations of necessity arising from the 
 rights and liabilities of the old corporations which may be still 
 outstanding after the union. 
 
 416. Whether a consolidation of railroad companies works a 
 dissolution of the old companies and the creation of a new com- 
 pany has sometimes been regarded as depending almost wholly 
 upon the legislative intent manifested in the statute, under which 
 the consolidation takes place. 5 If the amalgamation be full and 
 complete, the effect may be to work a dissolution of the old com- 
 pany and the creation of a new company. If the statute contains 
 no grant of corporate powers to the consolidated company, it is 
 
 1 Paine v. Lake Erie & Louisville E. R. 82; and sec Philadelphia & Wilmington 
 Co. SI [n R. R. Co. r. Maryland, 10 How. 3! 6 : Del- 
 
 2 Wilmet v. Atlanta & Richmond Air aware Railroad Tax in re, is Wall. 206. 
 Line l;.v. Co. 2 Woods, 409; S. 0. lb. 4 Shields v. Ohio, 95 U. S. 319. 
 
 447 154. 5 Central R R. & Banking Co. v. Geor- 
 
 3 Railroad Co. t>. Harris, 12 Wall. 05, gia, 'J2 U. S. 665. 
 
 898
 
 § 417.] REMEDIES AND JURISDICTION OF COURTS. 
 
 difficult to see how a new corporation is created. A grant of cor- 
 porate existence is never implied. 1 The fact that a consolidated 
 company is liable for the debts of the old companies, or that it 
 possesses the rights of the old companies, does not necessarily 
 imply a surrender of the old charters. 
 
 417. The consolidation of the stock of railroad companies 
 created by the laws of different states, although done with 
 legislative authority, does not constitute the corporations thus 
 consolidating one corporation of both states, or of either, but the 
 corporation of each state continues a corporation of the state of its 
 creation, the same persons as officers and directors managing and 
 controlling the several corporations as one body. 2 The contract 
 of consolidation, and the legislation authorizing and confirming it, 
 create substantially a new corporation with a new name, but such 
 corporation, in a legal point of view, is a distinct corporation in 
 each state, and so remains. A mortgage made after such consol- 
 idation, upon the line of road in one state only, is the sole mort- 
 gage of the corporation existing in that state, and is legal and 
 valid. Thus corporations existing in Wisconsin and Illinois were 
 consolidated in this way under the name of the Racine and Mis- 
 sissippi Railroad Company. Under this name it executed a mort- 
 gage of that part of the road situate in the State of Illinois. 
 There being a corporation having a distinct entity in each of these 
 states bearing this name, the mortgage was regarded as the mort- 
 gage of the Illinois corporation. Another railroad corporation of 
 the latter state having been united with the consolidated com- 
 pany, and a mortgage having been made of the entire railroad 
 line in Illinois owned by the Illinois corporation, although the 
 last consolidation may have been illegal, that fact was held not to 
 affect the validity of the mortgage as to that part of the property 
 not owned by the third corporation at the time of the consolida- 
 tion. The company having issued its bonds and mortgage under 
 such circumstances was estopped from denying its own corporate 
 existence and its own title to the mortgaged property. 3 
 
 1 Per Strong, J., in Central R. R. & 2 R ac j ne &, Miss. R. R. Co. v. Farmers' 
 
 Banking Co. v. Georgia, supra ; declaring Loan & Trust Co. 49 111. 331. 
 
 that assertions to the contrary in McMa- 3 Racine & Miss. R. R. Co. v. Farmers' 
 
 han v. Morrison, 16 Ind. 172 ; Clearwater Loan & Trust Co. supra. 
 v. Meredith, 1 Wall. 25, 40, were not nec- 
 essary to the decisions made. 
 
 394
 
 EFFECT OF CONSOLIDATION UPON JURISDICTION. [§ 418. 
 
 When railroad companies organized under the laws of different 
 states have each mortgaged their property, and they have, by 
 virtue of the laws of the respective states, consolidated into one 
 company, a holder of the bonds of one of the old companies may 
 enforce payment in the courts of the state in which the mortgaged 
 road is situate, by a foreclosure suit against the consolidated com- 
 pany ; and the courts of the other state in which no part of the 
 road was situated, and to which it in no way owed its existence, 
 have no jurisdiction to enforce the remedy. 1 
 
 418. A consolidated company is the successor of each of 
 the old companies so far as concerns a right of action of a cred- 
 itor of one of the old companies; and the property of the old 
 company in the hands of the new is liable for the satisfaction of 
 any judgment lie inay obtain. 2 But in respect to the property 
 of other companies, which have joined in the consolidation, the 
 consolidated company is a new and independent company as to 
 the creditors of one of the old companies, and such creditors have 
 no claim against the new property unless the new company has 
 expressly assumed the obligations of the old. An action having 
 been commenced against the Michigan Southern and Northern In- 
 diana Railroad Company and its officers in New York, where it 
 was a foreign corporation, it afterwards consolidated with the 
 Lake Shore Railway Company and with the Buffalo and Erie 
 Railroad Company, pursuant to the laws of the several states by 
 which the original companies were incorporated, and the consoli- 
 dated companies were known by the name of the Lake Shore and 
 Michigan Southern Railway Company. L^pon a reference a 
 judgment for the amount claimed was reported with an order re- 
 straining the defendant corporation from making any dividends 
 until the amount was paid. After the coming in of the report, 
 an order was made substituting the Lake Shore and Michigan 
 Southern Railway Company and its officers as defendants. Upon 
 appeal this latter order was held erroneous, as it made the con- 
 solidated company and its officers Liable upon the original con- 
 
 1 i: Hon & Hamilton B. B. Co. >•. Hunt, Central Ry. Co. 29 Md. 557 ; Bruffetl v. 
 20 Ind. 457. Greal Western R. R. Co. 25 I I 
 
 nty v. Lnke Shore & Mich. 8odth. Powell v. North Mo. R. R. 42 Mo. 63; 
 Ry. Co. 52 X. V. .';<;.•>,; Chase v. Vander- Selma, Rome & Dalton R. R. Co. v. Har- 
 bilt, 62 N. V. .",07; Tagart v. Northern bin, 40 Qa. 706. 
 
 S95
 
 § 410.] REMEDIES AND JURISDICTION OF COURTS. 
 
 tracts, and subjected them and all the property of the consoli- 
 dated company fco the restraint adjudged against the old company- 
 The effect of the substitution is not merely to continue against 
 the now corporation and its officers proceedings which affected 
 the property of the original defendants, but to subject the prop- 
 erty of two other companies to judgment rendered subsequently 
 to the consolidation in an action to which they were not parties. 1 
 
 After the consolidation of two or more companies into one 
 under a new name, a suit may be maintained against it by that 
 name upon a note or bond executed by one of the consolidated 
 companies. The company is estopped from denying the name by 
 which it is sued. The old company which executed the obliga- 
 tion has, by force of the consolidation, assumed the new name. 2 
 
 419. Where the articles of consolidation of two railway 
 companies provide that the new company shall assume the 
 debts and liabilities of the old companies, and shall carry out all 
 their unexecuted contracts, and the act of legislature, ratifying 
 and confirming the consolidation, saves the rights and remedies of 
 creditors, a creditor of one of the old companies may maintain his 
 action against the new company. 3 The consolidated company, 
 though having a new name, is estopped to deny the name by 
 which it is sued. 4 
 
 When a consolidated company becomes, by virtue of the con- 
 solidation, liable for the debts of the companies composing it, the 
 creditors' remedy is complete and adequate at law, and a court of 
 equity will not assume jurisdiction to enforce it. 5 
 
 When a new corporation formed by the consolidation of two or 
 more other corporations assumes the debts and obligations of the 
 original companies, a cause of action by a holder of preferred or 
 guaranteed stock of one of the old companies to enforce an alleged 
 contract to pay specified dividends upon such stock is against the 
 new corporation, and its officers are not necessary or proper parties 
 to the action. 6 "A judgment or decree against the corporation is 
 
 1 Prouty v. Lake Shore & Mich. South. 3 Western Union R. R. Co. v. Smith, 
 Ry. Co. 52 N. Y. 363. 75 111. 496. 
 
 2 Columbus, Chicago & Ind. Cent. Ry. * Columbus, Chicago & Indiana Cent. 
 Co. v. Skidmore, 64 111. 566 ; Columbus, Ry. Co. v. Skidmore, 69 111. 566. 
 Chicago & Ind. Cent. Ry. Co. v. Powell, 5 Arbuckle v. 111. Midland Ry. Co. 81 
 40 Ind. 87. 111. 429. 
 
 396 
 
 6 Chase v. Vanderbilt, 62 N. Y. 307.
 
 COURT FIRST ASSUMING JURISDICTION RETAINS IT. [§§ 420, 421. 
 
 binding upon the directors as well as upon all classes of stock- 
 holders. It affects the common property of all ; and if at an}' time 
 or for any reason, during the progress of a litigation, it is made to 
 appear that the directors do not or cannot properly protect the 
 special interests of any class, courts, upon application, would have 
 the power to give the necessary relief or an opportunity to be 
 heard. As the directors are under the same obligation to all the 
 stockholders the}' represent, they cannot be charged by a, plaintiff 
 in an action with the duty of especially taking care of and protect- 
 ing the interests of one class of stockholders as against the others ; 
 and if for any sufficient reason the common stockholders, in person 
 or as representatives, are necessary or proper parties, the plaintiff 
 should select other stockholders not having an official relation to 
 the company, not those whose general duty might conflict with 
 special interests, and thus render them improper representatives 
 of a particular class of stockholders." 
 
 420. A consolidated company is not the same as one of its 
 constituents as regards an executory contract with a stran- 
 ger to the undertaking to deliver bonds. The New Jersey, Hudson, 
 and Delaware Railroad Company, having agreed to deliver to sub- 
 scribers bonds of the company in consideration of moneys to be 
 paid in instalments, as the work upon the railroad should go for- 
 ward, became amalgamated with two other companies under the 
 name of the New Jersey Midland Railway Company, and having 
 tendered the bonds of the consolidated company, brought suit 
 upon the subscriptions. It was claimed that the company had not 
 ceased to exist, but had merely changed its name and form of or- 
 ganization. It was held that the suit would not lie, the bonds 
 offered not being those agreed for ; just as the bonds of a road of 
 ten miles in length are different securities from bonds of a com- 
 pany having a road a hundred miles long. 1 
 
 III. In Cases of Concurrent Jurisdiction, the Court which first as- 
 sumes Jurisdiction retains it. 
 
 421. Where two or more courts have concurrent jurisdic- 
 tion of the same subject matter of litigation, that in which 
 suit is first brought should be lefl t<> adjudicate between the par- 
 ties. Any court in which suit upon the same matter is afterwards 
 1 New Jersey Midland By. Co. v. Strait, 85 N..J. I- 322. 
 
 397
 
 § 421.] REMEDIES AND JURISDICTION OF COURTS. 
 
 brought should, upon being advised of the pendency of the suit 
 in a court of competent jurisdiction, and having precedence in 
 point of time, dismiss the bill and discharge its receiver, if one 
 has been appointed. 1 
 
 Jurisdiction of a cause and of the subject matter of it once ob- 
 tained by one court cannot be taken away by proceedings in an- 
 other court of coordinate jurisdiction. After a bill had been filed 
 in the Circuit Court of the United States for the foreclosure of a 
 mortgage, a compromise agreement was made, providing among 
 other things for the conversion of a portion of the bonds into 
 stock, and a new organization of the company, which the court 
 ratified in the form of a decree. On the faith of the decree, bonds 
 had been surrendered and stock taken, the property placed in the 
 hands of a trustee, who was authorized to incur debts and pledge 
 property to secure them. The decree, so far as it provided for the 
 conversion of bonds into stock, could not, of course, be made 
 effectual without the consent of the bondholders, for that would 
 be changing the contract without their consent. Any bondholder 
 who had not become a party to the agreement could proceed to 
 enforce a foreclosure of the mortgage, and this court, rather than 
 a state court, was the proper tribunal for that purpose. " It was 
 not possible," said Judge Drummond, 2 " that the cause could 
 be divided into fragments, and, in the actual state of affairs, one 
 party in interest go to one court, and another to a different 
 court, for the enforcement of his equitable rights. If the under- 
 standing of the parties and the terms of the decree were en- 
 tirely carried out, there would be no difficulty ; but if in that 
 way their expectations were not realized, and there should be a 
 failure to satisfy the claims of the creditors, there would seem 
 to be no question that this court was the proper tribunal to 
 do equity, because it was only by control over the orders of 
 the court, already made, that this could be accomplished." The 
 trustee should also report to that * court, and any of the parties in 
 interest had the right to insist upon his so reporting. He had no 
 right to turn over to another tribunal matters which have been 
 partially adjudicated in the Circuit Court, for that was the only 
 
 1 Keep v. Michigan Lake Shore R. R. 2 Bill v. New Albany, &c. Ry. Co. 2 
 Co. 6 Chicago Legal News, 101 ; Milwau- Biss. 390. 
 kee & St. Paul R. R. Co. v. Milwaukee & 
 Minn. R. R. Co. 20 Wis. 165. 
 398
 
 COURT FIRST ASSUMING JURISDICTION RETAINS IT. [§ 422. 
 
 court whose decision upon the matters involved would be binding 
 upon the parties. Therefore, when the trustee, during the pen- 
 dency of this suit, without the permission of that court, filed a 
 bill in a state court to foreclose the same mortgages which were 
 the subject of the bill in the Circuit Court, and a receiver was 
 appointed and a sale made in the state court, and the property 
 delivered to the purchaser, such an interference on the part of the 
 state court with property at the time within the jurisdiction of the 
 Circuit Court, was unauthorized, and the latter court has never- 
 theless jurisdiction of the property, and a bondholder is entitled to 
 the equitable interposition of the court to protect his rights, and 
 to demand an account from the trustee or his representatives. As 
 to the effect of the proceeding in the state court upon the juris- 
 diction of the Circuit Court over the cause and the subject matter 
 of it, Judge Drummond said: "There can be no doubt it has 
 created great confusion in the position of those claiming under the 
 mortgages, and embarrassment in the court to deal properly with 
 their interests. It has thus brought about an apparent conflict 
 between courts, state and federal, which should always be avoided. 
 But the conflict arises from acts done after the court had obtained 
 jurisdiction of the cause, and for which, therefore, it cannot be 
 justly held accountable ; and when a party affected by an order or 
 decree entered in a pending cause asks for relief, it is no answer 
 to say that another jurisdiction has attempted to seize the prop- 
 erty, and thus place it beyond the power of the court to give re- 
 lief. The question always must be, Is it competent for the court 
 to act? If so, its duty is plain, and it necessarily follows from 
 what has been said that, in my opinion, the property is still within 
 the control of this court to adjudicate upon the equitable rights of 
 all who have ever been before it." 
 
 422. Proceedings in a second foreclosure suit while one is 
 
 pending, void. — After a foreclosure suit has been t imenced, 
 
 so long as it is pending and the court retains jurisdiction of the 
 cause, other proceedings for the same purpose in another court 
 are irregular and void, although prosecuted under the siippositP.n 
 that the proceedings in the former case wen- ended. Thus, a suit 
 having been commenced in the Circuil Courl of the I oited States 
 for the District of Indiana in 1857, to foreclose mortgages given 
 by the New Albany and Salem Railroad Company, and a decree 
 
 899
 
 § 423.] REMEDIES AND JURISDICTION OF COURTS. 
 
 having been entered by consent declaring the rights and interests 
 of the bondholders under the several mortgages and of the stock- 
 holders, the purpose of which was to effect a reorganization of the 
 company, no further proceedings were had, when nearly ten years 
 afterwards, in August, 1868, some of the bondholders demanded 
 that the trustee should take proceedings to foreclose the mort- 
 gages. The trustee, acting upon the assumption that the original 
 suit brought in the Circuit Court for that purpose had been ended 
 by the decree referred to, commenced suit for the foreclosure de- 
 sired in a court of the State of Indiana. This suit proceeded to a 
 final decree, under which the property was sold to purchasers who 
 organized themselves into a new company. The holder of a subse- 
 quent mortgage bond then petitioned the Circuit Court, in which 
 the original suit was commenced, for the appointment of a receiver 
 in that suit, upon the assumption that this court still retained 
 jurisdiction of the suit and the mortgaged property. This view 
 was sustained by the Circuit Court ; and the successor of the trus- 
 tee who had brought suit in the state court was led to apply for 
 leave to file a supplemental bill for the foreclosure of the mort- 
 gages, and his application was granted. 1 
 
 One of the questions which arose upon this supplemental bill 
 was whether a process of subpoena should have issued upon it. 
 The Supreme Court of the United States held that this is only 
 necessary where new parties are brought in. The supplemental 
 bill is a mere adjunct to the original bill, and, where the parties 
 have already been served, no further subpoena for them is required. 2 
 
 V. Sale of Franchise or Property of Railroad Company on Ex- 
 ecution. 
 
 423. The franchise of a railroad company or of any sim- 
 ilar corporate body, and corporate property essential to the en- 
 joyment of the franchise, are not subject to sale on execution, 
 unless the legislature assents to the transfer. 3 This is the com- 
 
 1 Bill v. New Albany, &c. Ry. Co. 2 13 S. & R. (Pa.) 210; Lccdom v. Plym- 
 Biss. 390. outh R. R. Co. 5 W. & S. (Pa.) 265; 
 
 2 Shaw v. Bill, 95 U. S. 10. Stewart v. Jones, 40 Mo. 140 ; Wood v. 
 8 Gue v. Tide Water Canal Co. 24 How. Truckee Turnpike Co. 24 Cal. 474; 
 
 257 ; Tippetts v. Walker, 4 Mass. 595, Thomas v. Armstrong, 7 Cal. 286 ; Mun- 
 
 597, per Parsons, C. J. ; Ludlow v. Hurd, roe v. Thomas, 5 Cal. 470 ; Hatcher v. 
 
 1 Dis. (Ohio) 552 ; Ammant v. New Toledo, Wabash & Western R. R. Co. 62 
 
 Alexandria & Pittsburg Turnpike Co. 111. 477 ; Oakland Ry. Co. v. Keenan, 56 
 400
 
 SALE ON EXECUTION. [§ 424. 
 
 mon law rule, and a statute authorizing a sale of a franchise on 
 execution, being in derogation of the common law, will be strictly 
 construed. Thus if the statute provides for a sale of the franchise 
 for the shortest period that will satisfy the execution, a sale of the 
 franchise for a certain period in part payment of the execution is 
 void. 1 As already noticed, 2 privileges granted to corporations of 
 a public character are conferred with a view to the public use and 
 accommodation, and they cannot voluntarily deprive themselves 
 of their franchises or of their property necessary for the exercise 
 of these franchises ; and in pursuance of the same policy the 
 franchises and property of such corporations are not allowed to 
 be taken from them on execution, because this would tend to 
 defeat the whole object of the charter, and either to place the 
 property and franchises in the hands of parties to whom it had 
 not been confided, or else to break up and destroy the corpora- 
 tion and render its improvements useless to the public. 3 
 
 A turnpike road cannot be levied upon by a judgment creditor. 
 Aside from the remedy that might be afforded by a Court of 
 Chancery, there is no remedy for the collection of debts against 
 such property, unless it be given by statute, in the nature of a 
 sequestration, to take the net profits after providing for the repair 
 and maintenance of the road. Real estate of the company not 
 necessary for the use of the road may be taken on execution ; but 
 if such real estate be blended with the road in one levy so that it 
 is difficult to separate them, the court will set aside the whole pro- 
 ceedings. 4 
 
 424. The mere fact that the property of a railroad is sub- 
 ject to a mortgage does not operate to exempt such property, 
 which is in its nature personal, from being levied upon by judg- 
 ment creditors of the company so long as the mortgagee has not 
 taken possession under the mortgage. The only remedy of tin; 
 mortgagee in such case is to invoke the interposition of a Court 
 of Equity to prevent further proceedings upon the execution ; and 
 
 Pa. St. L98. <'->nini > State v. Hives, 5 8 Susquehanna Canal Co. v. Bonham, 
 
 Ired [N. C.) L. 297. 9 W. & S. (I'm.) 72. 
 
 1 James v. Pontiac & Groreland Plank 4 Ammant v. New Alexandria & Pitts- 
 Boad Co. 8 Mich. 91 ; and see Sejmour bnrg Turnpike Read Co. 13 B. & R. (Pa.) 
 v. Milford & Chillicothe Turn]. ike Co. 10 210; and confirmed by Susquehanna Canal 
 Ohio, 470. Co. v. Bonham, supra. 
 
 2 £S 1-25. 
 
 26 401
 
 § 425.] REMEDIES AND JURISDICTION OF COURTS. 
 
 an injunction will be granted upon its appearing that the mort- 
 gage security is inadequate. 1 It is not sufficient, however, to show 
 that the constant and uninterrupted use and enjoyment of the 
 property by the railroad company is indispensable to enable it 
 to earn money with which to pay the interest, as it becomes due. 
 It must be averred and proved that the security would be affected 
 to entitle the mortgagee to this relief. 2 
 
 A corporation upon whose property an execution has been 
 levied cannot itself claim protection against the execution and 
 obtain an injunction against a sale under the execution, upon 
 the ground that the property is covered by mortgage ; whatever 
 protection the mortgagee is entitled to must be asserted by him- 
 self. 3 
 
 425. Any property, which is a part of a railroad mortgaged 
 as an entire property, is exempt from execution. — Rails and 
 chairs, lying by the track in readiness for repairs or reconstruction, 
 are not liable to levy and sale on execution as against a mort- 
 gagee of the road; 4 nor, according to some authorities, are they so 
 liable as personal property even as against the railway company 
 itself. The general principle governing this matter is stated in 
 Sheppard's Touchstone: 5 "That which is parcel or of the essence 
 of a thing, albeit at the time of the grant it be actually severed 
 from it, doth pass by the grant of the thing itself. And, therefore, 
 by the grant of a mill the millstone doth pass, albeit at the time 
 of the grant it be actually severed from the mill. So by the grant 
 of a house, the doors, windows, locks, and keys, do pass as parcel 
 of it, albeit at the time of the grant they be actually severed from 
 the house." 
 
 A mortgage of the entire property of a railroad company, both 
 that which it has at the time and that which it may afterwards 
 acquire, together with its tools and income, covers wood bought 
 for its use; and therefore a judgment creditor maybe enjoined 
 from selling and removing such property on petition of the mort- 
 gagees, when it appears that the whole property mortgaged is 
 
 1 Coe v. Peacock, 14 Ohio St. 187; Lane 3 Boyd v. Chesapeake & Ohio Canal 
 v. Baughman, 17 lb. 642 ; Coe v. Colum- Co. 17 Md. 195. 
 
 bus, Piqua & Ind. R. R. Co. 10 Ohio i Covey v. Pittsburg, Fort Wayne &Chi- 
 
 St. 372, 380. cago R.R.Co.3 Phila. (Pa.) 173; Fahs v. 
 
 2 Coe v. Knox County Bank of Mount Roberts, 54 111. 194. See §§ 154-163. 
 Vernon, 10 Ohio St. 412. & Shep. Touch, page 90. 
 
 402
 
 SALE ON EXECUTION. [§§ 426, 427. 
 
 inadequate to satisfy the mortgage debt. 1 The remedy of a 
 judgment creditor in such case is in equity, to have the interest 
 of the mortgagor ascertained and subjected, in such mode as may 
 be consistent with the rights of the prior incumbrancers, to the 
 payment of his judgment. Under a mortgage which contains 
 an express reservation of " so much of the income as might be 
 necessary to pay for the running expenses and repairs" of the 
 road, when the nature of a claim against the road is such as to 
 entitle the creditor to have it paid out of the earnings of the com- 
 pany, this may be accomplished by appropriate proceedings in 
 equity. A claim for damages, on account of stock killed upon the 
 road, would doubtless come within such an exception, and, per- 
 haps, even without such express reservation, it ought to be re- 
 garded as an incidental liability incurred by the company in oper- 
 ating the road, and to be deducted from the earnings before the 
 net income covered by the mortgage could be ascertained. 2 
 
 426. But in Minnesota personal property may be seized 
 upon execution, even as against a mortgagee. Lumber or cord- 
 wood belonging to a railroad company whose property is subject 
 to mortgage is subject to levy and sale upon execution by a judg- 
 ment creditor of the company. Such sale divests the company 
 of its property in the lumber or wood, and passes it to the pur- 
 chaser. It severs whatever relation or connection of appurtenance 
 or otherwise that existed between the lumber or cord-wood, and 
 the railroad, and the running or operating of the same. A receiver, 
 subsequently appointed in a suit for foreclosure, cannot recover 
 possession of such property. Power conferred upon such receiver 
 to take possession of the railroad and its property, "and also all 
 other goods and chattels owned by said company in any way relat- 
 ing or appertaining to or connected with said railroad, or the run- 
 ning or operating of the same," does not avail the receiver, be- 
 cause such property was not owned by the company, the prior sale 
 having divested it of all title to this property. 3 
 
 427. In a sale of property to a railroad company a stipu- 
 lation as to the time of the passing of title is binding bel vre< Q 
 
 i Lane v. Baugbman, 17 Ohio Si. 642; - Lane c. Baughman, 17 Ohio St. 648, 
 Coev. Peacock, 14 lb. 187. Sec, however, G48, per White, J. 
 
 1 Roberta, 54 111. 194, ' Mcllrathv. Snure, 22 Minn. 891. 
 
 403
 
 § 428.] REMEDIES AND JURISDICTION OF COURTS. 
 
 the parties to the contract, and also as against creditors of the 
 company who have notice of such contract. Thus the St. Joseph 
 and Denver City Railroad Company having purchased ties under 
 an agreement that they should not be considered the property of 
 the company until placed under the rail, a creditor of the com- 
 pany, knowing the terms of the contract, could acquire no title to 
 such ties by a levy and sale on execution after the company had 
 taken possession of the ties and moved them to different places 
 along the line of the l'oad. Such a sale is conditional, and until 
 the condition is performed no title passes. 1 
 
 428. The appropriate remedy of a judgment creditor against 
 a railroad corporation is by application to a Court of Equity, 
 seeking a discovery as to the condition of the company ; and upon 
 the failure of the officers to pay when directed the chancellor may 
 take possession of the road through a receiver, and apply the net 
 income or any surplus fund to the payment of the creditor's claim. 
 "To permit every and any agent of a corporation like this to be 
 garnisheed before or after judgment would result in the sacrifice 
 of all the private and public interests connected with it. The 
 chancellor, by giving to the creditor the income of the road, re- 
 taining enough to defray the necessary expenses of the corpora- 
 tion, has given him all that he has the right to demand, and at the 
 same time preserves the corporate property for private and public 
 use. Nor does this ruling prevent a corporation from being gar- 
 nisheed as the debtor of a third party, whose creditor is seeking 
 to make his debt. In such a case, however, the court will re- 
 quire payment to be made in the same manner as if the company 
 were the real debtor." 2 
 
 This is the practice adopted in England. 3 The Supreme Court 
 of the United States in like manner, where there was a judgment 
 at law against a bridge company, under which the tolls were sold 
 in execution, approved of the appointment in equity of a receiver 
 to collect tolls, and pay them into court, to the end of dischai'g- 
 ing the judgments at law. The court declared that the remedy 
 at law of creditors holding executions against corporations is ex- 
 
 1 Owens v. Hastings, 18 Kans. 446. 3 Blanchard v. Cawthorne, 4 Sim. 566 ; 
 
 2 Wilder v. Shea, 13 Bush (Ky.), 128, Fripp v. Chard Ry. Co. 11 Hare. 241. 
 per Pryor, J. 
 
 404
 
 SALE ON EXECUTION. [§ 429. 
 
 ceedingly embarrassed, and that they could not obtain satisfaction 
 of their judgments unless equity afforded relief. 1 
 
 Where a judgment is by law a lien upon the debtor's real es- 
 tate, and a railroad company is by statute the owner in fee of 
 the real estate taken for its right of way, as is the case in Wis- 
 consin, a suit in equity may be brought to have a judgment 
 against a railroad company declared a lien ; and upon a sale under 
 a decree, followed by a conveyance duly confirmed by the court, 
 the whole interest of the company existing at the time of the 
 rendition of the judgment passes to the purchaser. 2 
 
 In Massachusetts it is provided that the franchise of a turn- 
 pike or other corporation authorized to receive toll, and all the 
 rights and privileges thereof, are liable to attachment on mesne 
 process and to sale on execution. In the sale of such franchise, 
 the person who satisfies the execution with all fees and expenses, 
 or who agrees to take such franchise for the shortest period of 
 time, and to receive during such time all such toll as the corpora- 
 tion would by law be entitled to demand, is considered the high- 
 est bidder. The corporation retains its powers in all other re- 
 spects than that to take the tolls, and is bound to the discharge 
 of its duties just as it was before the sale. 3 
 
 429. Statutory provisions for enforcing executions against 
 railroad companies. — In New York the mode appointed by law 
 for the collection of a judgment against a railroad company after 
 the return of an execution unsatisfied, is by an action in which 
 a receiver is appointed and the property of the company seques- 
 tered for the creditor's benefit. 4 
 
 In Pennsylvania it is provided by statute that a judgment 
 creditor of a corporation may have execution by fieri facias, which 
 shall command the sheriff to levy upon any personal or real 
 property, franchises, and rights of such corporation, and sell the 
 same. The levy may extend to the property, franchises, and rights 
 of the corporation in every county of the commonwealth, and 
 the sale thereof is as effectual as though all the property and rights 
 
 i Covington Drawbridge Co. v. Shop- There is a somewhat similar Btatnte in 
 
 herd, 21 How. 112, 12 1 ; and see Macon & Delaware. R. Code 1*74, pp. .■177, :i7S. 
 
 Western R. R. Co. v. Parker, 9 Ga. ."-77. 4 3 R. S. (5th ed.) 768, §44; l Lawi 
 
 a Railroad ' !o. v. James, 6 Wall. 750. 1870, ch. 422, § 3 ; Loder v. N. Y., Utica & 
 
 Stat. 1800, ch. 08, §§25-34. OgdenBburgh B. E. Co. 4 Han (N.Y.), 23. 
 
 L05
 
 § 429.] REMEDIES AND JURISDICTION OF COURTS. 
 
 were located and levied upon and sold in the county wherein 
 the execution was issued. 1 Insolvent corporations are proceeded 
 against by sequestration. 2 
 
 In a late case the sale by a sheriff upon a judgment of part of 
 a road lying in one state seems to have been regarded as an un- 
 justifiable abuse of a legal right which would be restrained on 
 a bill filed by any bondholder. 3 
 
 In Virginia the road and franchises of a railroad company are 
 liable for the payment of judgments recovered against it. Instead 
 of selling the interest of the corporation to satisfy a small debt, 
 the court may direct a lease of it to be made for the shortest pe- 
 riod, for which a sufficient rent may be obtained to pay the debts 
 and the costs of suit. If to accomplish this object it is necessary 
 to lease the railroad for a term which will yield in rents a sum 
 far exceeding the amount of the judgments, and it cannot be 
 leased for a shorter term, the creditors are entitled to have it 
 leased for the longer term. 4 
 
 Likewise in Kentucky a railroad and its appurtenances are 
 treated in law as one entire thing, which cannot be sold to en- 
 force the payment of taxes in parcels, as for instance all of the 
 road in one county cannot be sold for the payment of the tax 
 within that county. Fragmentary taxations or sales might be 
 unjustly vexatious and injurious to the owners, and might disturb 
 the public use and interest. 5 
 
 In Georgia a chartered railroad, with all its rights and priv- 
 ileges, including its corporate franchise, is property subject to be 
 applied to the payment of its debts, and may be sold under a 
 judgment at law. The franchise of the company is property. It 
 is in fact the chief value of a railroad. There is no exemption pf 
 any property of a corporation from the payment of its debts. The 
 judgment and execution must be framed upon equitable principles, 
 although under the peculiar system in this state, a court of law 
 may generally administer as ample relief as a court of equity. 6 
 
 1 Act of 1870, p. 58, § 1; 1 Brightly's 5 Applegate v. Ernst, 3 Bush (Ky.), 
 Purdon'sDig. 291. 648. 
 
 2 Oakland Ry. Co v. Keenan, 56 Pa. G City of Atlanta v. Grant, 57 Ga. 340. 
 St. 198. In regard to the franchise of the corpo- 
 
 3 Dupont v. Bushong, U.S. Circuit Ct. ration the court said that without it the 
 1 Weekly Notes of Cases, 378. railroad would be almost worthless. " To 
 
 4 Winchester & Strasburg R. R. Co. own it would be like owning a horse, with 
 v. Colfclt, 27 Gratt. (Va.) 777. no right to ride him or drive him, — no 
 
 406
 
 SALE ON EXECUTION. [§ 429* 
 
 In Mississippi the equity of redemption of a railroad company- 
 is subject to sale for the payment of the company's debts, however 
 long a time the mortgage may have to run. A resort to chancery 
 is now necessary in all cases. 1 
 
 In Texas, 2 the road-bed, track, franchise, and chartered rights 
 and privileges of an}' railroad company are made subject to the 
 payment of its debts and legal liabilities, and may be sold in 
 legal satisfaction of the same; but whenever judgment is ren- 
 dered against any railroad company, the party in whose favor 
 such judgment is rendered may have execution thereon, directed 
 to the sheriff of that county in which the principal office of said 
 company is kept ; and if the said company fail to point out other 
 property to satisfy said execution, the sheriff may, at the request 
 of the plaintiff, levy the same upon the road-bed, track, franchise, 
 and chartered powers and privileges of said company ; and said 
 levy is held to embrace the whole road-bed, and track, and entire 
 line of said railroad, whether situated in the same county or not • 
 and he is required to proceed to advertise and sell the same at the 
 court-house door of his county, as in other cases, making the same 
 advertisement as is provided by law in cases of the sale of lands ; 
 and upon said sale, to execute to the purchaser a conveyance of 
 the said road-bed, track, franchise, chartered powers, rights and 
 privileges. 
 
 In California, 3 for the satisfaction of any judgment against a 
 corporation authorized to receive tolls, its franchise, and all the 
 rights and privileges thereof, may be levied upon and sold under 
 execution, in the same manner and with like effect as any other 
 property. The purchaser at the sale receives a certificate of pur- 
 chase of the franchise, and is immediately let into the possession 
 of all property necessary for the exercise of the powers, and the 
 receipt of the proceeds thereof, and must thereafter conduct the 
 business of such corporation, with all its powers and privileges, 
 and subject to all its liabilities, until the redemption of the same, 
 which may be made at any time within one year after such sale. 
 
 right to put him to labor. This would be 2 Paschal's Dig. 18G6, p. 820, arts. 4912, 
 
 owning materials, merely ; the iron and 4914. 
 
 timbers, the earth and masonry, of the 8 Code and Stat. 1876, §§ 5888, 5389, 
 
 railroad ; or the hide and flesh and bones 5392, 5393. The same BtatlUe i-i n enacted 
 
 of the horse." in Dakota T. Civil Code 1877, §§ 442 
 
 1 Vicksburg & Meridian It. B. Co. v. 447. 
 McCutchen, hi .Miss. 645. 
 
 407
 
 § 480.] REMEDIES AND JURISDICTION OF COURTS. 
 
 430. Funds in possession of the president, officers, and 
 agents of a railroad company are not subject to garnishment 
 in an ordinary action by a creditor against the company. 1 Their 
 possession is the possession of the company, and to garnishee them 
 in an action against the company is to garnishee the debtor, and 
 not a creditor of the debtor. Such a proceeding is in effect an 
 attempt " to compel the corporation to pull the money out of its 
 ppcket." 2 Funds in the possession of the president or other of- 
 ficer of a corporation authorized to receive and hold them for the 
 company are in the possession of the company, — are in its treas- 
 ury, and not in the possession of the officer as an individual. 
 " The servant who feeds, waters, and curries his master's horse, 
 and keeps the key of the stable, the master having the actual and 
 dominant possession and control ; the clerk who opens and shuts 
 the store and sells the goods, subordinate to the actual possession 
 of the merchant ; the treasurer of the corporation who has charge 
 of the safe and the moneys therein, and receives and pays out, 
 under the immediate direction and control of the principal officers, 
 are not to be deemed in such possession and control of the proper- 
 ties as subjects them to garnishment." 3 
 
 i Wilder v. Shea, 13 Bush (Ky.), 128. 3 McGraw v. Memphis & Ohio E. E. 
 
 See §§ 114-120. Co. 5 Cold. (Tenn.), 434, 439. See §§ 
 
 2 Wilder v. Shea, stipra, per Pryor, J. 114-120. 
 408
 
 CHAPTER XIV. 
 
 FORECLOSURE PROCEEDINGS UNDER CORPORATE MORTGAGES. 
 
 I. Parties plaintiff, 431-437. I III. Defences, 449-451. 
 
 II. Parties defendant, 43S-448. | IV. Decrees, 452-455. 
 
 Isr the present chapter it is proposed to examine only such 
 decisions as relate directly to the foreclosure of corporate mort- 
 gages. For general principles governing proceedings in equitable 
 suits of foreclosure, determining the parties to such suits, the 
 pleadings and the decrees, reference should be had, if there be 
 occasion, to general treatises. 1 
 
 I. Parties Plaintiff. 
 
 431. A mortgagee, although he does not himself own any 
 part of the mortgage debt, the mortgage being in fact made to 
 him as trustee for the benefit of the holders of certain notes, but 
 not expressing the trust upon its face, is the proper party to en- 
 force it by foreclosure suit. 2 He not only holds the legal title, 
 under which he could maintain an action to recover possession of 
 the property mortgaged upon condition broken, but by his rela- 
 tion to the holders of the notes he is a trustee, presumptively 
 clothed with the requisite power to act for them in the collection 
 of the debt. Whether such holders be numerous or not he may 
 bring suit to enforce the security without uniting those for whose 
 benefit it is prosecuted. 
 
 432. A single bondholder, unless restrained by the terms of 
 the mortgage, may maintain a bill in equity to foreclose a 
 mortgage, bringing it in his own name, but for the benefit "t all 
 other bondholders ns well as of himself. In this respect ii makes 
 
 1 Sec Jones on Mortgages, chs. xxi. 29 Ohio St. 880; Coe v. Columbus, Piqaa 
 
 xxii. §§ 1367-1515. & lud. K. It. Co. 10 Ohio St. 872. 
 
 2 Hayes v. Galion Gai Light & Coal Co. 
 
 Kill
 
 § 433.] FORECLOSURE PROCEEDINGS. 
 
 no difference whether the bondholder is secured by a mortgage 
 deed strictly such, where the mortgagee holds the title in trust for 
 the holders of such of the bonds as he has transferred, or whether 
 he is secured by a trust deed in the usual form, where a trustee 
 holds the title for the benefit of all the bondholders. 1 
 
 Ordinarily a bondholder secured by a mortgage to trustees is 
 not allowed to sue the corporation with respect to any matter 
 within the trust, except when it appears that the trustees refuse 
 or neglect to act, or have assumed a position prejudicial to the 
 interests of the bondholders, or there is a vacancy in the office. 2 
 
 433. A single bondholder may insist upon a foreclosure, 
 although the mortgage provides for a foreclosure by the trus- 
 tee upon request of the majority of the bondholders secured 
 by the mortgage. Inasmuch as a provision in a railroad mort- 
 gage authorizing the trustee, on the company's default, to take 
 possession of the property, and upon notice to sell it, is a cumu- 
 lative remedy which does not affect the right to foreclose by bill 
 in equity, a provision in the deed authorizing the trustee, upon 
 request of a majority of the holders of bonds, to exercise the 
 power, does not in any way affect the right of a single bondholder, 
 upon default of the company, to insist upon a foreclosure in equity, 
 at least for the amount of the interest overdue, if the whole prin- 
 cipal debt has not become due by lapse of time, or by virtue of 
 any provision of the mortgage. This point is illustrated by the 
 case of Alexander v. Central Railroad of Iowa, 2 before the Circuit 
 Court of the United States for the District of Iowa. This com- 
 pany had executed a mortgage containing the following provision : 
 " And it is agreed, in case of the default of the payment of the 
 semi-annual interest, as above provided, that said trustee, or its 
 successors, is hereby expressly authorized and empowered, upon 
 the request in loriting of a majority of the owners or holders of 
 said bonds, to enter into and upon, and to take actual possession of 
 all the property, real and personal, and rights, franchises, and 
 
 1 Mason v. York & Cumberland R. R. 459, 478 ; Campbell v. Railroad Co. 1 
 Co. 52 Me. 82 ; March v. Eastern R. R. Woods, 368, 370. 
 
 Co. 40 N. H. 548, 566. s 3 Dill. 487 ; 1 Cent. L. J. 543. See, 
 
 2 Knapp v. Railroad Co. 20 Wall. 117; also, relating to the same case, Farmers' 
 Coal Co. v. Blatchford, 1 1 Wall. 172, 177 ; Loan & Trust Co. v. Cent. R. R. of Iowa, 
 Galveston R. R. Co. v. Cowdrey, 11 Wall. 4 Dill. 533; 5 Cent. L. J. 56; Sage v. 
 
 Same, 93 U. S. 412. 
 
 410
 
 PARTIES PLAINTIFF. [§ 433. 
 
 privileges of the premises hereby conveyed, and each and every 
 part thereof, and by their agents or attorneys have, hold, use, and 
 enjoy the same, and from time to time make all repairs and re- 
 placements, and all useful alterations, additions, and improve- 
 ments thereto, as fully as the parties of the first part might have 
 done before such entry ; and to collect and receive all tolls, freight, 
 incomes, rents, issues, and profits of the same, and of every part 
 thereof ; and the said trustee and its successors shall and may, 
 and hereby is expressly authorized and empowered to sell at pub- 
 lic auction, to the highest bidder, the entire property, real and 
 personal, rights, franchises, and privileges conveyed." And it 
 was further provided that in case the company should make de- 
 fault in the payment of interest on any bond secured by the mort- 
 gage, then, after the expiration of twelve months from the time it 
 became due, and without demand or notice, at th<f election or op- 
 tion of a majority of the holders of said bonds, the whole principal 
 sum mentioned in each and all of the said mortgage bonds then 
 outstanding shall, forthwith, become due and payable, and the lien 
 or incumbrance thereby created for the security and payment 
 thereof may at once be enforced. 
 
 A default having occurred in the payment of interest, certain 
 bondholders requested the trustee in the mortgage, the Farmers' 
 Loan and Trust Company, to bring a suit to foreclose the mort- 
 gage, and upon its refusal so to do they themselves filed a bill in 
 equity for that purpose in their own behalf, and for all other bond- 
 holders who might be similarly situated, to which the trustee 
 was made a party defendant. The trustee appeared and filed an 
 answer, setting up that a majority of the bondholders had never 
 demanded action on the part of the trustee, and that it was will- 
 ing to submit to the direction of the court as to its duty in the 
 premises, and to become plaintiff if the court should so order. 
 The railroad company demurred to the bill, on the ground that 
 under the provisions of the deed of trust there could be do fore- 
 closure by bondholders, or by the trustee, unless a majority pf the 
 bondholders so desired, and there was no such averment in the 
 bill. The court, however, held that the bill was properly brought ; 
 but if the plaintiffs elected to dismiss the bill as to the trustee, the 
 might be allowed to become a party plaintiff, and to file a 
 bill for the benefit of all the bondholders. The provisions of the 
 mortgage deed did not restrict the right of any coupon holder to 
 
 ' 111
 
 § 434.] FORECLOSURE PROCEEDINGS. 
 
 foreclose for interest after a default for the requisite time. By 
 the terms of the mortgage the whole principal would not become 
 due upon a default in the payment of interest, except at the elec- 
 tion of a majority of the holders of the bonds ; and so, therefore, 
 without such action on the part of the bondholders, there could be 
 no foreclosure in equity for anything more than the overdue 
 interest. But to this extent any one of the bondholders could 
 invoke the remedy in equity to foreclose. 
 
 Judge Dillon, of the Circuit Court of the United States, after 
 noticing that the power of sale in the deed of trust is a cumulative 
 remed} 7 for the benefit of mortgage creditors, and does not exclude 
 their right to resort to the judicial tribunals for a foreclosure, 
 said: "Provisions in an instrument of this character limiting the 
 right of a mortgage creditor to resort to a Court of Chancery to 
 foreclose his security are not to be extended beyond the fair 
 meaning of the language used ; and it is our opinion that there 
 is no restriction in the deed of trust before us upon the right of 
 the coupon holder to foreclose for interest upon default, although 
 a majority of the bondholders do not unite in the suit, or request 
 the trustee to bring it. The provision in question gives a major- 
 ity of the bondholders, on default of the payment of interest, the 
 option or election, after the expiration of a year from the default, 
 to have the wliole principal sum become due at once, and the 
 mortgage security enforced accordingly. This is not inconsistent 
 with the unabridged right of any coupon holder to foreclose for 
 interest, in the manner sought in the present bill, and it was not 
 necessary that a majority of the coupon holders should unite in 
 bringing the bill, or in a request to the trustee to bring it. As 
 the bill alleges that the trustee refused to bring suit, the bill was 
 properly brought in the name of the plaintiffs, for themselves and 
 the other coupon holders, making the trustee a defendant. If the 
 plaintiffs elect to dismiss the bill as to the trustee, we will allow 
 the trustee to become a party plaintiff, and to file a bill for all 
 the bondholders ; but it would be anomalous to have the trustee 
 on the record both as defendant and plaintiff in the same proceed- 
 ing. The demurrer of the railroad company to the bill is over- 
 ruled." 
 
 i 
 
 434. It is not necessary that all the bondholders should 
 actually join in the suit. — When a foreclosure suit has been 
 412
 
 PARTIES PLAINTIFF. [§ 434. 
 
 commenced by bondholders in behalf of themselves and all other 
 bondholders whose bonds are secured by the same deed, who 
 choose to come in as complainants and bear their share of the 
 expenses of the suit, and the trustees of the mortgage are made 
 defendants, it is not necessary that all the bondholders shall be 
 made actual parties, especially when they are numerous, and many 
 of them unknown. 1 To require all of them to be made parties, 
 and in the case of the death of any that the suit should be re- 
 vived in the name of the personal representative of the deceased 
 party, before any final decree could be rendered, would be to deny 
 the bondholders any relief. The rule and practice of courts of 
 equity in such cases is that the case may proceed when the court 
 has sufficient parties before it to represent all the adverse inter- 
 ests of the plaintiffs and defendants. The interests of the bond- 
 holders are represented by the actual complainants, and by the 
 trustees who are made parties defendant. The other bondholders 
 may be allowed to come in as complainants, or may propound 
 their claims before the master. 
 
 A holder of part of the bonds secured by a mortgage of prop- 
 erty insufficient to satisfy the entire mortgage debt, has no right 
 to appropriate to his sole benefit, by execution and sale, the prop- 
 erty mortgaged to secure all the bonds. The bondholders have 
 a common interest in the security, and are all equally entitled to 
 the benefit of it ; and in case of a deficiency of the fund to satisfy 
 the whole of the debt, a distribution must be made in equity 
 among all the holders of bonds pro rata? To permit a bond- 
 holder to proceed at law for the collection of a part of the mort- 
 gage debt by execution against the mortgaged property would 
 prevent & pro rata distribution in case of a deficiency, and would 
 give him an inequitable preference over his fellow-bondholders. 8 
 
 A single bondholder cannot attach and apply to the payment 
 of his claim any part of the property mortgaged to pay his own 
 bonds and others secured by the mortgage without alleging and 
 proving that the other debts secured by the mortgage have, been 
 
 i Mason v. York & Cumberland R. It. 447; Campbell v. Railroad Co. 1 Woods, 
 Co. 52 Me. B2 ; March v. Eastern R. R. 3G8. 
 
 Co. 40 N. H. 548, 566 j Wilmcr v. Atlanta a Pennock v. Coe, 23 How. L17. 
 & Richmond Air Line Ry. Co. 2 Woods, 3 Fish v. N. 5 . Water ProoJ Paper Co. 
 
 29 N.J. Bq. L6.
 
 §§ 435, 436.] FORECLOSURE PROCEEDINGS. 
 
 paid, and bringing the mortgage trustees or other holders of the 
 legal title before the court. 1 
 
 435. One who holds bonds of a railroad company as col- 
 lateral security has the same right as any other bondholder to 
 press a sale of the mortgaged property. 2 
 
 To a suit by bondholders to foreclose a mortgage, the mort- 
 gagor may plead that the complainants are not the absolute 
 owners of the bonds, but hold them as collateral security for a 
 debt less in amount than the money due on the bonds, and that 
 the assignor should be made a party to the bill. 3 
 
 In a suit against a railroad company by the pledgees of its 
 bonds as collateral security for its own indebtedness to a smaller 
 amount, a decree can be entered for only the amount secured by 
 the pledge. 4 
 
 436. After individual bondholders have filed a bill to fore- 
 close a mortgage in behalf of themselves and all others in like 
 interest, the trustees to whom the mortgage was made may 
 come in and ask to become complainants instead of defendants, 
 and their request will generally be allowed unless it appear that 
 they have adverse interests and are not in good faith fulfilling 
 their trust. So soon as they are admitted as complainants, how- 
 ever, they have control of the suit, and are charged with the con- 
 duct of it. The only standing the original complainants, the 
 bondholders, have, must arise from an allegation that the trustees 
 were derelict in their duty ; or from some like allegation show- 
 ing the neglect or refusal of the trustees to act. When the trus- 
 tees come into court, deny the charge of neglect or unfaithfulness, 
 and ask to do what the bondholders allege they ought to do, but 
 were unwilling or neglected to do, and are allowed to become 
 complainants, they then become masters of the suit. 5 
 
 The trustees in such case may be allowed in the discretion of 
 the court to dismiss the proceedings commenced by the bond- 
 holders and proceed in another court. Thus a bill to foreclose a 
 
 1 Martin v. Mobile & Ohio R. R. Co. 7 4 Jesup v. City Bank of Racine, 14 
 Bush (Ky.), 116. Wis. 331. 
 
 2 McCurdy's Appeal, 65 Pa. St. 290. 5 Richards v. Chesapeake & Ohio R. 
 
 3 Aekerson v. Lodi Branch R. E. Co. R. Co. 1 Hughes, 28. See, also, Farmers' 
 28 N. J. Eq. 542. Loan & Trust Co. v. Central R. R. Co. 
 
 of Iowa, 11 West. Jurist, 428. 
 
 414
 
 PARTIES PLAINTIFF. [§ 437. 
 
 mortgage made by the Chesapeake and Ohio Railroad Company, 
 brought by bondholders in the Circuit Court of the United States 
 for the Eastern District of Virginia, 1 was dismissed at the request 
 of the trustees who had subsequently been admitted as complain- 
 ant, in order that they might be allowed to proceed in the courts 
 of the State of Virginia, in which they had commenced proceed- 
 ings, and where, as they alleged, certain difficulties in regard to 
 jurisdiction which arose in the Circuit Court would not be in the 
 way of their proceedings ; and where they would have other ad- 
 vantages in prosecuting the suit. All the bondholders under the 
 mortgage acquiescing in their request, with the exception of a few 
 holding a comparatively small amount, the Circuit Court declared 
 that, for the court to determine that the trustees shall proceed in 
 that court and not elsewhere, there being no charge of duplicity 
 or fraud on their part, would be to set up the opinion of the court 
 as to what the best interests of these cestuis que trust are against 
 those of themselves and of the trustees who are legally charged 
 with the care of those interests. The objection to the original 
 bill in this case being in large part on account of the absence of 
 proper parties, the bondholders who objected to the dismissal of the 
 bill asked leave, if the court should allow the motion to dismiss, 
 to file a new bill, which should include all the proper parties, and 
 should relate back to the time of the filing of the original bill. 
 "A fatal objection to this request," said Judge Bond, "is, that 
 now that the trustees have undertaken by legal means to foreclose 
 this mortgage, no bondholder has a right to proceed in his own 
 name to foreclose. He can ask the aid of a court of equity, only 
 on the ground of unfaithfulness, neglect, or inability on the part 
 of the trustees. Upon due consideration, therefore, the court will 
 make an order directing the receiver to settle his accounts up to 
 a day aamed therein, and to make a report thereof to the court 
 up to that date, whereupon he will be discharged, and the com- 
 plainants be allowed to dismiss their proceedings and prosecute 
 those already commenced in the state court." In this opinion 
 Chief Justice Waite concurred. 
 
 437. When a railroad company mortgages its property di- 
 rectly to all its bondholders by name, to secure specifically to 
 each the amount due on the bonds to him, no one bondholder, 
 
 1 Bicbardl v. Chesapeake & Ohio K. II. Co. I Hu 
 
 415
 
 § 438.] FORECLOSURE PROCEEDINGS. 
 
 even when professing to act in behalf of all bondholders who may- 
 come in and contribute to the expenses of the suit, can proceed 
 alone against the company, and ask a sale of the property. It is 
 a general rule both at law and in equity, that a suit upon a writ- 
 ten instrument must be brought in the name of all persons who 
 are parties to it or have an interest in it. Then if it appears that 
 the mortgage is an inadequate security, there is another reason 
 whv one bondholder or a part of the bondholders cannot proceed 
 without the others. In such case it is the interest of every bond- 
 holder to diminish the claim of every other bondholder. " In so 
 far as he succeeds in doing that he adds to his own security. 
 Each holder, therefore, should be present, both that he may de- 
 fend his own claims and that he may attack 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 apprehended, every one interested should have notice in 
 advance of the time, place, and mode of sale, that he may make 
 timely arrangements to secure a sale of the property at its full 
 
 value." 1 
 
 II. Parties Defendant. 
 
 438. The bondholders for whose benefit a mortgage of the 
 property and franchises of a railroad company has been made 
 to trustees are not necessary parties to a bill in equity brought by 
 the trustees against the company to foreclose the mortgage. 2 
 
 A trustee for bondholders represents their interests, and when 
 made a party to a suit affecting their interests, they are as much 
 bound by the decree rendered in the suit as if they were individu- 
 ally made parties to the suit. If a trustee, who is made a party 
 to the suit, is himself a bondholder, he cannot afterwards litigate 
 the same subject matter in his individual capacity. If he owned 
 the bonds at the time, he is bound because he was representing 
 himself. If he has bought them since the suit, he is bound as 
 privy to the person who was represented. 3 
 
 The bondholders are not necessary parties whether the mort- 
 gage constitutes a prior or subsequent incumbrance, or whether 
 the trustees be complainants or defendants in the suit. Bond- 
 holders are privies in interest, and may come in to defend pro in- 
 
 i Railroad Co. v. Orr, 18 Wall. 471. 3 Corcorau v. Chesapeake & Ohio 
 
 2 Shaw v. Norfolk County R. R. Co. Canal Co. 94 U. S. 741. 
 5 Gray (Mass.), 162. 
 
 416
 
 PARTIES DEFENDANT. [§ 439. 
 
 teresse suo, but their rights are affected by a decree against a 
 trustee. He does not stand in the attitude of a stranger claim- 
 ing collaterally, but comes in under the mortgage. 1 
 
 439. A state -which has indorsed the bonds of a railroad 
 company, and has a statutory lien upon the property of the 
 company for their payment, has an interest in a suit instituted by 
 the holders of such bonds praying that they may be subrogated to 
 the lien and rights of the state, and that the lien be established, 
 and should be made a party if possible. But the fact that the 
 state cannot be made a party is a sufficient reason for excusing 
 her absence from the suit. 2 If the suit be in the Circuit Court 
 of the United States within the state interested, and against a 
 corporation organized under the laws of that state, while it is im- 
 possible to make the state a defendant, she cannot even by her 
 own consent be made a party complainant, for that would oust 
 the jurisdiction of the court. 3 " Suppose," said Judge Woods, 
 " we turn the complainants out of this court because the state is 
 not a party. If they go into the state court, they are met by the 
 same difficulty, for the state will not allow herself to be sued in 
 her own courts. Can it be possible that these complainants are 
 without remedy against the railroad company because their bonds 
 are indorsed by the plighted faith of the State of Alabama? It 
 would be a reproach to the administration of justice to so hold." 
 The complainants do not ask any relief against the state, but 
 only a decree against the railroad company, for the unpaid inter- 
 est upon the bonds and for a sale of the property pledged as se- 
 curity. Although the state is interested in having the property 
 fairly applied to the extinguishment of the security, there is no 
 reason why she must necessarily be made a party to a suit in 
 which no decree is sought against her. "The indorser of a note 
 secured by a mortgage is not a necessary party to a suit to fore- 
 close tin- mortgage. If the state has paid any interest on tl 
 bonds, and is thereby entitled to any purl of the proceeds of the 
 mortgaged property, she can propound her claim before the maa- 
 
 1 Board of Supervisors of [owa County - Davis /■. Gray, 16 Wall. 203, 220. 
 r. Mineral Poinl l:. R, ' !o. 24 We. 93; ■■ Young v. Montgomery & Eufaula R. 
 McElrath v. Pittsburg & Steubenville R. I;. Co. -j. Wood 
 B Co 66 Pa. Si 37 ; Campbell <■. Rail- 
 road C<>. l Woods, 368. 
 
 27 H7
 
 §§ 440, 441.] FORECLOSURE PROCEEDINGS. 
 
 ter, and it will be allowed." Neither is the fact that the state 
 cannot be sued any reason why the holders of the bonds should 
 not be subrogated to the rights of the state and have the benefit 
 of the security. Subrogation is an equitable principle and is re- 
 sorted to in order to prevent a failure of justice. 
 
 440. "Whether the United States can compulsorily be made 
 a defendant in a suit to foreclose a mortgage on a railway upon 
 which it holds a lien or mortgage is an unsettled question ; 1 
 though Mr. Justice Grier, in the Circuit Court of the United 
 States, has held that a mortgagee may have an effectual decree of 
 foreclosure where the United States is the owner of the equity of 
 redemption, on a notice given in such manner as the court may 
 prescribe, if the land be not held for government purposes. 2 
 
 441. A subsequent mortgagee not made a party to a bill to 
 foreclose a prior mortgage is unaffected by a sale under a decree 
 rendered in such suit, and consequently he cannot have an in- 
 junction to restrain such sale. He may redeem at any time by 
 tendering the amount due ; and if only the interest on the prior 
 mortgage is due he may redeem on tendering that. The Jackson- 
 ville, Pensacola, and Mobile Railroad Company issued bonds under 
 the Internal Improvement Act of the State of Florida, which the 
 trustees of the fund guaranteed upon the condition provided by 
 the act, that the bonds should be a first lien on the road, and 
 on the failure of the company to provide and pay the interest, 
 and one per cent, per annum for sinking fund, it should be the 
 duty of the trustees, after thirty days from default, to take pos- 
 session of the road and property, and advertise and sell it to the 
 highest bidder, and apply the proceeds to purchasing and cancel- 
 ling outstanding bonds of the company, or incorporate them with 
 the sinking fund. Default was made, and the trustees sold the 
 railroad for a sum sufficient to retire the guaranteed bonds of the 
 company ; but the purchasers, after paying a portion of the pur- 
 chase money with which a portion of these bonds were retired, 
 managed to get a deed of the property and evaded or failed to 
 pay the balance. The holders of some of the outstanding bonds 
 then brought a bill against the holders of the property on the 
 
 1 Meier v. Kansas Pacific Ry. 4 Dill. 2 Elliot v. Van Voorst, 3 Wall. Jun. 
 378. 299. 
 
 418
 
 PARTIES DEFENDANT. [§ 442. 
 
 equity of the vendor's lien, to compel the payment of the balance 
 of the purchase money, and obtained a decree and execution. A 
 holder of second mortgage bonds of the company, who was not 
 made a party to either the suit to foreclose the lien of the guar- 
 anteed bonds, or to the suit by the holders of such bonds to ob- 
 tain payment of the balance of the purchase money, filed a bill to 
 enjoin the sale. He claimed among other things that the princi- 
 pal of the first mortgage bonds was not due at the time of the 
 sale by the trustees of the improvement fund, and that the second 
 mortgagees ought to have the privilege of redeeming ; but as he 
 was not injured by the sale already had, and could not be injured 
 by the proposed sale, his prayer was denied. 1 
 
 442. Subsequent judgment creditors. — A mortgage or judg- 
 ment prior in point of time is paramount to a subsequent judg- 
 ment which is first enforced ; and if it be enforced by a bill in 
 equity to which the owner of the second judgment, or of the title 
 acquired under it, is not made a party, such junior judgment cred- 
 itor, or the purchaser under his execution, would have the right 
 to redeem even after the statutory period of redemption had ex- 
 pired, because his rights would not be cut off by a foreclosure 
 suit to which he was not made a party. This point is illustrated 
 by one phase of the litigation in respect to the La Crosse and 
 Milwaukee Railroad Company, afterwards the Milwaukee and 
 Minnesota Company, and the Milwaukee and St. Paul Railway 
 Company. 2 Without following in detail the complicated facts of 
 the case, the legal point is made clear by the illustrations and rea- 
 soning of Mr. Justice Dyer. " Suppose a second mortgagee fore- 
 closes his mortgage and takes title under his foreclosure sale, but 
 does not take possession. Suppose then a prior mortgagee fore- 
 closes his mortgage, does not make the second mortgagee a party, 
 takes title under his foreclosure sale and gets possession, who has 
 the paramount legal title ? Clearly the prior mortgagee, but the 
 second mortgagee's right of redemption is not cut off, because he 
 was not ;i party to the proceeding. Let us follow it Further. 
 Suppose tin: prior mortgagee forecloses his mortgage, does not 
 mako a second mortgagee a party, and gets title under ;i fore- 
 
 1 Searles >■. Jacksonville, Pcnsacola & Co. 7 Hiss. 7.'i. And Bee Railroad Co. v. 
 Mobile R. R. <'"• '-i Woods, 021. Jamos, G Wall. 7. r >o; Bronson v. La Crosse 
 
 2 Howard v. Milwaukee ft Si. Paul Kv. & Milwaukee It. It. ( '<>. '-' Wall. 28& 
 
 41 ( J
 
 § 443.] FORECLOSURE PROCEEDINGS. 
 
 closure sale. The second mortgagee is in possession holding title 
 under a foreclosure of his mortgage. The paramount title is 
 again in the prior mortgagee, but he cannot have a writ of assist- 
 ance or other process in his foreclosure proceeding against the 
 second mortgagee to get possession of the premises, because that 
 second mortgagee was not a party to his suit. 1 The equity of re- 
 demption of that mortgagee is not cut off, and if the prior mort- 
 gagee would get possession, in case the second mortgagee does not 
 redeem, he must bring ejectment. I mention these only as illus- 
 trations of the general principle. Now a judgment creditor with 
 a posterior lien issues execution, sells the property, and takes title. 
 A prior judgment creditor prosecutes his bill in equity to enforce 
 the lien of his judgment. The party in possession is sole defend- 
 ant in the bill. A decree is rendered, enforcing not any lien 
 created by the decree, but the' lien of the judgment as of the date 
 of the judgment, and a sale is ordered. The sale transpires, and 
 then a contest arises upon the legal titles held respectively by the 
 purchaser under the decree and the purchaser under the execution 
 sale upon the subsequent judgment. I cannot come to any other 
 conclusion than that the purchaser under the decree founded upon 
 the first judgment in this state of the case takes the paramount 
 legal title. True, the plaintiff was not a party to the bill tiled 
 upon the prior judgment, but the omission to make him a party 
 did not give him superior legal rights. For rank of legal title we 
 must look to the judgments from which the respective titles flow." 
 
 443. As a general rule it is neither necessary nor proper to 
 make prior mortgagees parties to a foreclosure suit. 2 Of course 
 if the prior mortgagees assent to a sale of the entire property, and 
 such a sale is desired, they must be made parties to the bill. It 
 may sometimes be necessary to make prior mortgagees parties 
 in order to settle the amounts for which their mortgages are liens 
 upon the property, as otherwise a purchaser at the foreclosure sale 
 cannot know before bidding what the value of the property to be 
 sold may be ; and the complainants in the bill should put them- 
 selves in a position to inform purchasers what is the actual amount 
 
 1 See, on this point, Terrell v. Allison, v. Page, 2 Sim. 471 ; Richards v. Cooper, 
 21 Wall. 289 ; Hickey v. Stewart, 3 How. 5 Beav. 304 ; Payne v. Hook, 7 Wall. 432 ; 
 750. Jerome v. McCarter, 94 U. S. 734, 736. 
 
 2 2 Jones on Mortgages, § 1439 ; Rose 
 
 420
 
 PARTIES DEFENDANT. [§ 444. 
 
 of prior incumbrances. 1 In the case of ordinary mortgages, it is 
 seldom necessary to resort to any legal proceeding to determine 
 the amount of the prior incumbrances ; but with railroad mort- 
 gages this necessity more often arises, especially when there have 
 been successive mortgages of portions of a road and afterwards 
 of the entire road or of a consolidated road ; or when other com- 
 plications have arisen to render the amounts for which the mort- 
 gages are valid liens uncertain. 
 
 To make the prior mortgagee a party, unless there is a volun- 
 tary appearance, there must be a service of process upon him. A 
 railroad mortgage is usually made to trustees, who represent the 
 bondholders in all matters affecting their rights in court. But 
 sometimes the bondholders are themselves the mortgagees, and in 
 such case service of process must be made upon the individual 
 bondholders in order to make them parties defendant. No gen- 
 eral notice calling on them to present their claims will make them 
 parties or bind them. If they are represented in the case by 
 trustees, then a notice calling upon them to present their bonds 
 before the master would be binding. But if they are in no way 
 represented in the suit, their rights are not affected by any de- 
 cree that may be rendered in the case. 2 
 
 So loner as a doubt exists as to the character and extent of a 
 mortgage lien, a court of equity will not expose the property to 
 sale under it, if the interest be capable of being reduced to a cer- 
 tainty. 3 In like manner where the effort of the junior mortgagee 
 is to obtain a sale of the entire property or estate, and not merely 
 of the equity of redemption, there is reason for making the prior 
 incumbrancers parties, for they have an immediate interest in the 
 decree. 4 
 
 A decree, declaring a mortgage to be a first lien upon the prop- 
 erty and franchises of a railroad company, gives it no precedence 
 over the prior lien of a party who had no notice of the proceed- 
 ings and was not a party nor privy to the decree. 5 
 
 444. Upon the foreclosure of a mortgage upon a distinct 
 
 1 Richards >■. Chesapeake & Ohio II. B. Canal, K. B. & [ron I !o. I < lent. I.. .1. 127 : 
 (',,. i Bughes, 28, •'!.->. Jerome v. McCarter, 94 U. 8. 784. 
 
 - Ebung t;. Montgomery & Euf aula R. 4 Per Strong, J., in Jerome v. McCarter, 
 R, Co. 2 Woods, 606, per Woods, J. tupra. 
 
 >; Sutherland v. Lake Superior Ship '■> Pittsburg, Cincinnati & St. Louis Kj. 
 
 Co. v. Marshall, 85 Pa. St. 187. 
 
 421
 
 §§ 445, 446.] FORECLOSURE PROCEEDINGS. 
 
 portion of a railroad, the mortgagee of another distinct portion 
 is not a necessary party. When the mortgagees of distinct divis- 
 ions of the road both claim the same property, as for instance the 
 machinery, rolling stock, franchises, and privileges of the entire 
 road, the question what the mortgages cover is one which cannot 
 be determined in a suit for foreclosure brought by one of the 
 mortgagees. 1 
 
 445. Individual stockholders are not generally allowed to 
 become parties to a foreclosure suit against a raih'oad company. 
 In a special case, however, where there is an allegation that the 
 directors fraudulently refused to attend to the interests of the cor- 
 poi'ation, a court of equity will, in its discretion, allow a stock- 
 holder to become a party defendant, for the purpose of protecting 
 his own interests against unfounded or illegal claims against the 
 company ; and he will also be permitted to appear on behalf of 
 other stockholders who may desire to join him in the defence. 2 
 "But this defence," says Mr. Justice Nelson, "is independent of 
 the company and of its directors, and the stockholder becomes a 
 real and substantial party to the extent of his own interests and of 
 those who may join him, and against whom any proceeding, order, 
 or decree of the court in the cause is binding, and may be enforced. 
 It is true, the remedy is an extreme one, and should be permitted 
 by the court with hesitation and caution ; but it grows out of the 
 necessity of the case and for the sake of justice, and may be the 
 only remedy to prevent a flagrant wrong." 
 
 The stockholders of a corporation need not be individually 
 made parties to a suit by its creditors to obtain satisfaction out of 
 surplus proceeds of a foreclosure sale, where the stockholders are 
 represented both by the corporation and by a committee of their 
 own. 3 
 
 446. Where a stockholder may intervene. — After a suit in 
 equity has been properly instituted against a railroad company, 
 its officers enjoined and a receiver appointed, a decree pro con- 
 fesso entered, and an authentic report of the facts made to the 
 court, which has thereupon ordered a sale of the property of the 
 
 1 Bronson v. Railroad Co. 2 Black, 524. 3 Railroad Co. v. Howard, 7 Wall. 392. 
 
 2 Bronson v. La Crosse & Milwaukee 
 R. R. Co. 2 Wall. 283. 
 
 422
 
 PARTIES DEFENDANT. [§ 446. 
 
 eompar^, an individual stockholder cannot be permitted to inter- 
 vene in the suit and file a cross-bill in the cause on a general 
 charge of fraud and collusion on the part of the receiver, and an 
 erroneous judgment on the part of the court in making the order. 
 The receiver of the Memphis, El Paso, and Pacific Railroad Com- 
 pany reported, among other things, that prior to the late civil 
 war the company had surveyed a route from the eastern boun- 
 dary of Texas to El Paso, and had graded about sixty-five miles 
 of its road, but had not paid the contractor ; that after the war, 
 about twenty or twenty-five miles of road had been graded, about 
 three miles of track had been laid down, and loose rails had 
 been dropped along the line for a few miles further. " Ten loco- 
 motives, purchased in France, together with a lot of about one 
 hundred and twenty tons of railroad iron, had been detained at 
 New Orleans for non-payment of duties, which, in the case of the 
 locomotives, exceeded their value. The other railroad iron had 
 been sold or attached in New York for claims against the com- 
 pany. This, from the report of the receiver, seemed to have 
 been the whole extent of the real operations of the company in 
 the construction of its vast work across the whole northern por- 
 tion of Texas, an extent of nearly a thousand miles, and in the 
 accomplishment of this result, or at least so much of it as had 
 been performed since the close of the war, there had been issued 
 forty millions of stock and about thirteen millions of bonds and 
 land certificates." Nothing else remained, as the result of this 
 vast issue of securities, which the receiver could lay his hands 
 on except a few thousand shares of stock in two other railroads, 
 and a residuum of less than three hundred thousand dollars of 
 cash assets accruing from the sale of land grant bonds in France 
 to the amount of over $5,000,000, under a representation and 
 pledge that the money should be devoted to the construction of 
 the road, so as to secure the grant of lands which formed the 
 basis of the mortgages and the only security for the payment of 
 the bonds. "A more utterly fraudulent concern, a more empty 
 bubble of speculation, is rarely to be met with in this highly spec- 
 ulating and fraudulent age," was the comment of the courl upon 
 this humiliating revelation of the facts of the case. And yet it. 
 appeared that the franchises and rights to grants of land belong- 
 ing to the organization would be of much value in the hands of 
 an honest and energetic organization; and the receiver reported 
 
 423
 
 § 446.] FORECLOSURE PROCEEDINGS. 
 
 an agreement which could be effected with a new company which 
 would have .the effect of securing the ultimate payment of the 
 debts ami obligations of record of the defendant company. This 
 proposition, after being taken under consideration by the court 
 and modified in some particulars, was approved, and the receiver 
 was authorized to carry it into execution. 
 
 At this stage of the proceedings certain officers and stockhold- 
 ers of the company appeared and desired to be allowed to become 
 parties to the suit, and to intervene for their respective interests. 
 The order authorizing the receiver to effect the proposed sale was 
 suspended until the interveners could formally present their case 
 by petition or cross-bill, and be heard. The complainants in the 
 suit and the receiver thereupon applied for a rule to show cause 
 why such order should not be vacated and set aside, and this was 
 the question before the court in the present case. The petitioners 
 objected to the proposed sale, and made general charges of fraud 
 and collusion on the part of the receiver. But the court held 
 that individual stockholders could not be allowed to intervene to 
 set aside the proceedings, or to interpose obstacles to the progress 
 of the suit. 1 Mr. Justice Bradley, of the Circuit Court of the 
 United States, said : " Rival creditors, by proceedings before a 
 master, may control the priority of their respective liens, and 
 creditors or stockholders may contest the validity of claims of 
 other creditors and stockholders, but all in subordination to the 
 general object and purpose of the suit ; to obtain administration 
 of the company's assets and property. To be allowed to inter- 
 vene as general defendants and contestants is another and differ- 
 ent thing. This can be admitted only upon the ground before 
 referred to, to wit : having an interest in the results as a stock- 
 holder or otherwise, and being able to show fraud and collusion 
 between the plaintiffs in the suit and the officers of the company 
 having charge of its interests. A suggestion, in the progress of 
 the suit, that an officer of the court is disposed to act fraudu- 
 lently, or that the court has made an injudicious or erroneous 
 order, will not be a sufficient ground to allow such a party to in- 
 tervene. Indeed, it is questionable whether, in any case where 
 a suit is properly instituted against a corporation, a stockholder of 
 that corporation can, even on a suggestion of fraud on the part of 
 its officers, come in by way of intervention as party to that suit, 
 i Forbes v. Memphis, El Paso & Pacific R. R. Co. 2 Woods, 323. 
 
 424
 
 PARTIES DEFENDANT. [§ 446. 
 
 and seek to defend or control the proceedings. An original bill 
 would rather seem to be the proper mode of proceeding. 
 
 " A commercial, or other business corporation, is constituted for 
 the specific purpose of suing and being sued, granting and receiv- 
 ing, buying and selling, and doing other business in a corporate 
 name and capacity, totally distinct from that of any or all of its 
 members considered as individuals. A corporation is a person. 
 Its property is not the property of its stockholders. Its rights are 
 not their rights. They have only an indirect interest therein. 
 The rights of a stockholder are to meet at stockholders' meetings, 
 to participate in the profits of the business, and to require that 
 the coi-porate property and funds shall not be diverted from their 
 original purpose. If the company become insolvent, it is the 
 right of the stockholders to have the property applied to the 
 payment of its debts. I do not know of any other rights, except 
 incidental ones, subsidiary or auxiliary to these. Of course, a 
 stockholder has ordinarily a right to a certificate for his stock, to 
 transfer it on the company's books, and to inspect these books. 
 For the invasion of these rights by the officers of the company, he 
 may sue at law or in equity, according to the nature of the case. 
 But all remedies for injuries to the property or rights of the com- 
 pany must be prosecuted in the name of the company, and all 
 demands against the company must be prosecuted against the 
 company by name, unless its officers or agents, by fraud and mis- 
 representation, have rendered themselves personally liable. A 
 stockholder, in his character of stockholder, cannot sue, nor, un- 
 less specially made liable by the charter, can he be sued for any 
 of the company's transactions. There is one case, and one only, 
 in which he can interpose, and that is where the officers and man- 
 agers of the company, by fraud and collusion with third persons, 
 are sacrificing, or are about to sacrifice and betray the interests of 
 the corporation. For such breach of trust and conspiracy he can 
 call the guilty parties to an account in a court of equity. In the 
 case before the court, the complainants might possibly have held 
 tin- officers and agents of the company personally Liable for the 
 frauds and misrepresentations charged against them. But the 
 .siid officers and agents were clothed with all the authority and 
 
 power of the coii)!. ration, and negotiated and operated in its 
 name, and issued its obligations upon its corporate credit, and in 
 
 every official way involved and pledged its corporate liability, and 
 
 425
 
 §§ 447, 448.] FORECLOSURE PROCEEDINGS. 
 
 beino- the legal representatives of the corporation, placed before 
 the world as such by the corporation, the parties injured had a 
 perfect rio-ht to proceed against the corporation for redress. It 
 cannot be, and is not seriously pretended, that the principal com- 
 plainants in the case, the trustees of the land grant mortgages and 
 bondholders, are acting in collusion with the officers of the com- 
 pany, or that they have any other object in view than the pro- 
 tection and security of the bondholders, who, it is admitted, have 
 been most outrageously defrauded out of their money." The ad- 
 mission of a stockholder to become a party defendant in any case 
 where he is not made so by the bill, being a matter of discretion 
 with the court, to be exercised with caution, and only as an ex- 
 treme remedy, the court did not deem it necessary to depart from 
 the general rule in this case, where the interests of all parties, 
 and especially of the bond fide creditors of the corporation, were 
 obviously coincident with the objects of the suit, and the order of 
 sale which had already been made. 
 
 447. Adverse interests as between co-defendants may be 
 passed upon and decided; and parties are often made defendants 
 because they will not join as plaintiffs, and are yet necessary par- 
 ties to the suit, in order that they may be bound by the decree. 
 Having in this way an opportunity of asserting their rights, they 
 are concluded by the decree as far as it affects rights passed upon 
 by the court. 1 
 
 When a right of priority is in dispute it ought to be settled be- 
 fore a sale, so that the party holding the first incumbrance can 
 bid upon the property up to the amount of his claim. 2 
 
 448. It is a general rule that strangers to a cause cannot 
 be heard in it either by petition or motion. Their remedy is by 
 original bill. But there is an exception to the rule as regards 
 creditors .who are allowed to prove debts, and persons belonging 
 to a class on whose behalf a suit is brought, as for instance bond- 
 holders for whom mortgage trustees have brought an action for 
 foreclosure. Such persons are regarded as quasi parties, and of 
 course have a standing in court. 3 
 
 1 Corcoran v. Chesapeake & Ohio Canal 2 Campbell v. Texas & New Orleans R. 
 Co. 94 U. S. 741. R. Co. 2 Woods, 263. 
 
 8 Anderson v. Jacksonville, Pensacola& 
 426 Mobile R. R. Co. 2 Woods, 628.
 
 DEFENCES. [§§ 449-451. 
 
 III. Defences. 
 
 449. In general. — In a bill to foreclose a mortgage given to 
 secure negotiable railroad bonds, as against bond fide purchasers 
 of the bonds for value, no other or further defences to the mort- 
 gage are allowed than would be allowed were the action brought 
 in a court of law upon the bonds. Such bondholders, in this re- 
 spect, stand in the same position as bond fide assignees for value 
 and before maturity of negotiable promissory notes. 1 
 
 450. A junior mortgagee cannot deny the validity of a prior 
 mortgage which he has assumed. — Where a mortgage of a 
 railroad is made in express terms subject to a prior mortgage of 
 the same property, securing bonds negotiable in form, and which 
 have in fact passed into circulation before the making of the 
 junior mortgage, the junior mortgagees, and all parties claiming 
 under them, are estopped from denying the amount or the va- 
 lidity of such bonds. 2 
 
 451. Subsequent contracts of the company. — Until a mort- 
 gagee takes possession under his mortgage, or files a bill to fore- 
 close it, and obtains the appointment of a receiver, he is in no way 
 responsible for the dealings of the mortgagor with third persons, 
 such for instance as the leasing of a railroad which is the subject 
 of the mortgage, although the lease be fraudulent against the 
 company. Such dealings, after the execution of the mortgage, 
 cannot affect the rights of the mortgagee, and he has no control 
 over them. He has no interest in the earnings of the road, or 
 concern in the appropriation of them, until he takes possession or 
 obtains the appointment of a receiver. Therefore the stockholders 
 of a railway company cannot set up such matters in defence to a 
 foreclosure suit. 3 
 
 1 Kenicott v. Supervisors, 10 Wall. Co. v. St. Paul Co. 6 Wall. 742 ; Jerome 
 452; following Carpenter v. Lon^an, II). >•. McCaittT, 1H l*. S. 7.54. 
 
 271. 3 Branson v. La Crosse & Milwaukee 
 
 2 Branson v. La Crossc& Milwaukee B. R. B. Co. 2 Wall. 1283. 
 B. Co. 2 Wall. 283 ; and sec Minnesota 
 
 . 427
 
 § 452.] FORECLOSURE PROCEEDINGS. 
 
 IV. Decrees. 
 
 452. Decree of sale of railroad situate in two states. — The 
 fact that a railroad company running through two states is incor- 
 porated in both does not prevent a court sitting in one of these 
 states from ordering a sale of the entire property situated in both 
 states, under a mortgage of the entire line of road executed by one 
 corporate body. The execution of the mortgage in this way 
 would estop the corporation from setting up a separate existence 
 in the two states. Moreover, there is no reason why a corpora- 
 tion chartered by two states may not constitute one and the same 
 corporate body. 1 Mr. Justice Strong, delivering the judgment of 
 the Supreme Court of the United States, in favor of the validity 
 of such a decree, said : 2 "If such a foreclosure and sale cannot 
 be made of a railroad which crosses a state line and is within two 
 states, when the entire line is subject to one mortgage, it is cer- 
 tainly to be regretted ; and to hold that it cannot be would be 
 disastrous, not only to the companies that own the road, but to 
 the holders of bonds secured by the mortgage. Multitudes of 
 bridges span navigable streams in the United States, — streams 
 that are boundaries of two states. These bridges are often mort- 
 gaged. Can it be that they cannot be sold as entireties by the 
 decree of a court which has jurisdiction of the mortgagors ? A 
 vast number of railroads partly in one state and partly in an 
 adjoining state, forming continuous lines, have been constructed 
 by consolidated companies, and mortgaged as entireties. It would 
 be safe to say that more than one hundred millions of dollars 
 have been invested on the faith of such mortgages. In many 
 cases these investments are sufficiently insecure at the best. But 
 if the railroad, under legal process, can be sold only in fragments ; 
 if, as in this case, where the mortgage is upon the whole line, and 
 includes the franchises of the corporation which made the mort- 
 gage, the decree of foreclosure and sale can reach only the part 
 of the road which is within the state, it is plain that the property 
 must be comparatively worthless at the sale. A part of a rail- 
 road may be of little value when its ownership is severed from 
 
 1 Wilmer v. Atlanta & Richmond Air 2 Muller v. Dows, 94 U. S. 444, 449. 
 Line Ry. Co. 2 Woods, 447, 454 ; McEl- See §§ 413, 414. 
 ratli v. Pittsburg & Steubenville R. R. Co. 
 55 Pa. St. 189. 
 
 428
 
 DECREES. [§ 452. 
 
 the ownership of another part. And the franchise of the com- 
 pany is not capable of division. 
 
 " In view of this, before we can set aside the decree which was 
 made, it ought to be made clearly to appear beyond the power 
 of the court. Without reference to the English chancery de- 
 cisions, where this objection to the decree would be quite untena- 
 ble, we think the power of courts of chancery in this country is 
 sufficient to authorize such a decree as was here made. It is 
 here undoubtedly a recognized doctrine that a court of equity, 
 sitting in a state and having jurisdiction of the person, may en- 
 force the decree by process against the defendant. True, it can- 
 not send its process into that other state, nor can it deliver pos- 
 session of land in another jurisdiction, but it can command and 
 enforce a transfer of the title. And there seems to be no reason 
 why it cannot, in a proper case, effect the transfer by the agency 
 of the trustees when they are complainants." 
 
 In New Jersey 1 it is provided by statute that railroad corpora- 
 tions existing by or under the laws of another state, any part of 
 whose route, whether acquired by lease or otherwise, lie within 
 this state, or which are authorized to exercise any franchises with- 
 in this state, shall be deemed corporations of this state, for the 
 purpose of being sued or proceeded against if insolvent, in the 
 same manner and to the same extent as if organized originally 
 therein, and no suit of foreign attachment shall be brought against 
 any such corporation. In case suit shall be brought for the fore- 
 closure of any mortgage of the franchises and railroads of any 
 such corporation in the state of its original creation and domicil, 
 and also of the same mortgage in the Court of Chancery of this 
 state, the suit in the Court of Chancery shall, so far as consistent 
 witli the protection of parties having acquired liens in this stale, 
 be regarded and conducted as auxiliary to the said suit brought 
 in said state where such corporation was originally created and 
 domiciled; and, upon decree obtained in the last mentioned suit 
 for the foreclosure of such mortgage, and for the Bale of the prop 
 erty and franchises thereby conveyed, including such property and 
 franchises in New Jersey, to pay and satisfy the mortgage and 
 other Liens which may 1>" established by such decree by such offi- 
 cers as shall be designated therefor, the Courl of Chancery in 
 this .st ;i t<; shall be empowered so to frame its decree Eor Eoreclos- 
 
 « Lawa L876, eta. 78, §§ 1, '-': '-' B. 8. 1877, p. 921, §§71 81. 
 
 129
 
 §§ 453, 454.] FORECLOSURE PROCEEDINGS. 
 
 ure and sale under said mortgage, to satisfy the same and such 
 other liens which by its said decree it shall establish, as that sale 
 may be made thereunder, out of this state, and at the same 
 time and place of the sale under the judgment or decree obtained 
 in said other state, and under such regulations as to advertise- 
 ment thereof as to the chancellor shall seem fit. 
 
 453. Decrees entered by consent, in like manner as decrees 
 in ex parte cases, so long as they remain unexecuted, are subject 
 to the control of the court. Such decrees have legal effect so long 
 as they stand unreversed ; but in fact they are the agreements of 
 the parties, which the court merely assents and gives effect to, and 
 are not judicial determinations. 1 So long as such decrees have 
 not been acted upon the court is at liberty to correct them accord- 
 ing as the court may afterwards judicially ascertain the facts and 
 the laws. But this power does not exist after such decrees have 
 been carried into effect. They are then regarded as final, and 
 estop the parties and their privies from calling them in question. 2 
 A consent decree entered upon the basis of an agreement between 
 the parties, by which the execution of a decree against a railroad 
 company was suspended upon certain terms, must be executed by 
 the company when the other party has complied with the agree- 
 ment on his part. Where, by such a decree, the railroad com- 
 pany was to pay certain instalments of a debt at certain dates 
 until the whole was paid, and if default was made the com- 
 plainants were to wait ninety days before making a seizure and 
 sale of the property, proceedings for sale after the ninety days' 
 indulgence will not be stayed, except upon some ground founded 
 upon the agreement ; the company must show a desire or willing- 
 ness to comply with the substance of the agreement. The equi- 
 ties of third parties are no ground on which to base such a peti- 
 tion. 3 
 
 454. "When a decree made by consent is beyond the scope 
 
 1 Vermont & Canada R. R. Co. v. Ver- Bank of Louisiana v. Marin, 3 La. Ann. 
 mont Central R. R. Co. 50 Vt. 500; 14 34. " Consent decrees decide nothing. 
 Am. Railw. R. 497, 531, per Barrett, J. They merely authenticate private agree- 
 
 2 Wadhams v. Gay, 73 111. 415 ; Edger- ments, and render them executory be- 
 ton v. Muse, 2 Hill (S. C-) Ch. 51 ; Farm- tween the parties." Per Rost, J. 
 ers'Loan & Trust Co. v. Central R. R. of 3 Anderson v. Jacksonville, Pensacola 
 Iowa, 4 Dill. 533. And see, further, Union & Mobile R. R. Co. 2 Woods, 628. 
 
 430
 
 DECREES. [§ 454. 
 
 of the original bill, and not in accordance with settled principles 
 of law, although the parties are bound by it after it has been acted 
 upon by either of them, yet the court not having made the decree 
 in the exercise of a judicial judgment or deliberation will not be 
 bound to regard it beyond the specific matter which is the subject 
 of the decree. The court is free to adopt a different policy at a 
 subsequent stage of the case. Thus, in the case of the Vermont 
 Central Railroad Company, 1 after a receiver had been regularly 
 appointed by the court, and had been in possession of the road 
 for some years, the parties made a compromise which in fact dis- 
 charged the debt for liquidation of which the receivership was cre- 
 ated, so that the occasion for the receivership no longer existed. 
 This compromise " was devised and put in form as the outcome of 
 the mind and will of the parties, as the mode of consummating into 
 validity a mutual arrangement by the parties as to their respec- 
 tive rights and interests, and as to the mode and means by which 
 the property was to be held and used in serving and satisfying 
 those rights and interests. That decree adopted what had been 
 created by the court as a receivership, as known and warranted 
 by the law ; but the administration of it was not left to the judicial 
 judgment and direction of the court under the law authorizing 
 and governing a receivership, known to the law as such. Instead 
 thereof the parties enacted a code ex contractu for the administra- 
 tion of the property, and provided ex contractu that there should 
 be the formality as of a decree supervening thereupon." The 
 administration proceeded for ten years or more before there was 
 any adverse litigation between the parties, during which time 
 there were many ancillary decrees and orders mainly agreed upon 
 by the parties. Such administration, although called a receiver- 
 ship in the proceedings, and having the form of one, was practi- 
 cally one by agreement of the parties. The court did not exercise 
 its own prerogative and control except in subordination to the 
 agreement of the parties. Its function was virtually the giving 
 of formal assent to what had been devised and agreed upon by 
 the parties. The court, therefore, upon the occurrence of adverse 
 litigation at a later stage of the cause, did not hesitate to declare 
 that this receivership was not a receivership in law. "The court 
 could not, in the first instance, bind by judgment, decree, and 
 
 • Vermont & Canada R. R. Co. v. Vermont Central R. R. Co. :.i> Yt. 550, 564 ; 14 
 
 Am. Railw. R. 4'J7,5. , (8 ) .000. 
 
 i;;i
 
 § 455.] FORECLOSURE PROCEEDINGS. 
 
 order, beyond the scope of the original bill, except by consent, 
 and by acquiescence in the execution thereof, and it would be 
 without warrant for the court to supervene upon what has come 
 to pass in virtue of agreement, consent, and acquiescence, and 
 deal with the subject and the parties the same as if all had been 
 done within the scope of the original bill and under the original 
 decree, in the legitimate exercise of judicial prerogative, in the 
 discharge of judicial duty, and as the result of independent judi- 
 cial judgment." 
 
 455. Final decree. — A decree in a foreclosure suit fixing the 
 amount of interest due on a mortgage, and providing for a sale 
 unless payment be made within a year, is a final decree from 
 which an appeal may be taken. 1 But a decree which does not fix 
 the amount due upon the mortgage, nor ascertain and define the 
 property to be sold under the decree, is not final in the sense 
 which allows an appeal from it. 2 
 
 After an injunction restraining a sale under a deed of trust, a 
 decree dissolving the injunction, and directing a sale according to 
 the deed of trust, and the bringing of the proceeds into court, is 
 a final decree from which an appeal may be taken. 3 
 
 An order appointing a receiver is a final order from which there 
 may be an appeal. 4 
 
 1 Milwaukee & Minn. R. R. Co. v. Sout- 2 Railroad Co. v. Swasey, 23 Wall. 405. 
 
 ter, 2 Wall. 440; Blossom v. Milwaukee, 3 Railroad Co. v. Bradleys, 7 Wall. 575. 
 
 &c. R. R. Co. 1 Wall. 655 ; and see Hinck- 4 Cincinnati, Sandusky & Cleveland R. 
 
 ley v. Gilman, Clinton & Springfield R, R. R. Co. v. Sloan, 31 Ohio St. 1. 
 Co. 94 U. S. 467. 
 
 432
 
 CHAPTER XV. 
 
 THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 I. Grounds for the appointment of re- I II. Selection of receivers, 480-482. 
 ceivers, 456-479. I III. Jurisdiction of receivers, 483-492. 
 
 I. Grounds for the Appointment of Receivers. 
 
 At the present time when so many railways in the United 
 States are in the hands of receivers, the subject of their appoint- 
 ment, rights, and liabilities is one of interest, not only to cred- 
 itors and others immediately interested in the insolvent companies, 
 but, in at least one aspect, to the business community generally ; 
 for one of the questions constantly arising in the operation of 
 roads by receivers relates to the extent of their liability, or of the 
 liability of the funds in their charge, for loss and damage done 
 to goods carried by them, and for the negligence of employees 
 whereby injury happens to passengers. The whole subject is one 
 of recent growth, and many of the most important decisions em- 
 braced within it have been rendered within two or three years. 
 Without dealing much with elementary matters, the present chap- 
 ter will present so much of the subject as relates to the appoint- 
 ment of receivers and their jurisdiction over the property, and the 
 succeeding chapter will relate to their duties and liabilities. 1 
 
 456. The English rule in regard to the appointment of 
 receivers at the suit of a mortgagee formerly was 2 that a Benior 
 mortgagee could not generally obtain such appointment, because, 
 
 1 It ia neither practicable nor desirable - Doe v. St. Helen's, &c. Ry. Co. 2 Q. 
 
 to embrace in this treatise the whole sub- B. 364 ; Potts v. Warwick 8 Birmingham 
 
 jectof the Law of Receivers. For the gen- Canal Co. Kay, 146 ; Bowen ». Brecon Rj 
 
 era! law of this subject, reference may be Co. L. R. 3 Eq. 541 ; Fripp v. Chard Ry. 
 
 had to the excellent work of Mr. High. Co. 11 Hare, 241; Hopkins ,-. Worce ter 
 
 Thesubject is developed here only so far & Birmingham Ry. Co L. R. 6 Eq.447; 
 
 as it relate directly to the enforcement of Amei v. Birkenhead Docks, 30 Beav. 34S. 
 corporate securities. 
 
 28 488
 
 § 456.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 having the legal title, he had full remedy at law for the re- 
 covery of possession by ejectment. When, however, his inter- 
 est was such that he could not maintain ejectment, as for in- 
 stance when that interest was the "■undertaking" of a railway 
 or canal company, or the rates, tolls, and dues arising therefrom, 
 he might come into court for a receiver. 1 By statute, the holder 
 of the legal title by mortgage is enabled to obtain the appoint- 
 ment of a receiver in all instances where there has been a de- 
 fault in the payment of the principal debt for one year, or of 
 interest for six months. 2 But, prior to a recent statute upon 
 this subject, it was held that the remedy of a mortgagee of a 
 railway company for the enforcement of the debt did not ex- 
 tend to the obtaining of a receiver to manage and operate the 
 road. 3 The Court of Chancery will, however, appoint a receiver 
 of tolls or earnings of the company when these are liable to the 
 payment of the debt. This is a remedy essentially different from 
 the appointment of a manager of the undertaking. Upon an ap- 
 plication to the Rolls Court for a receiver, Sir John Romilly, 
 Master of the Rolls, appointed a receiver of the tolls and rents ; 4 
 but said : " I do not think I can give to the receiver such power 
 of management of the affairs of the corporation as would make 
 him liable to proceedings by the attorney general by mandamus, 
 or the like. I am not aware whether the letting by the receiver, 
 instead of the corporation, would have that effect ; but, if it 
 would, then the letting should be by the corporation, but the 
 rents should ' be secured by the receiver." The appointment of 
 a receiver, at the suit of a mortgagee of tolls, is one of the oldest 
 remedies of the court, and not dependent upon any statute. 5 
 
 In a case before the English Court of Appeal in Chancery, 6 
 upon the question of appointing a receiver of a railway company 
 in behalf of mortgagees, Lord Cairns said : "In addition to the 
 
 1 Doe v. St. Helen's, &e. Ry. Co. supra, statute was enacted, in 1867, for the ap- 
 
 2 23 & 24 Vict. c. 145, §§ 11-32. By pointment of a manager of a railway com- 
 tho Judicature Act of 1873, a receiver may pany, at the suit of a judgment creditor, 
 be appointed by an interlocutory order of 4 De Winton v. The Mayor, &c. of 
 the court, in all cases in which it shall ap- Brecon, 26 Beav. 533. 
 
 pear to the court to be just or convenient 6 Hopkins v. Worcester & Birmingham 
 
 that such order should be made. 36 & 37 Ey. Co. supra. 
 
 Vict. ch. 66, § 25, subs. 8. « Gardner v. London, Chatham & Dover 
 
 3 In consequence of the refusal of the R. Co. 2 L. R. Ch. 201, 212. 
 Court of Chancery to give this remedy, 
 
 434
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 457. 
 
 general principle that the Court of Chancery will not in any case 
 assume the permanent management of a business or undertaking, 
 there is that peculiarity in the undertaking of a railway which 
 would, in my opinion, make it improper for the Court of Chan- 
 cery to assume the management of it at all. When parliament, 
 acting for the public interest, authorizes the construction and 
 maintenance of a railway, both as a highway for the public, and 
 as a road on which the company may themselves become carriers 
 of passengers and goods, it confers powers and imposes duties and 
 responsibilities of the largest and most important kind, and it 
 confers and imposes them upon the company which parliament 
 has before it, and upon no other body of persons. These powers 
 must be executed and these duties discharged by the company. 
 They cannot be delegated or transferred. The company will, of 
 course, act by its servants, for a corporation cannot act otherwise, 
 but the responsibility will be that of the company. The com- 
 pany could not, by agreement, hand over the management of the 
 railway to the debenture holders. It is impossible to suppose that 
 the Court of Chancery can make itself or its officer, without any 
 parliamentary authority, the hand to execute these powers, and 
 all the more impossible when it is obvious that there can be no 
 real and correlative responsibility for the consequences of any im- 
 perfect management. It is said that the railway company did not 
 object to the order for a manager. This may well be so. But, in 
 the view I take of the case, the order would be improper even if 
 made on the express agreement and request of the company." 
 
 457. In the United States, courts of equity have exercised 
 their powers with much more freedom in the appointment of 
 receivers of railways. There has, unfortunately, been much occa- 
 sion for the exercise of their jurisdiction in the temporary man- 
 agement of the roads of insolvent companies. Instances are not 
 wanting where courts have, through their receivers, retained the 
 management of such roads through a long series of years ; and the 
 propriety <,f this course has frequently been assailed. Generally, 
 however, the doctrine is fully recognized that courts assume the 
 management of railroads only with a view to the winding up <>f 
 insolvent companies, or to the sale of their property for the benefit 
 of the mortgage creditors ; that, in the Larger class of cases, justili- 
 cation of the appointment of a receiver springs out <>f the jurisdio- 
 
 486
 
 § 457.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 tion of courts thus to liquidate and sell ; and that, in these cases, 
 roads are managed and their business continued, through the in- 
 tervention of receivers, in order that the roads may be sold with- 
 out loss of business and: depreciation of the property. 1 In this 
 way the property is preserved, pending the litigation, and used 
 for the benefit of all concerned, with the ultimate purpose of dis- 
 posing of the property itself, and obtaining assets with which to 
 pay off the mortgage upon foreclosure of it. There are other cir- 
 cumstances which will justify the interference of a court of equity 
 by the appointment of a receiver ; as for instance when a com- 
 pany receiving income more than sufficient to pay the expenses of 
 an economical management refuses to apply the surplus to the 
 payment of a judgment or mortgage which is a lien upon its 
 property. 2 
 
 In some states courts of equity are fortified in their assumption 
 of the management of insolvent railroad and other corporations by 
 express statutes. But, without the aid of a statute, the chancery 
 jurisdiction of the courts is sufficient for the exercise of this au- 
 thority in all instances where their interference is necessary to 
 protect the property or to enforce the right of persons interested 
 in it, whether creditors or stockholders. 3 "It is not unusual," 
 said Mr. Justice Swayne, of the United States Supreme Court, 4 
 " for courts of equity to put receivers in charge of the railroads of 
 companies which have fallen into financial embarrassment, and to 
 require them to operate such roads until the difficulties are re- 
 moved, or such arrangements are made that the roads can be sold 
 with the least sacrifice of the interest of those concerned. In all 
 such cases the receiver is the right arm of the jurisdiction invoked. 
 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 results intended to be secured by such legislation 
 without its aid." 
 
 In several states it is provided by statute that in an action by a 
 mortgagee for the foreclosure of his mortgage and* the sale of the 
 mortgaged property, a receiver may be appointed where it appears 
 
 1 Milwaukee & Minnesota R. R. Co. v. herd, 21 How. 112 ; and see Stevens v. 
 Soutter, 2 Wall. 510; S. C. Woolworth, Davison, 18 Gratt. (Va.) 819. 
 
 49; Florida v. Jacksonville, Pensacola & 3 Stevens v. Davison, 18 Gratt. (Va.) 
 Mobile R. R. Co. 15 Fla. 201, 286. 819. 
 
 2 Covington Drawbridge Co. v. Shep- * Davis v. Gray, 16 Wall. 203. 
 
 436
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 458. 
 
 that the mortgaged property is in danger of being lost, removed, 
 or materially injured, or that the condition of the mortgage has 
 not been performed, and that the property is probably insufficient 
 to discharge the mortgage debt. 1 
 
 In Michigan a court of chancery cannot take from the directors 
 of a corporation or vest in a receiver the management and control 
 of the corporate business, except in proceedings to dissolve the 
 corporation under a statute providing therefor. An ex parte ap- 
 pointment of a receiver to manage the corporate business, or an 
 ex parte granting of an interlocutory injunction to deprive the 
 directors of control, is more than irregular ; it is absolutely void, 
 being entirely beyond the power of «the court. 2 
 
 458. The appointment of a receiver is an equitable remedy, 
 and has been said to be in effect an equitable execution. 3 This 
 remedy is a provisional one also, and bears a similar relation to 
 courts of equity that proceedings in attachment bear to courts of 
 law. " The issuing of an attachment and the appointment of a 
 receiver in a civil action are both proceedings which are merely 
 ancillary or auxiliary to the main action. The action may be 
 prosecuted to final judgment, either with or without such proceed- 
 ings. These auxiliary proceedings are merely intended to secure 
 the means for satisfying the final judgment in case the plaintiff 
 should succeed in the action, and they can only be resorted to 
 where the special circumstances exist which the law prescribes 
 for their institution." 4 
 
 The appointment of a receiver of a railroad company in a fore- 
 closure suit does not follow a default in the payment of interest 
 as a matter of course, but is a matter of sound discretion with the 
 court. Although the mortgage provides that the trustee, on de- 
 fault of payment of either principal or interest of the bonds, may 
 take possession of the property, yet when the aid of a coin) of 
 
 1 California, Codes & Stats. L876,ch. 5, For statute authorizing appointment "I' re- 
 
 l t ; Arkansas, Digest 1874, p. 838, ceivers in New York, see a R. S. 1875, p, 
 
 § 4810 ; Kentucky, Code of Practice 1876, 511, §244. 
 
 J 299; Dakota T. f Code of Civil Procedure "Port Buron & Gratiol Ry. Co. v. 
 
 1877, § 219; Montana T., Law - 1877, \>. Judge of St. Clair Circuit, 81 Mich 156. 
 
 odeof Civil Procedure, § 221 ; Wash- 8 Jeremy's Km- Jur. 249. 
 ington T., Laws 1877, p i" | Wyoming T., ' Cincinnati, Sandusky & Cleveland R. 
 
 Compiled Laws 1877, ch. I of R. Co. v. Sloan, 31 Ohio, 1, perWhite,J. 
 
 Civil Code; Ohio, R. 8. I860, p. 1019. 
 
 137
 
 § 459.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 equity is invoked it will look into the facts and exercise an equi- 
 table discretion. 1 
 
 459. Upon an application for a receiver by mortgage cred- 
 itors, it is generally necessary to show something more than 
 the fact that a default has occurred in the payment of in- 
 terest; as for instance to show that ultimate loss is likely to 
 happen to the beneficiaries under the mortgage by permitting the 
 property to remain in the hands of its owners until final decree 
 and sale. 2 The appointment of a receiver is a matter within the 
 sound discretion of the court, and the power is exercised in behalf 
 of railway bondholders only «in strong cases ; and only upon its 
 appearing that the property is insufficient to pay the debt, and 
 that the mortgage creditors are in danger of suffering irreparable 
 loss. 3 Urgent occasion for the appointment of a receiver to man- 
 age and operate a railroad should be shown before the court exer- 
 cises its authority in this way. Mr. Justice Miller, of the Supreme 
 Court of the United States, in reference to the exigencies which 
 justify the exercise of this prerogative of a court of chancery, said 4 
 that the appointment of receivers by a court to manage the affairs 
 of a long line of railroad, continued through five or six years, is 
 one of those judicial powers, the exercise of which can only be 
 justified by the pressure of an absolute necessity. 
 
 Such a necessity did not exist in the case before him : " The 
 idea of appointing or continuing a receiver for the purpose of tak- 
 ing ninety-five miles of railroad from, its lawful owners, which is 
 earning a gross revenue of $800,000 per annum, to enforce the 
 payment of a judgment of $16,000, the lien of which is seriously 
 controverted, is so repugnant to all our ideas of judicial proceed- 
 ings that we cannot argue the question. If Mr. Howard has a 
 valid judgment, the usual modes of enforcing that judgment are 
 
 1 Jones on Mortgages, § 1516; Wil- Minnesota R. R. Co. v. Soutter, 2 Wall, 
 liamson v. New Albany, &c. R. R. Co. 1 510 ; Vose v. Reed, 1 Woods, 647 ; Fris- 
 Biss. 198. bee v. Timanus, 12 Fla. 300; Florida v. 
 
 2 Williamson v. New Albany R. R. Co. Jacksonville, Pensacola & Mobile R. R. 
 lBiss. 198; Union Trust Co. v. St. Louis, Co. 15 Fla. 201, 286; Cincinnati, San- 
 Iron Mountain & Southern R. R. Co. 4 dusky & Cleveland R. R. Co. v. Sloan, 31 
 Dill. 114 ; 4 C. L. J. 585; Cheever v. Rut- Ohio St. 1. 
 
 land & Burlington R. R. Co. 39 Vt. 653 ; * Milwaukee & Minnesota R. R. Co. v. 
 
 Burlingame v. Parce, 12 Hun (N. Y.), 144. Soutter, 2 Wall. 510; and see Delaware, 
 
 8 Pullan v. Cincinnati & Chicago Air Lackawanna & Western R. R. Co. v. Erie 
 
 Line R. R. Co. 4 Biss. 35; Milwaukee & Ry. Co. 21 N. J. 298. 
 438
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 460. 
 
 open to him, both at law and in chancery; but the extraordinary- 
 proceeding of taking millions of dollars' worth of property of such 
 peculiar character as railroad property is from its rightful possess- 
 ors, as one of the usual means of collecting such a comparatively 
 small debt, can find no countenance in this court." 
 
 To the same effect Mr. Justice Barrett, of the Supreme Court 
 of Vermont, says: 2 " It is a fundamental element in any idea of 
 a receivership under the law that there should be such a necessity 
 for it as to render it the duty of the court, in the exercise of its 
 judicial judgment upon the case presented, to exert its preroga- 
 tive in that behalf, and create the receivership in the discharge of 
 that duty. It is never to be created because it will do no harm ; 
 nor even because it will do good, unless the exigency be such as 
 to impose the duty upon the court." 
 
 460. Whether a receiver should be appointed is a ques- 
 tion often attended with difficulty, and to answer it properly 
 is one of the most embarrassing duties a Court of Chancery has 
 to perform. This was the remark of Judge Drummond in a cause 
 before the Circuit Court of the United States, which presented 
 peculiar and unusual difficulties. A bill had originally been filed 
 by a mortgage trustee for a foreclosure of the mortgage and a sale 
 of the property. After the case had been pending some time, a 
 compromise agreement was made for a reorganization of the com- 
 pany, and a decree was entered by consent ratifying the agreement. 
 This contemplated, with other things, a surrender of a portion of 
 the bonds and their conversion into stock ; and, of course, could be 
 made effectual only by the voluntary action of all the bondholders. 
 The property was placed in the hands of a trustee to carry out the 
 orders of the court. Various interlocutory orders were made in 
 the case from time to time. After some years the trustee and 
 some of the bondholders applied to a state court for a foreclosure 
 of the same mortgages, and that court appointed a receiver, and 
 decreed a sale, which was completed and the road delivered t<> the 
 purchasers. In this situation of affairs a bondholder, who had not, 
 come into the compromise agreement, applied t<> the Circuit Court 
 for the appointment of a receiver, and that court, having decided 
 that it had not lost control of the Bubject matter <>l the suit, and 
 
 1 Vermont &. Canada H. U. Co. v. Vermont Ccntrnl K. II. Co. 50 Vt. 500 ; 1 I Am 
 Railw. Rep. 4'j7, .0-14. 
 
 139
 
 § 461.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 that the interference of the state court in dealing with and dis- 
 posing of property at the time within the jurisdiction of the Cir- 
 cuit Court was unauthorized, the only inquiry remaining was, 
 therefore, whether a receiver should be appointed pending the set- 
 tlement of the rights of the parties by the court. The company 
 was insolvent, the former trustee was dead, having made no re- 
 ports to the court of the manner in which he had performed his 
 trust ; the new trustee had been a party to the litigation in the 
 state courts, and had sought to dismiss the proceedings in the Cir- 
 cuit Court. The parties then in possession of the road were acting 
 in hostility to the decrees of the Circuit Court, and the interests 
 therein adjudicated. The court, therefore, deemed it impossible 
 to give any relief to the petitioner and others in similar relations, 
 unless the court should take possession of the property ; and a 
 receiver was accordingly appointed. 1 
 
 461. That a receiver will not be appointed upon the ap- 
 plication of a mortgagee, as a matter of course, upon a de- 
 fault is illustrated by the case of the St. Louis, Iron Mountain, 
 and Southern Railway Company. This company owed its exist- 
 ence to the consolidation of several other companies, which had 
 largely built the road before they were absorbed in the pres- 
 ent corporation. 2 Each of the four companies which became so 
 consolidated was already heavily mortgaged, and the new cor- 
 poration executed a mortgage of its property and income, and 
 franchises, for $28,000,000, chiefly for the purpose of taking up 
 the existing mortgages. Only about $2,000,000 of the old bonds 
 were exchanged for the new, and it was soon apparent that the 
 company could not complete its road and pay the interest on its 
 bonded debt, and consequently an arrangement was made by which 
 the interest coupons on all the bonds for two years were funded. 
 During this time the road was completed, the floating debt con- 
 siderably reduced, and the income of the road each year had in- 
 creased ; but the company was unable to pay in full the coupons 
 first maturing after this period. In this condition of things the 
 agents of Baring Bros. & Co., who were very large creditors of 
 the company, proposed that half of each coupon should be paid, 
 relying on the leniency of the holders for such extension of time 
 
 1 Bill v. New Albany, &c. Ry. Co. 2 2 Union Trust Co. v. St. Louis, Iron 
 Biss. 390. Mountain & Southern R. R. Co. 4 Dill. 
 
 44Q 114; S. C. 4 C.L.J. 585.
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 461. 
 
 for the other half as should be necessary. This plan was accepted 
 and acted upon by nearly all the creditors ; but the above named 
 creditors had apparently changed their purpose, though no notice 
 of such change appears to have been given ; for their coupons 
 were presented for payment, and payment of half of each having 
 been tendered, it was refused, and a bill for foreclosure was im- 
 mediately filed, with an application for the appointment of a re- 
 ceiver. The bill alleged that the road was insolvent ; that there 
 was danger that the prior divisional mortgages would be fore- 
 closed on the separate parts of the road, and the road, which was 
 valuable as a whole, would be rendered no security at all for the 
 debt of the complainants ; and that the income of the road which 
 should be appropriated to the payment of the interest would be 
 diverted to the payment of the floating debt of the company on 
 part of which the directors of the company were personally liable. 
 These allegations were controverted by the answer, which claimed 
 that the road was yielding a net income of six per cent, on 
 $28,000,000, while its entire debt was more than -$2,000,000 less 
 than that sum ; that the income had been steadily increasing for 
 several years ; and that besides the road, its rolling stock and ap- 
 purtenances, the company owned lands apart from the road, but 
 subject to the mortgage, of the value of $8,000,000. 
 
 It was insisted in behalf of the complainants, that the failure to 
 pay the interest, and to deliver possession of the road on demand, 
 left no discretion in the court to refuse to place the road in the hands 
 of a receiver; that because the income of the road was pledged 
 for the payment of the bonds, and the; trustees were authorized, 
 on failure to pay any instalment of interest, to take possession, the 
 court was recpiired as a matter of law, without regard to the re- 
 sources of the company, and without reference to any showing of 
 danger of ultimate loss to the bondholders, or of any serious delay 
 of payment, to take possession of the property of the company. 
 
 Mr. Justice Miller, delivering the opinion of the Circuit Court 
 of the United States, commenting upon the bill of the complain- 
 ants, said that it did not ask for any specific performance of the 
 contract to deliver possession of the road to the mortgagees iipoo 
 default; that it abandoned the right of foreclosure by the power 
 
 le given to the trustees, and SOUght the safer mode of sale in 
 
 chancery; that although the Burest mode of securing the income 
 of the io ;i d may he through a receiver, yet the income is no 
 
 111
 
 § 462.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 more mortgaged than the visible property and franchises of the 
 company, and, unless there is danger of loss to the bondholders, 
 there is no more reason why the income rather than other prop- 
 erty of the company should be sequestered. It is also in the 
 power of the court, without appointing a receiver, to require of 
 the defendant the rendering of an account of the income, and, 
 after payment of the necessary expenses, to pay so much as right- 
 fully should be paid upon the debt secured by the mortgage. 
 
 The court, while admitting the right of the complainants to 
 foreclose the mortgage, declared that the appointment of a re- 
 ceiver depended upon the danger of ultimate loss to the bond- 
 holders, by permitting the property to remain in the possession of 
 its owners until the final decree and sale ; that the appointment 
 is a matter of discretion with the court in view of all the circum- 
 stances of the case ; and that the facts established in this case 
 did not show any such danger of loss to the bondholders as to 
 justify the court in turning over to them, or to a receiver, the 
 possession of the road and property embraced in the mortgage. 
 
 462. A receiver will not be appointed against the wishes 
 and interests of a great majority of the bondholders, upon 
 the application of a very small minority of bondholders, so long 
 as the property is honestly and successfully managed ; but will 
 leave the complainants to their remedy of a decree of sale in ac- 
 cordance with the law and pi'actice in an ordinary foreclosure 
 suit. In such case the equities of the great body of the creditors 
 and stockholders of a railroad company, whose interests would be 
 imperilled by the appointment of a receiver, will be respected in 
 the exercise of the discretionary power of the court to interfere 
 by taking possession of the property, and the complainants will be 
 left to their technical right of foreclosure in the usual course of 
 proceedings. Especially will the court decline to interfere in this 
 way when the result of such interference would be to overturn a 
 funding scheme, which all but a small fraction of the bondholders 
 have agreed upon and are successfully carrying out, and to break 
 up a long line of railroad into several fragments upon which the 
 mortgages were originally given, to the manifest injury of the 
 whole property. 
 
 These equities of the great body of the mortgage creditors of a 
 railroad company are well considered and applied by Mr. Justice 
 442
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 462. 
 
 Harlan in the recent case of the Wabash Railway Company, be- 
 fore the Circuit Court of the United States for the Seventh Cir- 
 cuit. 1 Each of the six companies originally owning this line of 
 road had at different times, from 1853 to 1869, executed a first 
 mortgage of its own road, the aggregate of these first mortgages 
 being $9,400,000. Second mortgages to the amount of $5,000,000 
 were executed bj several of the original divisions of the road. 
 Upon a consolidation of five of the original companies a consoli- 
 dated mortgage was executed, and finally, in 1873, upon a further 
 consolidation with these companies of the sixth company, another 
 mortgage, known as the gold mortgage, was executed. Under the 
 latter mortgage there was a foreclosure sale in 1876 ; whereupon 
 the present Wabash Railway Company was organized from the 
 stockholders of the old company, who put in further capital to the 
 amount of $1,600,000. A further mortgage was executed by the 
 new company in 1877 ; and furthermore, a funding scheme was 
 proposed and was agreed to by holders of more than four fifths of 
 all the mortgage debts. The main feature of this scheme was 
 the funding of the past due coupons and those maturing so far 
 ahead as November 1, 1878, and issuing therefor scrip certificates, 
 running until the maturity of the bonds from which the coupons 
 were detached, bearing interest at seven per cent, annually, such 
 arrangement not to impair the liens of the bondholders under their 
 respective mortgages. Provision was also made for a sinking 
 fund. Holders of bonds to the amount of nearly $100,000, in 
 1878, brought a foreclosure suit and applied for the appointment 
 of a receiver. Mr. Justice Harlan, denying the application for a 
 receiver, said: "On the side of the complainant it appears that 
 he is the owner of certain bonds, for the security of which mort- 
 gages were executed. In the payment of interest upon those 
 bonds there has been a default. The present managers, in execu- 
 tion of the funding scheme, have been paying interest to those 
 bondholders who have given their assent to that scheme, and de- 
 cline to pay interest to the complainant and those standing with 
 him, who refuse to become parties to the funding scheme. More; 
 than that, the present managers are not applying all of the net 
 revenue arising from the operation of the road to the payment of 
 interest in tin; order of priority of mortgages, hut are applying a 
 
 1 Tysen '•. Wabash By. <'<>., Chicago oral, and it is to be regretted that only a 
 Times, Joly 28, 1878. This opinion was newspaper report of it can bo presented. 
 
 II:;
 
 § 462.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 portion to the discharge of obligations created by the last mort- 
 gage upon the property. Complainant claims that this is a mis- 
 application of the income, and of itself, in connection with the 
 supposed inadequacy of the security for all the bonds, would make 
 it the duty of the court to take charge of the property by a re- 
 ceiver. The complainant and his colleagues insist that the duty 
 of the managers is to keep down the interest on the first mortgage 
 to the extent of the entire net income of the company ; since that 
 course, they insist, will increase the value of the subsequent in- 
 cumbrances, and that they have no right, as a condition precedent 
 to the performance of their duty, according to the rights of the 
 parties, to require the complainant and his colleagues to submit to 
 a funding scheme which they do not approve. Upon the other 
 hand we find the vast majority of the bondholders, under all the 
 mortgages, insisting that the funding scheme is the best arrange- 
 ment for all concerned, and that under that arrangement, faith- 
 fully and honestly carried out, the rights of all the parties will be 
 best secured. The company invites complainants to join in that 
 scheme with the large majority of those who have the same char- 
 acter of rights with them. That that scheme is being honestly 
 adhered to and will be carried out in good faith, the evidence does 
 not permit me to doubt. Without stopping to state in detail all 
 the reasons arising out of the evidence for the conclusion I reach, 
 I will say that I cannot doubt that the appointment of a receiver 
 at this time would not only break up this line of railway into 
 its original fragments, but would overturn the funding scheme, 
 thereby destroying a large present income for the great majority 
 of bondholders entitled to preference. It would, in addition, work 
 the financial ruin of all the interests involved in this railroad en- 
 terprise, subordinate to the first mortgage bondholders, including 
 the interests of the complainant and those united with him in 
 this suit. Those who will certainly suffer, and who will suffer 
 first, will be the stockholders of the old company, and who be- 
 came the stockholders in this new organization by advancing 
 $1,600,000. None of the bondholders, who were such when that 
 $1,600,000 was advanced by the stockholders, are here actively 
 seeking the appointment of a receiver. Some of those who are 
 conspicuously moving in that direction became, according to their 
 evidence, the owners of bonds quite recently, and, as we may infer 
 
 from the evidence, for merely speculative purposes The 
 
 444
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 463. 
 
 court cannot, in deference to the mere technical rights of a very- 
 small minority of bondholders, lay its hand upon a railroad over 
 six hundred miles in length, running through three great states, 
 and thereby imperil, if not destroy, the interests of those whose 
 rights are entitled to equal consideration with those of the com- 
 plainant and his colleagues. If the present managers of the road 
 were guilty of any fraud or dishonest practice in their control 
 of this property, I should feel differently. While there are dif- 
 ferences between them and some of the bondholders, as to cer- 
 tain matters connected with the discharge of the company's obli- 
 gations, those differences do not involve the integrity of those 
 operating the railroads. The court is disposed to recognize the 
 absolute necessity of large discretion in the management of such 
 vast property, and in the distribution of the net income arising 
 therefrom ; and it is unwilling, for the present at least, to make 
 honest differences as to such matters the basis for its interference 
 by the appointment of a receiver." 
 
 463. In a case where it was shown that no interest had 
 been paid on the first mortgage bonds of a railroad company 
 for about ten years, and that the road had in the mean time 
 changed hands once or twice, the court regarded these facts alone 
 as raising a suspicion that the owners of the road had been very 
 unfortunate, or very reckless, or very unmindful of their duty, 
 and as alone affording a very strong ground for the appointment 
 of a receiver on the motion of the mortgagee. 1 Another impor- 
 tant fact established in the case was that the mortgage trustee 
 and some of the bondholders, on several occasions, applied to the 
 president of the company for leave to examine their records, with 
 a view to ascertaining the amount of the company's income and 
 to the disposition made of it, and tin; application was evaded or 
 denied. In view of the withholding of such necessary and proper 
 information, the court applied the maxim, Omnia prcesumuntur 
 contra sjyoliatoj-em. 
 
 In this case the defendant attempted to excuse the non-payment 
 of interest upon the ground that tin- company had been obliged t<> 
 provide for other roads with which they had in some wa\ become 
 consolidated; in constructing additions to their mad, and in pur- 
 chasing rolling stock and equipping ;i long line of road ; for all of 
 1 Pullan v. Cincinnati & Chicago Air Line K. li. < !o. i Bias. 85, ■»:. 
 
 II..
 
 § 463.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 which purposes a very large expenditure in the aggregate had 
 been made. But the court said that even honest inability to pay 
 a debt is a poor excuse when one is sued for it ; and that the fact 
 that the defendant company had burdened itself with a vast ex- 
 penditure and indebtedness subsequently to the mortgage, instead 
 of being any reason why a receiver should not be appointed, was 
 rather one reason for such appointment, inasmuch as the company 
 by assuming such burdens was becoming less and less able to pay 
 the interest upon the mortgage. " But the most remarkable feat- 
 ure in the answer," said Judge McDonald, giving the decision of 
 the court, " as it seems to me, is, that it does not, that I can see, 
 present any feasible scheme for paying this interest at all. In- 
 deed, so far as appears from the answer, it does not seem that the 
 interest will ever be paid voluntarily. A strong desire is evinced 
 to extend the road and raise vast sums for equipping it ; but no 
 corresponding anxiety is shown to do anything for the first mort- 
 gage bondholders. The answer evidently evinces a design to 
 postpone this matter till the very last. Under all the circum- 
 stances, I think the appointment of a receiver would be very 
 proper, if the bill had averred that the mortgaged property was 
 not a sufficient security for the debt ; and that without a receiver 
 the bondholders are in danger of irreparable injury. I suppose 
 that in no case of a mortgage ought a Court of Chancery to appoint 
 a receiver, if the mortgaged property is of such value as to render 
 it clear that, on a foreclosure and sale, the debt could all be made. 
 In the present case, the mortgaged property would probably not 
 bring so much on sale." In the case before the court the mort- 
 gage covering the earnings of one section of a road, which was 
 one fourth part in length of the whole road, a receiver was ap- 
 pointed whose duty it was made to examine the books and affairs 
 of the road, to ascertain its net earnings monthly, and receive one 
 fourth part of the net earnings of the whole line, and pay this 
 into court for the use of the bondholders. The company and its 
 officers were ordered to give the receivers all proper facilities for 
 this examination, and to render full and fair monthly statements 
 to the receiver under oath, and pay over to him every month a 
 fourth part of the net proceeds. 
 
 In a case before Judge McLean, in the Circuit Court of the 
 United States, 1 it appeared on a motion for a receiver in a similar 
 1 Williamson v. New Albany R. R. Co. 1 Biss. 198. 
 446
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§§ 464, 465. 
 
 case that the defendant had failed to pay the semi-annual interest 
 which had fallen due within six months of the time of the filing 
 of the bill ; and principally, if not solely, for that single and re- 
 cent failure, the court, while overruling the motion for a receiver, 
 did what was nearly equivalent to appointing one, in placing the 
 road so far under the control of the court as to require that com- 
 pany to make monthly reports of the net income of the road, and 
 to pay a certain proportion of it into court every month for the 
 use of the bondholders. 
 
 464. It is ground for the appointment of a receiver that 
 the mortgaged property is liable to be seized on executions. — 
 The fact that a railroad company is insolvent, and is owing a large 
 floating debt which its creditors are rapidly reducing to judgments, 
 has been regarded as ground for the appointment of a receiver 
 at the instance of mortgage creditors. Upon such judgments the 
 railroad and its appurtenances might be seized piecemeal and the 
 security of the mortgage creditors destroyed. It is true that the 
 seizure of property which is security for the mortgage debts may 
 be restrained by injunction, but it might be necessary to issue as 
 many injunctions as there are creditors. Such a state of facts is 
 regarded as calling for the appointment of a receiver. 1 
 
 465. The conduct of the officers of a corporation may be 
 such as to require the appointment of a receiver to take from 
 them the control of the company's affairs. Thus the court will 
 appoint a receiver upon the application of general creditors of a 
 corporation, whose directors have unlawfully and fraudulently ex- 
 ecuted a mortgage of its property to secure its stockholders, the 
 company being insolvent, and it being necessary to preserve its 
 property pending the litigation. 2 
 
 A receiver will be appointed upon allegations of gross acts of 
 fraud on the part of the officers of a railroad company by whom 
 its property is likely to be squandered and embezzled. The court 
 in such ease will act upon the application of bondholders, oi cred- 
 itors, or of stockholders. The officers of the Memphis, El Paso, 
 and Pacific Kailr<»ad Company, a corporation of Texas, vrere en- 
 
 » South Carolina K;iilro:i<l in re, before 2 Avery v. Bleea Manufacturing (.'->. ^ 
 Judge Bond "f the Fourth Circuit, 11 Chi- N. J.'Eq. 412. 
 cago Lc^.d tfowa, 8. 
 
 117
 
 § 466.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 joined, and a receiver of its property appointed, upon a bill filed 
 by a stockholder, a bondholder, and the trustees for bondholders, 
 under the mortgages of the company, on behalf of themselves and 
 all other stockholders, creditors, and bondholders of the company. 1 
 An abuse of the corporate franchise, aside from the insolvency of 
 the corporation, may be ground for such interference. 2 
 
 466. The application of the income of a road to completing 
 and operating it is not a misapplication of the funds of the 
 road which calls for the appointment of a receiver, especially 
 when so made with the consent and by the advice of a large num- 
 ber of the bondholders. In a case before the Circuit Court of the 
 United States for the District of Indiana, 3 Mr. Justice McLean re- 
 fused to appoint a receiver in such a case, having regard not only 
 to the interests of the bondholders but also to the general credit- 
 ors of the company, who were deemed to be entitled to some in- 
 dulgence in the payment of the deferred interest, because the 
 completion of the road for which the floating debt was incurred 
 had added much to the value of the mortgage security, and had 
 increased the profits of the road; and especially as the work was 
 done on the recommendation of the mortgage trustee who sought 
 the appointment of a receiver. " No change of agency could in- 
 crease, I am convinced, the efficacy of that already employed on 
 the road. A sale of the property would, in all probability, sacri- 
 fice the stock of the road, amounting to between two and three 
 millions of dollars, and more than half if not two thirds of the 
 property of the bondholders. It might enable some one or more 
 persons to purchase the road at an almost nominal consideration. 
 These consequences, I admit, are not to stand in the way of an 
 equitable right, enforced under circumstances of fairness and jus- 
 tice. But if such results may be avoided by a short postponement 
 of the interest, and under a prospect of a speedy payment, I hold 
 myself authorized to do so, under the facts above stated. But I 
 will afford to the bondholders every reasonable assurance that can 
 be required. I will admit an order to be entered that the motion 
 of the complainant for the appointment of a receiver be denied, 
 
 1 Forbes v. Memphis, El Paso & Pacific 3 Williamson v. New Albany, &c, R. 
 R. R. Co. 2 Woods, 323. R. Co. 1 Biss. 198. 
 
 2 City of Rochester v. Bronson, 41 How. 
 (N. Y.) Pr. 78. 
 
 448
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 467. 
 
 and that the said company, from and after the first day of Janu- 
 ary next, set aside one half of the net earnings of the road for 
 the payment of the interest of the bonded debt of said company, 
 the other half to be applied to the payment of the floating debt 
 of the company. A report of the gross and net earnings to be 
 made to the court monthly." This order was not to be under- 
 stood as preventing a renewal of the motion for a receiver upon 
 any new statement of facts. 
 
 467. Refusal of trustees to perform the trust. — It has al- 
 ready been noticed that the usual ground of application for the 
 appointment of a receiver of a railway, in behalf of bondholders, 
 is that the mortgagor is insolvent and the property inadequate se- 
 curity for the mortgage debt. But there are other grounds upon 
 which the courts will exercise this power, aside from any appre- 
 hended loss to the persons secured. The refusal of the trustees 
 under the mortgage deed to perform the trust, or their misconduct 
 in the performance of it, is sufficient ground for the interference 
 of the court, upon the application of the bondholders, or of any 
 considerable part of them. Thus, upon a default in the payment 
 of interest, if the trustees, without good reason, refuse to take 
 possession of the property and sell it in accordance with the 
 provisions of the mortgage deed, the court will require them to 
 execute the trust, or will appoint a receiver. 1 
 
 Where the mortgage trustees, for more than five months after 
 notice to them by a majority of the bondholders, and request by 
 them to proceed to execute the trust by taking possession and sell- 
 ing the property, neglected to take any steps towards the execu- 
 tion of the trust, although the deed of trust made it their duty 
 to do so, the bondholders have a clear right to apply to the court 
 to compel the trustees to act, or to appoint some one who will. 
 This right is independent of any probable deficiency of the trust 
 property to pay the debts secured by the deed of trust. The 
 application for a receiver in such a case is simply a demand by 
 the beneficiaries of tin; deed that the trust be executed according 
 to it.s terms. 2 
 
 1 Wilmer v. Atlanta & Richmond Air - Per Judge Woods, in Wilmer v. At- 
 
 Line By. Co. '± Woods, 409; Jenkins v. lanta & Richmond Air Lino By. Co.su- 
 
 Jenkina, l Paige N. V. Ch, 243. pro. 
 
 2'J 449
 
 §§ 468, 469.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 468. A receiver may in some cases be appointed merely 
 for the purpose of securing the profits accruing from the use of 
 the property, without any ultimate purpose of obtaining assets by 
 a sale of the property, as for instance when the security provided 
 for does not give the creditor any right to sell the property itself, 
 but merely a right to take it into possession and use it until the 
 claim is satisfied from the net profits. In such case the creditor 
 may be unable, without the assistance of the court, to obtain and 
 hold possession of the property, especially when this is a long line 
 of railroad with its appurtenances ; and the creditor himself gen- 
 erally seeks the aid of a receivership, and the court as generally 
 grants such aid. But even when the creditor does not seek this 
 aid, but merely to be put in possession of the income of a railroad 
 which is the stipulated security, the court may, in behalf of the 
 debtor, decline to put the creditor into the personal management 
 of a road, for fear that such possession once gained by the creditor 
 may be continued, through his mismanagement of the property 
 or otherwise, longer than would be necessary if the property were 
 managed by a disinterested and efficient officer of the court, who 
 would be amenable to the court for a proper administration of the 
 road, a proper accounting for the proceeds, and a proper applica- 
 tion of them to the payment of the debt secured. In such cases 
 a receivership is often indispensable to the enforcement of the lien, 
 and to the protection at the same time of the rights and interests 
 of all parties interested in the property. 
 
 469. Appointment of receiver of insolvent corporation to 
 sell its property. — In New Jersey it is provided by statute that 
 when the propei'ty of an insolvent corporation in the hands of a 
 receiver is incumbered with mortgages or other liens, the legality 
 of which is brought in question, and the property is of a charac- 
 ter materially to deteriorate pending the litigation, the Court of 
 Chancery may order the receiver to sell it clear of incumbrances 
 at public or private sale for the best price that can be obtained, 
 bringing the money into court, there to remain subject to the same 
 liens and equities of all parties in interest as was the property 
 before it was sold, and to be disposed of as the court may by its 
 decree direct. 1 Under this statute it is held that a sale may be 
 ordered, although the litigation be not distinctly and solely as to 
 
 i 1 E. S. 1877, p. 192, § 84 ; Nix. Dig. Supplement, 409 ; Act of March 13, 1866. 
 450
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 469. 
 
 the legality or validity of the incumbrances. It is sufficient that 
 there is a dispute as to the extent to which a mortgage is an in- 
 cumbrance. 1 As to the mode of sale, the receiver, under this 
 statute, should be vested with large discretional powers. 2 
 
 The object of the legislature in these acts is declared to be the 
 prevention of loss by the depreciation in value of the property 
 pending protracted litigation. The mischief and the remedy are 
 plainly apparent upon the face of the act. It was not intended 
 to confine the remedy to mischief arising from litigation of any 
 particular character, but to all litigation between incumbrancers 
 respecting the validity, extent, or priority of their liens. The act 
 must be so construed as to suppress the mischief and advance the 
 remedy. 3 
 
 It has been urged that the franchises of a corporation are not 
 within the words of this act; that they are not property, and 
 therefore that they cannot be sold by virtue of the act. Techni- 
 cally speaking, franchises are property, but they are property of a 
 peculiar character, arising only from legislative grant, and are not, 
 in ordinary cases, subject to execution or to sale and transfer, even 
 in payment of the debts of the corporation, without the assent or 
 authority of the legislature. But construing the original and sup- 
 plementary acts together, it is apparent that the chancellor has 
 discretionary power to order a sale of the franchises, as well as of 
 the property of insolvent corporations, and that he may order a 
 sale of both clear of incumbrances. 4 
 
 As between trustees for first mortgage bondholders of an insol- 
 vent railroad company who are seeking to foreclose an overdue 
 mortgage upon property of far less value than the amount of the 
 debt, and a receiver who applies under this act for an order of 
 sale of the property and franchises free from the lien of the in- 
 cumbrances, the trustees are entitled to the possession of the prop- 
 erty, and to apply the income, if any, to the reduction of their 
 debt, and a court of equity will not interfere with such right, 
 unhss the equities of other parties are likely to be prejudiced. 
 The validity and extent of the mortgage can be best determined 
 in the foreclosure suit, and the property can be sold to better ad- 
 
 1 Middlcton v. West N. J. Line R. R. 3 Randolph v. Lamed, 27 N. J. Eq. 557. 
 Co. 26 N. J. Bq. 269, 270. « Randolph v. Lamed, supra. 
 
 2 Potts v. N. J. Arms & Ordnance Co. 
 17 N. J. Bq. 305. 
 
 451
 
 § 470.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 vantage after these questions are disposed of. In such a case no 
 one but the mortgagees are interested, and if they wish to delay 
 the sale pending the litigation, there is no reason why their prayer 
 should not be granted. 1 
 
 470. Appointment of receiver to operate road. — It is also 
 provided by statute in New Jersey 2 that if any railroad company 
 fails to run daily trains on any part of its road for the space of ten 
 days, then the chancellor, upon petition of any citizens of the 
 state, and due proof of the facts, shall speedily appoint a receiver, 
 who by order of the chancellor is empowered and required to take 
 possession of all the real and personal property of such company, 
 and to operate the road and transact its ordinary business in the 
 transportation of freight and passengers for such time as the chan- 
 cellor may direct ; and all expenses incurred thereby are made a 
 first lien on all the earnings thereof prior to any other claim, and 
 the surplus, if any, is distributed as the chancellor may direct. 
 
 This act is the creature of public considerations altogether. 
 When a receiver has been appointed under it in behalf of the 
 public, the possession of the road, when given up, should be re- 
 turned to the company from which it was taken. The right of 
 possession as between two companies, each claiming such right, 
 cannot be determined upon the petition of either. A claim of 
 paramount right of possession by a company other than that from 
 whose possession the road was taken by force of a proceeding of 
 this kind is a matter to be settled between the opposing parties in 
 due course of law upon the surrender of the road to the company 
 from which it was taken. 3 
 
 When a receiver has been appointed under this act, his proceed- 
 ings will not be stayed to allow an inquiry into the causes of the 
 company's failure to operate the road, and proof that such failure 
 was not attributable to the fault of the company, but to the act of 
 lawless persons, by whom the rolling stock was by force taken out 
 of their possession and withheld from them with a view to compel- 
 ling the payment of wages due from another company. By the 
 terms of the statute it is obligatory upon the court to take posses- 
 sion of a road and operate it, in order to relieve the public from the 
 
 1 Randolph v. Larned, supra. 8 Long Branch & Sea Shore R. R. Co. 
 
 2 Laws 1874, ch. 27, § 1 ; 2 R. S. 1877, v. Sneden, 26 N. J. Eq. 539. 
 p. 943. See, also, 1 R. S. 1877, p. 196, § 106. 
 
 452
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§ 471. 
 
 effect and consequences of the apparent dereliction of duty on the 
 part of the owners. Whenever the exigency shall have ceased, 
 the court will restore the road to the owners. But until the rail- 
 road company satisfies the court of its willingness and ability to 
 operate the road, the receiver will be continued in possession. 
 The public necessity is paramount. 1 
 
 471. "When property is in the hands of trustees who hold 
 their office ex officio as high public officers of the state, and 
 especially where one part of the trust involves duties of a public 
 character, the court will be very reluctant to take the fund out of 
 their hands, and place it in the hands of a receiver, and will not 
 do so except for the most cogent reasons, such as gross fraud and 
 imminent danger of the trust fund. 2 The legislature of Florida 
 vested certain public lands, including all swamp and overflowed 
 lands belonging to the state, in the governor, comptroller, treas- 
 urer, attorney general, and register, as trustees, to constitute an 
 internal improvement fund, and to serve, amongst other things, as 
 a guaranty of bonds to be issued by certain designated railroad 
 companies, of which the Florida Railroad Company was one, for 
 the procurement of iron rails and rolling stock. A certificate of 
 guaranty was to be placed on the bonds. In case the interest on 
 these bonds, and one per cent, per annum for a sinking fund, were 
 not paid by any of the companies, the trustees were authorized to 
 take possession of and sell the road, appurtenances, and franchises 
 of the company in default, and to apply the proceeds in purchas- 
 ing up the bonds, or incorporating them with the sinking fund. 
 The powers given to the trustees were large and various. They 
 were authorized to fix the prices of the lands, to make arrange- 
 ments for draining them, and to promote their settlement and 
 cultivation by allowing preemptions and other modes of encour- 
 agement. The Florida Railroad Company having issued a large 
 number of bonds, which were duly indorsed by the trustees, failed 
 to pay any instalments of interest or of the sinking fund, the 
 trustees seized and sold the road, and with the proceeds of the 
 sale purchased and cancelled a large proportion of the outstanding 
 guaranteed bonds of the company. A holder of bonds of the com- 
 pany not so purchased filed a bill in the Circuit' Court of the 
 
 i Long Branch & Sea Shore It. R. Co. 2 Vose v. Reed, I Woods, G47. 
 in re, 24 N.J. lvj. 398. 
 
 •1.-,:;
 
 § 472.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 United States for the Northern District of Florida, for relief 
 against the trustees, whom he charged with mismanaging the 
 funds, and against other parties and corporations, whom he 
 charged with complicity in such mismanagement by obtaining 
 fraudulent purchasers of the lands at nominal prices. He also 
 prayed for an injunction and the appointment of a receiver of the 
 trust fund. An injunction was granted, awaiting a hearing of 
 the case upon its merits. Upon the question of appointing a re- 
 ceiver, Mr. Justice Bradley, delivering the opinion of the court, 
 after speaking of the objects of the trust as being the develop- 
 ment of the resources of the state, the reclamation of the lands, as 
 well as promoting railroad improvements, said : 1 "Now these pub- 
 lic and political objects of the trust make it extremely fitting that 
 the chief executive officers of the state should administer the fund. 
 And it must be a very strong case, indeed, which will induce the 
 court to take the property out of their hands and put it into the 
 hands of its own officers. The legislature has seen fit to intrust 
 the chief officers of the state with these important duties, and it 
 would show a great disrespect to this coordinate branch of the 
 government for the judiciary, on light grounds, to displace these 
 officers from the trust, and to put appointees of its own in their 
 stead." The court will in such case resort to every other coer- 
 cive means of compelling the trustees to perform their duty before 
 resorting to the extreme measure of a receivership. 
 
 472. Whether the Supreme Court of the United States 
 would in any case appoint a receiver pending an appeal in that 
 court is an undecided point ; but upon a motion for a receiver of 
 the Pacific Railroad in Missouri, the court declined to make the 
 appointment upon the showing made in that case. 2 Appeals in 
 equity are heard upon the pleadings and proofs below. No new 
 evidence can be admitted, and the pleadings cannot be amended. 
 A decree of foreclosure and sale had been entered in the Circuit 
 Court by consent of the company. The solicitor of the company 
 bought the property at the sale, paying the purchase principally 
 in bonds of the company, secured by the foreclosed mortgage. 
 The owners of the bonds thus paid over organized themselves 
 into a new company, and the property was assigned to them. 
 
 1 Vose v. Reed, supra. 95 U. S. 1 ; Pacific Railroad v. Missouri 
 
 2 Pacific R. R. of Missouri v. Ketchum, Pacific R. R. Co. 15 Am. Railw. R. 80. 
 
 454
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§§ 473, 474. 
 
 The receiver who had been appointed in the Circuit Court pend- 
 ing the proceedings was discharged, and was directed to turn over 
 all the property in his hands to the new corporation. Soon after 
 this the new company made a new mortgage for a greater sum 
 than that which had been cancelled by foreclosure, and delivered 
 the bonds principally to the parties who had been holders of the 
 bonds surrendered in payment of the purchase money. The stock- 
 holders of the old company, at a meeting soon after this, repudi- 
 ated the action of their directors in allowing a foreclosure decree 
 to be taken ; and an appeal was accordingly taken from the de- 
 cree of foreclosure. The Supreme Court refused to grant the 
 relief asked, because the pleadings did not disclose the defence 
 sought to be made. Although the sale was in form to the com- 
 pany's solicitor, it was in reality to the bondholders for whom the 
 foreclosure was had ; and it appeared affirmatively that the orig- 
 inal decree was by consent, and no irregularity in the sale was 
 complained of in the court below. 
 
 473. The appointment of a receiver in such case may, per- 
 haps, be more appropriately made by the Circuit Court from 
 which the litigation was taken to the Supreme Court. It might 
 be inconvenient, if not impracticable, for the Supreme Court to 
 pass such interlocutory orders as would be necessary to protect 
 the property in litigation. The Circuit Court could, however, act 
 with a full knowledge of the facts, and of the practice in such 
 cases. That court, moreover, has the ultimate disposition of the 
 property under the direction of the Supreme Court. Such a 
 course was pursued by the Circuit Court sitting in Georgia in a 
 suit by Henry Clews against The Cherokee Railroad Company. 
 While the case was pending before the Supreme Court of the 
 United States, occasion arose for the appointment of a receiver 
 t<> prevent the waste and destruction of the property. The ap- 
 pointment was made by the Circuit Court. The Supreme Court 
 of Georgia, upon a question whether a receiver appointed in a 
 court of that state should be sustained as against the receiver ap- 
 pointed by the Circuit Court, was of opinion that the latter court 
 had properly made the appointment. 1 
 
 474. The general rule to be deduced from the many cases 
 1 May v. Printap, Supreme Court of Georgia, August T. 1877, 5 Reporter, 392. 
 
 455
 
 § 475.] THE ANOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 showing what facts and circumstances justify the appointment of 
 a receiver in behalf of a mortgagee is, that the appointment will 
 be made when the security is inadequate, or there has been waste 
 or misapplication of the property by the mortgagor or other party 
 in possession ; and also when there is danger of such abuse on the 
 mortgagor's part, and of consequent loss to the mortgagee. 1 In- 
 adequacy of security is always an essential ingredient of a case 
 that calls for such interference, unless it be shown that there is 
 imminent danger of the sacrifice or loss of an adequate security. 
 There is a well defined distinction as to the right to have a 
 receiver appointed between a mortgage which pledges the tolls 
 and income of the property, and one which does not. When 
 there is such a pledge of the rents and profits, upon a default and 
 petition of the great body of the bondholders or of trustees rep- 
 resenting them, a receiver is appointed very much as of course. 2 
 It has been suggested that, in such case, instead of the court's as- 
 suming the management of the road, it may sometimes be expe- 
 dient to require the earnings of the road to be paid over to a 
 receiver, to be held and distributed by him, — the interference of 
 others with the management of the road being prevented mean- 
 while by injunction. 3 
 
 475. As a general rule, a receiver appointed in a prior 
 suit should not be displaced by the appointment in a sub- 
 sequent suit of a receiver of the same subject matter by the 
 same court. The receiver does not represent the plaintiff in the 
 suit, but the court. Unless there be special occasion for displac- 
 ing the receiver first appointed, the proper course of practice is 
 to extend the receivership in the first suit over the second, sub- 
 ject to the legal and equitable claims of all parties, and the rights 
 of the parties in each suit are substantially the same as if differ- 
 ent persons had been appointed at the several times, when such 
 receivership was granted. If, however, a different receiver be ap- 
 pointed in the second suit, the receiver in the first suit is dis- 
 placed and must deliver the property to the receiver appointed in 
 the second. 4 
 
 1 Keep v. Mich. Lake Shore E. R. Co. 8 Per Manning, J., in Meyer v. John- 
 6 Chicago Legal News, 101. ston, 53 Ala. 237, 350. 
 
 2 Des Moines Gas Co. v. West, 44 Iowa, * Florida v. Jacksonville, Pensacola & 
 23, 25. Mobile R. R. Co. 15 Fla. 201, 276. 
 
 456
 
 GROUNDS FOR THE APPOINTMENT OF RECEIVERS. [§§ 476-478. 
 
 476. As a general rule a receiver should not be appointed 
 without notice to the mortgagor or other party in possession and 
 an opportunity to be heard. It would be a case of great urgency, 
 and where delay would involve a serious injury to the property in 
 controversy, that would justify an exception to this rule. During 
 the interval between the application for the appointment of a re- 
 ceiver and the hearing after notice, sufficient protection of the 
 plaintiff's rights can usually be afforded by an injunction or other 
 restraining order. 1 
 
 Upon an application for a receiver, the mortgagee is not re- 
 quired to establish conclusively his right to recover, but merely to 
 show a probable right, especially when he is entitled by the terms 
 of the mortgage to the income, rents, and profits of the mortgaged 
 property. 2 
 
 477. When an individual bondholder or a judgment cred- 
 itor seeks the appointment of a receiver he must sue on behalf 
 of himself and all other persons who have interests of the same 
 kind or class as his own. In such a proceeding, he acts as trustee 
 for all others who are entitled to be paid pari passu with him. 3 
 It is not necessary that the other parties in interest should concur 
 in the application. 4 
 
 478. If the mortgaged premises are in the possession of a 
 tenant or lessee, it is necessary to make him a party to the suit 
 before a receiver of tin; property can be appointed. If he be not 
 made a party, there is no objection to the appointment of a re- 
 ceiver of the rents and profits to whom the tenant could be re- 
 quired to attorn ; but such receiver would have no power to mo- 
 lest the possession of the tenant. 
 
 5 
 
 1 Florida v. Jacksonville, Pcnsacola & 2 Des Moines Gas Co. v. West, 44 
 
 Mobile R. R. Co. 15 Fla. 201 ; and see Iowa, 23. 
 
 Cincinnati, Sandusky & Cleveland R. R. 8 Bowen v. Brecon Ry. Co. L. R. 3 Eq. 
 
 Co. v. Sloan, 31 Ohio St. 1 ; S. C. 15 Am. 541 ; Potts v. Warwick & Birmingham 
 
 Railw. R. 37G; High on Receivers, §§ 111, Canal Co. Kay, 142 ; Fripp v. Chard Ry. 
 
 112. In Louisianathe appointment of are- Co. 11 Hare, 241; Gravenstine's Appeal, 
 
 ceiver of a corporation on an ex parte ap- 19 Pa. St. 310. 
 
 plication without alleging its insolvency ' Fripp v. Chard Ry. Co. supra. 
 
 is held to be absolutely null. Turgeaao. & Keep v. Michigan Lab- Shore R. R. 
 
 Brady,24 La. Ann. 348. Co. 6 Chicago Legal News, 101 ; Sea Ins. 
 
 Co. v. Stebbins, 8 Paige (N. V.), 565. 
 
 i;.t
 
 §§ 479, 480.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 479. The fact that a corporation is insolvent will not au- 
 thorize the corporation itself to apply to a court of equity for a 
 receiver to wind up its affairs. A creditor in a proper case may 
 come into court with such application, but the insolvent debtor 
 cannot. 1 A corporation cannot apply in its corporate capacity 
 and name to be put into the custody of a receiver. 2 
 
 II. Selection of Receivers. 
 
 480. In the appointment the court is not necessarily con- 
 trolled by the expressed wish of the parties, although the mort- 
 gagee and mortgagor both concur in asking for the appointment 
 of the same person. If such person be one under whose charge 
 the resources of the road have been exhausted and the necessity 
 for a receiver brought about, the court will probably refuse to 
 make the appointment. The receiver is not the servant of the 
 bondholders, but of the court, which must regard the interests of 
 other creditors of the insolvent corporation. 3 The court should, 
 at any rate, be satisfied of the fidelity and ability of the person to 
 whom the property is intrusted during the pendency of the suit ; 
 and although it is often proper and desirable that officers of the 
 corporation to whom no fault is imputed should be continued in 
 the management of it as receivers, 4 when there has been mis- 
 management, the control of the road should not be given to those 
 whose administration of its affairs had ended in bankruptcy. 5 It 
 has been declared, moreover, that an officer of a corporation under 
 whose management it has become insolvent is not a proper per- 
 son to be appointed a receiver. A person who cannot, with the 
 aid of others, manage a business successfully, is as a general rule 
 regarded as unfit to wind it up alone. 6 
 
 Where a receiver has been put in possession of a road, under an 
 agreement between the parties in interest in a foreclosure suit 
 that the complainants, upon giving security in the sum of $350,- 
 000, should have possession of the road and should name the re- 
 ceiver, the other parties are placed in a somewhat different atti- 
 tude towards that officer from what they would be in if he were 
 
 1 Hugh v. McRae, Chase's Dec. 466. 5 Williamson v. New Albany, &c. R. R. 
 
 2 Kimball v. Goodburn, 32 Mich. 10. Co. 1 Biss. 198. 
 
 8 Richards v. Chesapeake & Ohio R. R. e McCullough v. Merchants' Loan & 
 
 Co. 1 Hughes, 28. Trust Co. 29 N. J. Eq. 217; Freeholders 
 
 4 Meyer v. Johnston, 53 Ala. 237. of Middlesex County v. State Bank of 
 
 New Brunswick, 28 N. J. Eq. 166. 
 458
 
 SELECTION OF RECEIVERS. [§ 481. 
 
 appointed by the coui't in the ordinary way ; for it does not lie 
 with them to object to the person of the receiver, though he be 
 a complainant in the suit, unless he commits some overt act of 
 unfaithfulness to his trust, which can be specified and proved. 
 They cannot go into his previous transactions in the suit, in 
 order to show that he had heretofore done acts which exposed 
 him to personal animadversion. 1 
 
 481. It is not unusual for parties representing different in- 
 terests to agree upon the appointment of two or more re- 
 ceivers, each of whom is expected to represent and look after the 
 interests of one of the parties ; and the courts have usually ap- 
 pointed the receivers so agreed upon. So long as harmony pre- 
 vails between receivers so appointed, there may be no difficulty 
 experienced in operating the road under such management, ex- 
 cepting the additional expense of two or more receivers where 
 only one is required. But it must be observed that this practice 
 is of doubtful utility. Dissensions are apt to arise between the 
 representatives of discordant or hostile interests, and then the 
 practicable management of the road by them becomes impossible. 
 In a case where this had been the result of appointing such re- 
 ceivers, 2 Mr. Justice Miller, in removing them to make way for 
 one receiver who should represent the court and be strictly neutral 
 in both feeling and conduct, said, " I have only one word to add : 
 In every view a receiver is strictly and solely the officer of the 
 court, if, by reason of the inability or neglect of the officers of the 
 corporation to conduct its business as it ought to be done, the 
 conduct of that business is taken charge of by the court, and car- 
 ried on by its agent. It is the duty of that agent to so conduct 
 this business as that the lawful rights and legal interest of all 
 persons shall be protected as far as possible with equal and exact 
 justice. 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 obligations to those who have; such a person, acting un- 
 der the control of the court, seeking it, s advice, as he would be in- 
 clined to do, on all questions of doubtful duty, and bound in suffi- 
 cient surety for the faithful performance of his duty, is, in my 
 opinion, the proper one for such an office." 
 
 1 Cowdrej v. Railroad Co. I Woods, 881. Circuit Court DiBt. of Kansas, r_> Chicago 
 
 2 Meier '•. Kansac Pacific By. Co. U. S. Legal News, 41, for Oct. *J(i, 1878. 
 
 I.V.I
 
 §§ 482, 483.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 Generally it may be said that the existence of two receivers 
 representing opposing interests is unnecessary and embarrassing, 
 even if they are on amicable terms, and have but a single place of 
 business. But their different interests are almost certain to ren- 
 der them antagonistic, and in that event a successful operation of 
 the road is rendered impossible. As remarked by Mr. Justice 
 Miller in the case under consideration, while it may be true that a 
 large personal interest may stimulate the activity and direct the 
 vigilance ; whenever occasion offers that vigilance will be directed 
 mostly to advancing personal interests, and that activity to secur- 
 ing personal advantages. 
 
 482. The appointment of a receiver once made cannot be 
 assailed in a collateral proceeding where it appears that the 
 court has jurisdiction of both the subject matter and of the neces- 
 sary parties. However erroneous the order of appointment may 
 have been it cannot be treated as void, but at the most only as 
 voidable in a direct proceeding for that purpose. 1 The same ob- 
 servations apply equally to an order granting an injunction against 
 the prosecution of a suit or judgment against a receiver. 2 
 
 Where the fact of the appointment of a receiver is put in issue 
 by the pleadings, a copy duly authenticated of the order appoint- 
 ing him is admissible evidence of the appointment. 3 
 
 III. Jurisdiction of Receivers. 
 
 483. Whether a receiver's authority is limited to the juris- 
 diction of the court appointing him. — The authority of a re- 
 ceiver cannot ordinarily extend beyond the limits of the territory 
 within which the court making the appointment has jurisdiction, 
 whether this be a state, county, or other local district. If the 
 court making the appointment has jurisdiction throughout a state, 
 the receiver has authority to take possession of property embraced 
 in the receivership anywhere in the state, but he has no authority 
 beyond that state, except so far as he is allowed to act in other 
 states through the comity of other governments. A receiver ap- 
 pointed by a court having jurisdiction of a limited judicial district 
 within a state has no authority to take possession of property in 
 another judicial district. 4 The inability of a receiver to exercise 
 
 1 Richards v. People, 81 111. 551. 8 Allen v. Cent. R. R. Co. 42 Iowa, 683. 
 
 2 Richards v. People, supra. i Florida v. Jacksonville, Pensacola & 
 
 460 Mobile R. R. Co. 15 Fla. 201.
 
 JURISDICTION OF RECEIVERS. [§ 484. 
 
 any extra-territorial power has been asserted by some courts with 
 great positiveness ; 1 and sometimes courts seem to have unquali- 
 fiedly refused to recognize a foreign receiver, and allow him to 
 maintain actions, on any ground whatever. 2 On the other hand, 
 the fullest authority has been accorded to foreign receivers to 
 bring suits with reference to the property they were appointed to 
 take charge of. 3 When the title of the receiver is not merely one 
 derived from his appointment as such by a foreign court, but he 
 has himself acquired a title personal to himself by reducing the 
 property to possession, 4 or by an assignment of the property from 
 the debtor, 5 his right to pursue the property in a foreign jurisdic- 
 tion may be regarded as certain. He has in such case a right of 
 action in his individual capacity. 
 
 The generally recognized doctrine, however, is that a receiver 
 appointed in one state has no power to institute proceedings in 
 the courts of another state, except by comity and inter-state and 
 inter-national courtesy ; but upon this principle a receiver is 
 generally allowed to sue in foreign courts unless the claim he is 
 seeking to enforce comes in conflict with creditors in that state, 
 claiming under attachment or other lien. 6 As against a foreign 
 corporation and a receiver appointed in another state, courts some- 
 times protect creditors in their own states by sustaining attach- 
 ments of property actually within the state where suit is brought ; 
 and if in such case a receiver be subsequently appointed in that 
 state, he takes the property subject to any lien that may have been 
 acquired by the attaching creditor. 7 
 
 484. It is a rule of law in all cases of conflict of jurisdic- 
 tion that the court which first takes cognizance of the contro- 
 versy is entitled to retain jurisdiction to the end of the litigation, 
 
 1 Booth v. Clark, 17 How. 322. bian Ins. Co. 14 Allen (Mass.), 353 ; Hunt 
 
 2 Farmers' & Merchants' Insurance Co. v. Columbian Ins. Co. 55 Me. 290,298; 
 v. Needles, 52 Mo. 17. Cagill v. AVoolbridge (Tenn.), 4 C. L. 
 
 8 Paradise v. Farmers' & Mercbants' J. 6. 
 Bank of Memphis, 5 La. Ann. 710; Mc- 7 Dunlop v. Patcrson Fire Ins. Co. 12 
 
 Alpin v. Jones, 10 La. Ann. 552. Hun (N. Y.), G27 ; Taylor v. Columbian 
 
 * Cagill v. Woolbridge (Tenn.), 4 Cent. Ins. Co. 14 Allen (Ma«.), 353. Sec Os- 
 
 L. J. 6. good v. Maguirc, 61 N. Y. 524, respecting 
 
 ■' I rraydon '■. Church, 7 Mich. 30, 51. the situs of property in the form of promis- 
 
 Qoyt o. Thompson, ~> N. Y. 320; gory notes in the hands of a receiver. The 
 
 WHlitta '•. Waite, 2."> \. V. 577; Graydon case is in conflict with the Massachusetts 
 
 v. Church, 7 Mich. 86 j Taylor v. Colum- case on this point. 
 
 401
 
 § 485.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 and incidentally to take possession of the subject matter of the 
 dispute through a receiver, to the exclusion of all interference from 
 other courts of coordinate jurisdiction. As remarked by Judge 
 Blodgett, in a case before the Circuit Court of the United States 
 for Northern Illinois, 1 " The proper application of this rule does 
 not require that the court which first takes jurisdiction of the case 
 shall also first take, by its officers, possession of the thing in con- 
 troversy, if tangible and susceptible of seizure, for such a rule 
 would only lead to unseemly haste on the part of officers to get 
 the manual possession of the property ; and while the court first 
 appealed to was investigating the rights of the respective parties, 
 another court, acting with more haste, might, by a seizure of the 
 property, make the first suit wholly unavailing. To avoid such a 
 result, the broad rule is laid down that the court first invoked will 
 not be interfered with by another court while the jurisdiction is 
 retained." Thus, if after the filing of a bill against a railroad 
 company in the Circuit Court of the United States in which the 
 appointment of a receiver is asked for, and before such appoint- 
 ment is made a suit be commenced in a state court for the ap- 
 pointment of a receiver of the same property, the state court, 
 although it may take possession of the property through its re- 
 ceiver, cannot supersede the jurisdiction of the Circuit Court ; but 
 the latter court will proceed in due course to appoint a receiver, 
 if occasion for such action be shown, and will assert its jurisdic- 
 tion. The adding of a new party and raising a new question as 
 to him is not enough to give jurisdiction to another court. 2 
 
 485. Where the conflict of jurisdiction does not relate to 
 the cause, but to the possession of the subject matter, prior- 
 ity of possession may be the test of the right to retain possession. 3 
 The question whether an actual seizure of the property is neces- 
 sary to the jurisdiction of the court in a case where the possession 
 
 i Union Trust Co. v. Rockford, Rock 3 Mallett v. Dexter, 1 Curtis, 178; Wis- 
 Island & St. Louis R. R. Co. 6 Biss. 197 ; wall v. Sampson, 14 How. 52 ; Chittenden 
 Alabama & Chattanooga R. R. Co. v. v. Brewster, 2 Wall. 191 ; Buck v. Col- 
 Jones, U. S. C. C. 7 N. B. Reg. 145 ; Bill bath, 3 Wall. 334 ; Memphis City v. Dean, 
 v. New Albany, &c. Ry. Co. 2 Biss. 390; 8 Wall. 64; Watson v. Jones, 13 Wall. 
 Keep v. Mich. Lake Shore R. R. Co. 6 Chi- 679 ; Bill v. New Albany, &c. Ry. Co. 2 
 cago L. N. 101 ; Sedgwick v. Mench, 6 Biss. 390; Parsons v. Lyman, 5 Blatchf. 
 Blatchf. 156. 170. 
 
 2 Memphis City v. Dean, 8 Wall. 64. 
 462
 
 JURISDICTION OF RECEIVERS. [§ 485. 
 
 of the property is necessary to the relief sought, or whether the 
 commencement of the action and service of process, or the com- 
 mencement of the action by the filing of the bill, is sufficient to give 
 the court jurisdiction, to the exclusion of all other courts, was dis- 
 cussed in the case of Wilmer v. Atlanta and Richmond Air Line 
 Railway Company, 1 in the Circuit Court of the United States for 
 the Northern District of Georgia. The bill in that case was filed 
 the thirtieth day of October, 1874, for a foreclosure of a mortgage, 
 and a copy and notice of motion for injunction and receiver were 
 served on the railroad company the next day. On the ninth of No- 
 vember following the company was enjoined from yielding posses- 
 sion of the property to any one except a receiver appointed by the 
 court in this case. A creditor of the company having recovered 
 judgment levied his execution upon the road, and sold it in different 
 parcels, and the purchaser was put in possession by the sheriff on 
 the same ninth day of November. On the next day the company, 
 by its managing director, filed a bill in the Superior Court of 
 Fulton County, in the State of Georgia, to prevent the judgment 
 creditor and the purchaser from taking possession of the road. On 
 November twentieth, the purchaser filed a cross-bill in the same 
 court, asking for the appointment of a receiver ; and a receiver 
 was the next day appointed, who, on the twenty-sixth of the same 
 month, took possession. The Circuit Court, on the nineteenth of 
 December following, appointed a receiver of the entire property 
 covered by the mortgage, but the receiver was unable to get pos- 
 session of that part of the trust property lying in Georgia, and on 
 the twenty-fourth of May, 1875, he applied to the court for a writ 
 of assistance to enable him to get possession of the property in 
 Georgia. Judge Woods, in appointing the receiver of the Circuit 
 Court, was of opinion that the filing of the bill in that court and 
 the service of process excluded the jurisdiction of all other courts 
 to take possession of and administer the property or any part of 
 it. But Mr. Justice Bradley, before whom the application for the 
 writ of assistance was heard, differed from Judge Woods as to the 
 jurisdiction and powers of the court, saying : " It is too well set- 
 tled to admit of controversy that where two courts have concur- 
 rent jurisdiction of a subject of controversy, the court which first 
 assumes jurisdiction lias it exclusive of the other. But where the 
 objects of the suits are different this rule does not apply, although 
 
 1 2 Woods, 409. 
 
 4G3
 
 § 485.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 the thing about or in reference to which the litigation is had is the 
 same in both cases. Thus, an action of debt on a bond, an action 
 of ejectment on the mortgage given to secure it, and a bill in 
 equity to foreclose the equity of redemption, may be pending at 
 the same time, unless prohibited by some statutory regulation. 
 The land mortgaged may be seized in execution by the sheriff in 
 an action at law, even while the ejectment or the bill to foreclose 
 is pending. A bill to foreclose is a personal proceeding, although 
 it has reference to a specific thing. Its object is to put an end to 
 an existing equity, and to procure a sale of the mortgaged prem- 
 ises. Possession may be taken in the course of the proceeding, 
 but until it is taken, can it be said that the property is sacred 
 from the touch of other persons or courts ? . . . . The contro- 
 versy not being the same, nor the parties the same, there is no 
 conflict of jurisdiction as to the question or cause. But, inasmuch 
 as both controversies have ultimate respect to the possession of the 
 railroad of the Atlanta and Richmond Air Line Railway Company, 
 there has arisen a conflict of jurisdiction as to the thing or subject 
 matter. It is important to know, therefore, whether this court 
 had jurisdiction over the subject matter, namely, the railroad, 
 when taken possession of by the receiver of the Fulton County 
 Court, so as to make that taking an invasion of the jurisdiction 
 and powers of this court. If it had, it will enforce that jurisdic- 
 tion, and assume the actual possession to which it gives the right. 
 If it had not, then it will not interfere with the actual possession 
 of the receiver of that court, though the rights represented by the 
 litigants in this court be superior to those of both litigants in the 
 state court, as those rights can be asserted when the possession of 
 the state court has ceased. The reason that it will not interfere 
 in such case is, that interference might create a collision between 
 the two courts, which would be unseemly, and contrary to the 
 comity which should exist between them. The two courts are 
 coordinate in jurisdiction, neither being superior to the other, and 
 both being charged in the respective cases before them with the 
 due administration of the laws of the State of Georgia. 
 
 " The test, I think, is this : Not which action was first com- 
 menced, nor which cause of action has priority or superiority, but 
 which court first acquired jurisdiction 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 
 464
 
 JURISDICTION OF RECEIVERS. [§ 486. 
 
 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 jurisdiction 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 cannot alter the case. It is a 
 question between the two courts ; and we must respect the posses- 
 sion and jurisdiction of the sister court. We cannot take the 
 property out of its hands, unless 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 assistance and for an attachment 
 must be denied." * 
 
 486. Doctrine that the mere filing of the bill gives juris- 
 diction of the thing in controversy. — The Supreme Court of 
 Georgia, recognizing a difference of opinion upon the question 
 whether the mere filing of a bill, in a case where the only recov- 
 ery can be out of the property, gives such jurisdiction of the res 
 as to prevent another court from appointing a receiver, expressed 
 the opinion that it does. 2 The decision of the case, however, 
 was made in view of facts showing a case of collusion in the ap- 
 pointment of a receiver in a court of the state. In a suit against 
 the Cherokee Railroad Company, begun in the Circuit Court in 
 1872, a receiver was appointed, but afterwards, by consent, this 
 appointment was revoked ; but the case otherwise remained the 
 same, and after a decree in favor of the plaintiff, the case was car- 
 ried to the Supreme Court of the United States. While it was 
 there pending, in September, 1876, certain parties, some of whom 
 were parties defendant in the former suit, filed a bill in a court of 
 the state, praying, among other things, for the appointment of a 
 receiver. On ( )ctober second the chancellor passed an order for a 
 hearing on the twenty-third day of the same month, and for per- 
 fecting service ten days before that time. Afterwards, by con- 
 sent, the hearing was set for the tenth day of the month, when 
 
 1 Qucere a- to correctness of this opinion, ion of Mr. Justice Bradley, '-' Woods, 409, 
 a May r. Prin tup, August T. 1877,5 Ho- suited in the preceding section, to the con- 
 porter, 392. The court refer to the opin- trary, and dissent from it on this point. 
 
 ao 465
 
 § 487.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 a receiver was appointed. Meanwhile, pending the former case 
 in the Supreme Court, the appointment of a receiver was applied 
 for in the Circuit Court, and a hearing was had and a receiver 
 was appointed on the twentieth of October. This receiver found 
 the receiver appointed by the state court in possession ; where- 
 upon, under the direction of the Circuit Court, he applied to the 
 state court for the possession of the property. The chancellor 
 granted an [order to that effect, which was affirmed by the Su- 
 preme Court of the state, upon the ground that the chancellor 
 made the appointment inadvertently, and without knowledge of 
 the facts of the proceedings in the federal court, and under cir- 
 cumstances indicating a collusion of parties in obtaining the ap- 
 pointment. 
 
 487. "When a receiver has once obtained actual possession 
 of the property committed to his charge, he cannot be inter- 
 fered with by a receiver subsequently appointed in another court. 1 
 When a question is pending in one court of competent jurisdic- 
 tion, it cannot be raised and agitated in another court ; much less 
 can a court assume to take possession of and administer property 
 which is in possession of another court, and in course of adminis- 
 tration by it. 2 Upon the institution of proceedings in bankruptcy 
 in a United States court against an insolvent railroad company, 
 already in the hands of a receiver appointed under proceedings in 
 a state court, his possession will not be interfered with, except 
 for some cause for which his title might be impeached under the 
 Bankrupt Act. 3 A court of the United States will not entertain a 
 bill for an account against the receiver of a corporation appointed 
 by a state court, but will leave the petitioner to pursue his remedy 
 in the court from which the receiver derived his appointment. 4 
 Neither will the court appoint a receiver of property which is in 
 the possession of a person not a party to the suit. Such person 
 may be made a party, and the objection is then removed. 5 
 
 i O'Mahoney v. Belmont, 37 N. Y. Su- 4 Conklin v. Butler, 4 Biss. 22. 
 perior Ct. 380 ; Wilmer v. Atlanta & Rich- 5 Searles v. Jacksonville, Pensacola & 
 mond Air Line Ry. Co. 2 Woods, 409." Mobile R. R. Co. 2 Woods, 621 ; Florida 
 
 2 Young v. Montgomery & Eufaula R. v . Jacksonville, Pensacola & Mobile R. R. 
 R. Co. 2 Woods, 606. Co. 15 Fla. 201, 280. 
 
 8 Alden v. Boston, Hartford & Erie R. 
 R. Co. 5 N. B. R. 230. 
 466
 
 JURISDICTION OF RECEIVERS. [§ 488. 
 
 48S. When, however, a line of railway extending through 
 several states belongs to the same corporate body which the 
 several states, by concurrent legislation, have united in creating, 
 a court having jurisdiction of the corporation has jurisdiction of 
 its property, both within the state and beyond its limits, and may 
 appoint a receiver of the whole. The Atlanta and Richmond 
 Air Line Railway Company, extending from Atlanta., in Georgia, 
 through South Carolina, to Charlotte, in North Carolina, having 
 mortgaged its entire road and property, and made default in the 
 payment of interest, executions were issued against the company, 
 and a receiver was appointed in each of the three states, although 
 the same person was appointed in the States of North and South 
 Carolina. There were, therefore, three distinct and independent 
 courts claiming possession of different portions of the road and 
 other property of the company, and it was in the actual possession 
 of two different receivers, living in different states and account- 
 able to different tribunals. In this position of the affairs of the 
 company the bondholders secured by the mortgage applied to the 
 Circuit Court of the United States for the Northern District of 
 Georgia to appoint a receiver for the entire line of the road. 1 
 The bill averred that this railroad property was one inseparable 
 and indivisible piece of property ; that it was a portion of a great 
 through route, and derived its chief value and business from that 
 fact. " It is obvious," said the Circuit Court judge, Mr. Woods, 
 in appointing the receiver, " that it would be a most unfortunate 
 case that such a property should be held by two different receivers, 
 accountable to three different courts. In fact, when we consider 
 that a large part of the property of the company consists of rolling 
 stock, which must necessarily pass from one end of the road to the. 
 other, and which must be used on the three divisions into which 
 the road is divided by its administration in three different courts, 
 if appears to be well-nigh impossible to administer the affairs of 
 the road and render accurate and satisfactory accounts. It is evi- 
 dent that such a divided control must result in crippling the oper- 
 ations of the road, destroying its business and reducing its receipts, 
 and placing in jeopardy the security of its creditors. This unfor- 
 tunate condition of affairs, resulting from the action of three inde- 
 pendent courts, would of itself be, as it appears to us, sufficient 
 ground for the appointment of a receiver for the entire property 
 
 1 Wilrner v. Atlanta & Richmond Air Line lly. Co. 2 Woods, 409. 
 
 407
 
 § 489.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 by this court, if the power and jurisdiction of this court to do so 
 is clear." 
 
 The property of the company in such case is one entire and in- 
 divisible thing. If the receiver is compelled to ask the assistance 
 of courts of other jurisdictions to aid him in obtaining possession 
 of the property, those courts would feel constrained, as a matter 
 of comity, to afford all necessary aid to put him in possession. 1 If 
 the suits are commenced in courts of coordinate jurisdiction, and 
 receivers are appointed by both, it would seem that the court 
 which first seizes the property acquires jurisdiction over it, to the 
 exclusion of the other, without reference to the time when the 
 suits were commenced. 2 
 
 489. Two or more states may, by concurrent legislation, 
 unite in creating the same corporate body, so that instead of 
 two or more separate bodies in the different states, there is one 
 consolidated body having the same rights and functions in the 
 one state that it has in the other. 3 A court having jurisdiction 
 over a corporate body of this kind, such for instance as a consoli- 
 dated line of railroad, may exercise jurisdiction over its real and 
 personal property outside of the limits of the state to which the 
 jurisdiction of the court is ordinarily limited, by the appointment 
 of a receiver to take possession of the entire property, both within 
 and without the state. The court having jurisdiction of the cor- 
 poration may, through that, reach its property situated outside 
 the territorial jurisdiction of the court. If necessary, it might 
 require assignments to be made by the company to the receiver. 4 
 If other persons outside the territorial jurisdiction of the court 
 have seized the property of the company, so that the court cannot 
 reach it by controlling the company, the receiver may be com- 
 pelled to ask the assistance of the courts of that jurisdiction to 
 aid him in obtaining possession ; but the courts of other jurisdic- 
 tions would feel constrained, as a matter of comity, to afford all 
 necessary aid in their power to put such receiver in possession. 5 
 
 1 Wilmer v. Atlanta & Richmond Air Line Ily. Co. supra; and see Ellis v] 
 Line Ry. Co. 2 Woods, 409 ; and see Ellis Boston, Hartford & Erie R. R. Co. 107 
 v. Boston, Hartford & Erie R. R. Co. 107 Mass. 1. 
 
 Mass. 1. * Northern Indiana R. R. Co. v. Michi- 
 
 2 Wilmer v. Atlanta & Richmond Air gan Cent. R. R. Co. 15 How. 233, 243. 
 Line Ry. Co. supra. 5 "Wilmer v. Atlanta & Richmond Air 
 
 3 Wilmer v. Atlanta & Richmond Air Line Ry. Co. 2 Woods, 409. 
 
 468
 
 JURISDICTION OF RECEIVERS. [§§ 490, 491. 
 
 490. A receiver appointed by a court having jurisdiction 
 of the cause cannot be interfered with by a court of coordi- 
 nate jurisdiction under proceedings subsequently commenced. 1 
 When a, junior mortgagee has first brought a suit to foreclose his 
 mortgage, and the court has taken possession of the mortgaged 
 property by a receiver, a senior mortgagee cannot gain possession 
 of the property while that suit is pending by a suit subsequently 
 begun in another court. He can only interfere with such posses- 
 sion by being admitted as a party to the first suit. The senior 
 mortgagee may commence a suit to foreclose his mortgage in an- 
 other court having jurisdiction, but no matter what he may be 
 able to show as to the incompetency, unfitness, or dishonesty of 
 the receiver appointed in the prior suit by the junior mortgagee 
 in another court, he can neither obtain the removal of that re- 
 ceiver or the appointment of another except by going into that 
 court and presenting his complaints there. 
 
 491. By the comity existing between the courts of the 
 different states, although a receiver has no extra-territorial ju- 
 risdiction, his appointment and title are recognized in other states 
 when his claims do not come in conflict with those of citizens of 
 the state in which adverse proceedings arise. Thus, a receiver 
 having been appointed in Virginia in a foreclosure suit against the 
 Atlantic, Mississippi, and Ohio Railroad Company, a citizen of 
 that state soon afterwards attached by trustee process, in a court 
 of the State of Pennsylvania, certain funds and credits of that 
 company in the hands of the Pennsylvania Railroad Company. 
 The receiver claimed the funds, and his right to them was sus- 
 tained ; the court declaring that a creditor had no right, after the 
 appointment of a receiver by a court within his own state, bind- 
 ing upon him there, to attempt to avoid its effect by escaping 
 from its jurisdiction, and going into another state and asking the 
 courts there to infringe the comity due to the acts of the courts 
 of his own state. Instead of comity this would be unfriendli- 
 ness, for it would be asking the courts of a foreign state to aid 
 in the violation of the law of the plaintiff's own state. 2 
 
 A citizen of the State of .Massachusetts, appointed a receiver 
 
 1 Young v. Montgomery & Eufaula R. R. Co.in 8npreme Court of Pa. Feb. 1878; 
 B.Co. 'i Woods, 606. - r ) Weekly Notes, 2G3 ; 5 Reporter, 661. 
 
 2 B;i^sl)y v. Atlantic, Misu. & Ohio R. 
 
 469
 
 § 492.] THE APPOINTMENT AND JURISDICTION OF RECEIVERS. 
 
 of an Ohio corporation by the United States Circuit Court in the 
 latter state, may maintain an action in that court for the recovery 
 of assets of such corporation wrongfully withheld. 1 A receiver 
 may generally sue in the courts of another state. His power to 
 do so, however, arises from comity merely, unless there be a spec- 
 ial statute authorizing such a suit ; and is generally kept subordi- 
 nate to the rights of local creditors, as respects property within 
 the jurisdiction where such a suit is brought. 2 
 
 492. When property has once vested in a receiver he can 
 take it into another state, and the law of such other state will 
 not divest him of his right to it. If it be attached in such other 
 state as the property of the corporation of whose property the 
 receiver has been put in charge, the courts will inquire whether 
 he has such right to the property when it comes into the state as 
 between himself and the citizens of the state ; but when the fact 
 that he has such right is ascertained, they will not regard it as 
 important by what mode the right was acquired. It makes no 
 difference whether the property vested in the receiver under the 
 local law of another state or under the common law. Neither is 
 it a matter of any importance whether the title to the property in 
 such case passes to the receiver or remains technically with the 
 corporation, so long as the property is taken from the corporation 
 and placed in the hands of the receiver under the direction of the 
 court. 3 If such property be already in the state when the receiver 
 is appointed, and it be attached at the suit of a citizen before the 
 receiver has taken possession of it, then the appointment of the 
 receiver in a foreign state might not vest the property in him as 
 against such creditor. 4 
 
 In a proper case the courts will protect citizens of their own 
 state against the claims of a receiver appointed by an extra-terri- 
 torial court, because they are not bound by such appointment, 
 and their assistance will not be given at the expense of injustice 
 to citizens of their own state, to enforce an extra-territorial act 
 resting only in comity. 
 
 1 Farlow v. Lea, 6 C. L. J. 195. 4 Taylor v. Columbian Ins. Co. 14 Al- 
 
 2 Chandler?;. Siddle, 3 Dill. 477. len (Mass.), 353 ; Upton v. Hubbard, 28 
 8 Pond v. Cooke, Supreme Court of Conn. 274 ; Willitts v. Waite, 25 N. Y. 
 
 Conn. 6 Reporter, 516. 577. 
 
 470
 
 CHAPTER XVI. 
 
 THE RIGHTS AND LIABILITIES OP A RECEIVER. 
 
 I. The title and power of a receiver in gen- 
 eral, 493-498. 
 
 II. A receiver cannot be sued without leave 
 of the court appointing him, 499-508. 
 
 III. A receiver's liability to suit for the 
 neuligence of his employees, 509-515. 
 
 IV. The company itself is not liable after 
 
 the receiver has assumed control,'516- 
 520. 
 
 V. Discharge and removal of receiver, 521- 
 526. 
 
 VI. Compensation and account of receiver, 
 527-530. 
 
 I. The Title and Power of a Receiver in General. 
 
 493. The title of a receiver to property placed in his charge 
 relates back to the date of the order of his appointment. — 
 The order of the court, either impliedly or expressly, takes the 
 title from the defendant, and it is thenceforth under the control 
 of the court ; and whether he be immediately appointed and qual- 
 ified to act or not, the title of the court and of its agent and offi- 
 cer dates from that moment. 1 The title to real estate vests in 
 the receiver by conveyance from the debtor, which the court may 
 comj^el him to make ; 2 but he is entitled to the rents and profits 
 from the date of the order appointing him, which in effect removes 
 the defendant or other person from the possession unless he holds 
 under a title paramount to that under which the appointment was 
 made. 3 
 
 The right to the custody of the property of which a receiver is 
 appointed vests immediately in him upon the filing of his bond ; 
 and he may, if necessary, by order of court, bring a suit for it in 
 his own name. But the right of possession extends only to the 
 
 i Steele v. Sturgis, 5 Abb. (N. Y.) Pr. 
 ■\vi\ Butter v. Fallis, 5 Sandf. (N. Y.) 
 610; Fairfield p. Weston, 2 Sim. & St. 
 96; Maynard '•• Bond, Supreme Court of 
 Mo. o Beporter, 530. Ami sec Metz '■• 
 Buffalo, C<>rry & Pittgburg B. K. ('o. 58 
 N. Y. 01 ; Allen v. Central B. B. Co. 42 
 
 Iowa, 683. Contra, see Farmers' Bank v. 
 Beaston, 7G. & J. (Md.) 421. 
 
 2 Chautauqua Bank v. Bieley, 19 N. Y. 
 369; Scott v. Elmore, 10 Hun (N. Y.), 68. 
 
 8 Ames v. Birkenhead Ducks, 20 Beav. 
 850; Evelyn v. Lewis, 3 Hare, 172 ; Lloyd 
 v. Mason, 2 M. & C. 487. 
 
 471
 
 § 494.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 property which is the subject matter of the mortgage. It does 
 not extend to money in the hands of the mortgagor at the time 
 the appointment is made, for although it be earnings of the road 
 the mortgage does not attach to it. 1 
 
 If, however, the order appointing a receiver be conditional on 
 his giving security, it would seem that he is not constituted re- 
 ceiver till he gives security ; and that till he gives such security 
 or takes actual possession, it is not contempt of court to take 
 chattels comprised in the security in execution. 2 If the receiver 
 really takes possession before the goods are seized, then, although 
 his appointment as receiver had not been completed, still, as pos- 
 session is taken on behalf of the mortgagee, it would seem that it 
 would be effectual against any interference by execution. 3 
 
 494. A receiver takes the property subject to any legal or 
 equitable liens upon it at the time of his appointment. 4 Thus 
 money deposited by a railroad company with bankers for the pay- 
 ment of a dividend is regarded as specially appropriated for that 
 purpose, and as giving the stockholders an equitable lien upon it 
 to the extent they are respectively entitled to share in it ; and a 
 receiver appointed before the whole amount deposited has been 
 paid out takes such funds subject to this equity. The Erie Rail- 
 way Company having so deposited the amount of a dividend pay- 
 able October first, 1873, a little more than a year afterwards with- 
 drew a balance of about $5,000, which had not been paid out, and 
 this sum passed into the hands of a receiver appointed soon after- 
 wards. A stockholder who had been absent and had neglected to 
 draw his dividend applied to the court by petition for an order 
 directing the receiver to pay him the amount of his dividend, and 
 such an order was made and was confirmed by the Supreme 
 Court of New York at general term. 5 
 
 The appointment of a receiver does not enlarge or restrict the 
 powers conferred upon the corporation by its charter. The re- 
 ceiver takes the property subject to the same limitations that 
 
 1 Noyes v. Rich, 52 Me. 115; Rider v. 3 Edwards v. Edwards, supra, per Mel- 
 Vrooman, 12 Hun (N. Y.), 299. lish, L. J. 
 
 2 Edwards v. Edwards, L. R. 2 Ch. D. * Bell v. Shibley, 33 Barb. (K Y.) 610. 
 291, overruling V. C. Malins, that the ap- As to rights of set-off see Berry v. Brett, 
 pointment takes effect from the date of 6 Bosw. (N. Y.) 627. 
 
 the order; S. C. L. R. 1 Ch. D. 454. 5 Le Blanc in re, 4 Abb. New Cas. (N. 
 
 Y.) 221. 
 
 472
 
 TITLE AND POWER IN GENERAL. [§ 495. 
 
 affected it in the hands of the company. An injunction granted 
 by a court of competent jurisdiction restraining a railroad com- 
 pany from obstructing certain streets is binding upon a receiver 
 subsequently appointed by a court of the United States, in the 
 same manner that it is binding upon an agent of the company or 
 upon a subsequent purchaser. 1 
 
 495. Suits by receivers. — A receiver represents the creditors 
 of the corporation whose property and effects he is placed in 
 charge of by a court of equity, so that in a suit brought by the 
 receiver to protect the property of the company, the creditors are 
 neither proper nor necessary parties. 2 While in bringing an 
 action he should allege his appointment by a court of competent 
 jurisdiction and his capacity to prosecute the action in his official 
 capacity, 3 the regularity or propriety of his appointment cannot 
 be called in question in such suit, but only in a direct proceed- 
 ing for that purpose. 4 
 
 In general, a receiver cannot sue without express authority 
 from the court. 5 Even if the order of appointment in general 
 terms confers the power to sue, it is usual and proper for a re- 
 ceiver before instituting a suit to obtain leave of court to do so. 6 
 
 A receiver of a corporation has all the rights of action and the 
 same legal remedies against third persons that the corporation 
 itself had. 7 Suit should be in the name of the corporation, in 
 whom the right of action was before his appointment. 8 If the de- 
 fendant or other person in possession of the property refuses to 
 deliver it to the receiver, before attempting to take possession he 
 should obtain an express order of court directing him to do so. 
 If a third person holds the property under a claim of right, the 
 receiver may obtain leave to bring an action to try such right, or 
 the plaintiff in the suit in which the receiver is appointed may 
 make such third person a party to the suit, and apply to have the 
 receivership extended over the property in dispute. 9 
 
 i Safford v. People, 85 111. 558. 6 Screven v. Clark, 48 Ga. 41. 
 
 - Gray v. Davis, 1 Woods, 420. Sec « High on Receivers, § 208 j Hayes v. 
 
 McNab 17. JSoonan, 28 Wis. 43 i. Brotzman, 6 Reporter, 493. 
 
 » Curtis p. McHhenny, 5 Jones (N. C), ' High on Receivers, § 816. 
 
 Eq, 290. 8 Booth v. Clark, 17 How.831 ; feager 
 
 i Vermont & Canada R. R. Co. v. Ver- v. Wallace, 44 Pa. St. 294; Manlove v. 
 
 montOent. R. R. Co. 46 Vt.792; Palmer Burger, 88 End. 211. 
 
 v. Clark, 4 Abb. N. C. (N. V.) 25 j Case ■ Parker v. Browning, 8 Paige (N. v.), 
 
 v. Marchand. 23 La. Ann. 60. 388. 
 
 -173
 
 § 496.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 496. The relation of the receiver to leases of the property. 
 Whether a receiver can refuse to operate a ^road leased to the 
 corporation whose property has been put under his control is a 
 question important for him to consider when the leased road can 
 be operated only at loss. If the mortgages under which he has 
 been put in possession of the road are older than the lease, the 
 mortgagees would not be bound by it unless they have assented 
 to it, and it would seem that a receiver in such case might disre- 
 gard the lease. But where on an application by motion to com- 
 pel a receiver to comply with the terms of a lease to the corpora- 
 tion in his charge, he set up his appointment and denied that he 
 was then operating the road or had operated it under the lease, 
 the court will not on such motion try and settle a disputed ques- 
 tion of law and fact. The rights of the parties should be settled 
 in an action. The mortgage bondholders, whose moneys it is 
 sought to divert to the payment of the rent of the leased l-oad, or 
 their trustees, should be made parties to such a suit. 1 
 
 A lease invalid in the beginning may be afterwards ratified by 
 the corporation by the payment of rent or otherwise. If, how- 
 ever, it was one which the company had no power to make, it 
 cannot then be ratified. 2 
 
 A receiver of the Southern Minnesota Railroad Company ap- 
 pointed in a foreclosure suit was authorized to enter into a con- 
 tract with a bridge company for the payment of fixed tolls for the 
 use of the bridge for a series of years, binding the company, its 
 assigns or successors, or the purchasers at the foreclosure sale 
 under the deed of trust. 3 
 
 Without authority conferred by statute or order of court a re- 
 ceiver has no power to make leases other than parol. 
 
 A receiver of a railroad under the appointment of the governor 
 of a state has no power to lease the road so as to vest the lessee 
 with an interest in the road and its franchises which could not be 
 divested by a subsequent act of the legislature. 4 
 
 Such is the authority of a Court of Equity over corporations 
 in the charge of receivers, that as between two railroad companies 
 
 1 People v. Erie Ry. Co. 54 How. (N. 3 La Crosse Railroad Bridge in re, 
 Y.) Pr. 59. 2 Dill. 465. 
 
 2 Ogdensburgh & Lake Champlain R. * McMinnville & Manchester R. R. v. 
 R. Co. v. Vermont & Canada R. R. Co. 4 Huggins, 59 Tenn. 177. 
 
 Hun (N. Y.), 268. 
 
 474
 
 TITLE AND POWER IN GENERAL. [§ 497. 
 
 in the hands of receivers, upon the application of either receiver, 
 a contract between the companies for the use of part of one road 
 by the other company, and for the use of terminal facilities, may 
 be modified so as to equitably readjust the rates agreed upon be- 
 tween them. If the application shows that at the time when the 
 contract was made rents, tolls, equipments, and all kinds of labor 
 and material were much more expensive than at present, and that 
 the rate established by the contract is excessive and unjust, the 
 court is not bound to recognize the obligation of the contract, but 
 may modify it if it can be done with due regard to the interest 
 of the other trust. " It will not require the receiver of one rail- 
 road company to furnish facilities to the receiver of another in 
 the operation of the road in charge of the latter, to the detriment 
 of the trust in the hands of the former ; but, if there be neces- 
 sity for so doing, it will not hesitate to modify the terms on 
 which the facilities are furnished, wholly ignoring, if need be, the 
 bargain made between the two insolvent companies, always tak- 
 ing care, however, that the company furnishing the facilities re- 
 ceives due compensation therefor." 1 
 
 497. Whether a receiver may disregard a statute fixing 
 traffic rates. — While the constitutionality of a state statute reg- 
 ulating freight and passenger tariffs was pending before the Su- 
 preme Court of the United States, Judge Dillon, in the Circuit 
 Court, declined to order the receiver to disregard the law, or to 
 conform to it in all things. 2 While there is always a presump- 
 tion in favor of the validity of an act of the legislature, and 
 that the receiver would be justified in following the state stat- 
 ute in all instances where the rates fixed by it are reasonable 
 and fairly compensatory to the company, yet, the judge said that 
 the receiver might exercise a fair and impartial judgment in the 
 matter, and if he should be of opinion that the rates fixed by 
 the statute are unjust and unreasonable, he was at liberty to act 
 for the time being under the direction and advice of the mort- 
 gage trustees, who are the persons having the most at stake in 
 the matter. No harm would come from this course, as the funds 
 would be in the control of the court; and if it should turn out 
 
 ' New Jersey & N. Y. I!. Co. in re, 29 wanna & Western K. 11. Co. V. Erie K\. 
 
 N. J Eq. 67. Bee, also, Delaware, Lacka- Co. 21 N. J. Eq. 298. 
 
 2 McElrath in re, 2 Dill. -jco. 
 475
 
 § 498.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 that they had been improperly received, they would be restored 
 to the parties who had overpaid. 
 
 498. What payments are within the discretion of a re- 
 ceiver. — It is a well recognized principle that a receiver should 
 not, without the previous direction of the court, incur any ex- 
 penses, on account of the property in his hands, beyond what is 
 absolutely essential to its preservation and use. 1 In all matters 
 involving a large outlay of money, the receiver should apply to 
 the court in advance, for authority to make the proposed expend- 
 iture ; but, except in extraordinary cases, the submission by the 
 receiver, at frequent intervals, of his accounts to the master, giv- 
 ing the latter an opportunity to disallow whatever he may not 
 approve, is regarded as a sufficient reference to the court for its 
 ratification of the receiver's proceedings. 2 All outlays of a re- 
 ceiver of a railroad made in good faith, in the ordinary course 
 of the management and operation of it, or so made with a view 
 to advance and promote the business of the road, and make it 
 profitable and successful, are fairly within the limit of discretion 
 necessarily allowed him. Thus, payments made by him as re- 
 batement of freight to shippers, in order to secure their custom 
 and increase the business of the road, being in the nature of draw- 
 backs, such as are usual with transportation companies, are prop- 
 erly within his discretion. 3 
 
 The earnings of a railway company in the hands of a receiver 
 are chargeable with valid claims for goods lost in transportation, 
 and for damage done to them, while the road is under the man- 
 agement of the receiver. Such losses are incident to the work- 
 ing of the road, and may be regarded as part of the ordinary 
 expenses of working it. The bondholders are entitled only to 
 what remains of the earnings of the road after charges of this 
 kind and other expenses of management are paid. 4 
 
 In accordance with this rule a receiver is not allowed to charge 
 in his account for expenditures made by him to defeat a pro- 
 posed subsidy from a city to aid in the construction of a parallel 
 line of railway, or to defeat any contemplated aid for such an en- 
 
 1 Cowdrey v. Galveston, Houston & 331 ; Coe v. New Jersey, &c. R. R. Co. 27 
 Henderson R. R. Co. 93 U. S. 352 ; S. C. N. J. Eq. 37. 
 
 9 Am. Ry. Reg. 3G1. 3 Cowdrey v. Railroad Co. 1 Woods, 331. 
 
 2 Cowdrey v. Railroad Co. 1 Woods, * Cowdrey v. Galveston, Houston & 
 
 Henderson R. R. Co. 93 U. S. 352. 
 476
 
 CANNOT BE SUED WITHOUT LEAVE OF COURT. [§ 499 
 
 terprise. Although the proposed line of road might diminish the 
 future earnings of the road in his charge, he is not allowed to de- 
 termine for himself the question of the advisability of the ex- 
 penditure, or to appropriate funds in his charge to defeat the 
 measure. 1 
 
 II. A Receiver cannot be sited without leave of the Court appoint- 
 ing him. 
 
 499. In general. — A receiver appointed by a Court of Equity 
 to take charge of and manage property while litigation is pend- 
 ing touching such property is but the hand of the court to hold 
 possession of and manage the property under the direction of 
 the court, and is not supposed to act in the interest of one party 
 more than another. He holds and manages the property for the 
 benefit of the party to whom the court may adjudge it; and act- 
 ing in this fiduciary capacity only, he is not subject to suit by any 
 party who may have complaint against him, without leave first ob- 
 tained from the court appointing him. 2 While property is in the 
 possession of a court of the United States through its receiver, 
 all proceedings in a state court affecting it without authority of 
 the federal court are void. This statement applies not only to 
 ordinary suits, but to every kind of legal proceeding affecting 
 the property. Thus, while a railroad is in the possession of a re- 
 ceiver of a court of the United States, a telegraph company can 
 acquire no title to a right of way over the line of the railroad by 
 proceedings for condemnation in a state court. 3 
 
 Objection was made in the Supreme Court of the United 
 States that a junior mortgagee could not file a bill of foreclosure 
 without leave, while the mortgaged premises were at the time in 
 the possession of a receiver appointed in a former suit in the same 
 court. In reply to this Mr. Justice Strong said : 4 "If there could, 
 under any circumstances, be any force in this objection, there is 
 none now. Both suits were brought in the same court ; these ap- 
 pellants appeared, answered, and cross-examined witnesses, ami 
 made no allegation that the suit had been brought without Leave 
 
 i Cowdrey v. Galveston, Houston & 3 Western Union Telegraph Co. v. At- 
 
 Henderson R. B. Co. 93 U. 8. 882 ; S. C. lantic & Pacific Telegraph ('•>. 7 Biss.367. 
 
 9 Am. By. Rep. 861. 4 .Jerome v. McCarter, 94 l 8. 784, 
 
 '- Hale v. Duncan, U. S. C. C. for Miss. 737. 
 6 Wash. L. B 285 ; 6 Reporter, 422. 
 
 477
 
 § 500.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 until about a year and a half afterwards. It was then too late. 
 They must be held to have acquiesced ; and, if not, leave of the 
 court to commence and prosecute the suit must be presumed after 
 the orders made to facilitate its progress." 
 
 500. In what courts a receiver may be sued. — The court 
 under which the receiver is acting may take cognizance of the 
 question of the receiver's liability for his official acts, or may per- 
 mit the party aggrieved to sue at law, unless the jurisdiction of 
 the court in the matter be assailed, in which case it must assume 
 exclusive jurisdiction. 1 As a general rule, receivers are amenable 
 solely to the court by which they are appointed ; but this rule 
 does not apply when citizens of another state seek remedy against 
 them in such other state, and the receiver's liability has already 
 been determined by the courts of the state in which he was ap- 
 pointed. 2 Ordinarily, however, a receiver cannot be sued for as- 
 sets in his hands without first obtaining leave of the appointing 
 court. 3 But the decree of court appointing a receiver entitles him 
 to protection in the possession of such property only as he is en- 
 titled to take possession of it. When he takes possession of prop- 
 erty to which he has no claim, he is not acting as the officer or 
 representative of the court, but as a mere trespasser. The right- 
 ful owner of a locomotive engine, which a railroad company in the 
 hands of a receiver never had any interest in, may take posses- 
 sion of it by a replevin suit, without first obtaining leave of the 
 court appointing the receiver, although the engine is, at the time, 
 used upon the road. 4 
 
 The court, whose officer a receiver is, may restrain persons 
 within its jurisdiction from prosecuting suits in foreign courts, 
 whereby the earnings of a railroad in the hands of the receiver are 
 locked up by attachment or trustee process. 5 The court in such 
 case acts upon the ground that the party upon whom the order is 
 made is within the jurisdiction of the court; that the receiver, as 
 the officer of the court, is entitled to protection while in the proper 
 discharge of his duty ; and that persons interfering with his col- 
 
 1 Klein v. Jewett, 26 N. J. Eq. 474 ; 5 Vermont & Canada R. R. Co. v. Ver- 
 Meara v. Holbrook, 20 Ohio St. 137. mont Central R. R. Co. 46 Vt. 792 ; Bar- 
 
 2 Paige v. Smith, 99 Mass. 395. ton v. Barbour, Sup. Ct. D. C. 1877, 6 
 
 3 De Graffenreid v. Brunswick & Al- Wash. L. R. No. 6. ; 6 Cent. Law Jour, 
 bany R. R. Co. 57 Ga. 22. 201. 
 
 4 Hills v. Parker, 111 Mass. 508. 
 
 478
 
 CANNOT BE SUED WITHOUT LEAVE OF COURT. [§ 501. 
 
 lecting the earnings of the road in his possession are guilty of 
 contempt of court. 
 
 The question whether a receiver is liable to action in a court 
 other than that from which he has received his appointment is 
 one upon which there is some conflict of authority. The English 
 doctrine is that a receiver is an officer of the court, his possession 
 the possession of the court, and that without leave of such court 
 no action can be maintained against him. Such, also, is the doc- 
 trine supported by the weight of authority in this country. 1 
 
 501. A court making the appointment of a receiver may- 
 draw to itself all controversies to which the receiver is a 
 party ; yet it does this by acting directly upon the parties, and 
 not by challenging the jurisdiction of other tribunals. 2 The mere 
 fact of the appointment constitutes no plea to the jurisdiction 
 of other courts ; their ordinary jurisdiction is in no way affected 
 by the appointment, in respect to matters in which the receiver 
 may be interested, or which affect the property placed in his 
 hands. 3 The court appointing the receiver is not thereby com- 
 pelled to assume jurisdiction of all controversies to which the 
 receiver may become a party, but may leave their determina- 
 tion to any court of appropriate jurisdiction. 4 It may assert its 
 right to take all such controversies to itself, by acting directly 
 upon the parties, and compelling them to proceed nowhere else 
 than in its forum. Its power is unlimited for purposes of pro- 
 tection to restrain by injunction all suits in other courts against 
 the receiver, or to punish as for a contempt any interference 
 with its officers by force or by action, but it may use its dis- 
 cretion in this respect. 5 Thus a suit was brought in a court of 
 the State of Kansas by a county treasurer against the St. Joseph 
 and Denver City Railr< tad Company to recover certain taxes, af- 
 ter a receiver of the company had been appointed by the Circuit 
 Court of the United States. The petition alleged the appoint- 
 
 i See article by Mr. High, 2 South. Law 4 Hills v. Parker, 111 Mass. 508; St. 
 
 Rev. 576, October, L 876, and cases cited; Joseph & Denver City R. R. Co. v. Smith, 
 
 Wiswall v. Sampson, l i How. 52, 65. supra, 
 
 » St. Joseph & Denver City It. R.Co.v. 6 St. Joseph & Denver Citj R. B. Co. 
 
 Smith, 19 Kami. 225; 6 Reporter, 831. v. Smith, supra, per Brewer, J.; Kinney 
 
 » Blumenthal v. Brainerd, 38 Vt. 402, v. Crocker, is Wis. 794; Chantauqna 
 
 407. County Bank v. Kislev, 19 N. V. 869- 
 
 479
 
 § 502.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 ment of the receiver and his possession and control of the road. 
 Without the issue or service of any process the company and 
 receiver filed a joint answer, in which they admitted that a por- 
 tion of the taxes were properly chargeable against the company, 
 and consented that judgment might be rendered against them in 
 the action for that amount. They also alleged the appointment 
 of the receiver by the United States Circuit Court, that he was 
 not amenable to the process of the state court, and prayed that 
 as to him the suit might be dismissed ; but it was held that the 
 state court had jurisdiction, and might properly render judgment 
 against the receiver. It is to be presumed in such case that if 
 the Circuit Court in its discretion deemed it best to draw to itself 
 this controversy, it would have done so. Moreover, it would seem 
 that the receiver, having voluntarily come into court, admitted 
 that a part of the claim was due, and consented that judgment 
 mio-ht be rendered against him, could not be allowed afterwards 
 to question the jurisdiction of the court. 1 
 
 502. The proper remedies against a receiver. — A receiver 
 in possession of property represents the court, and acts as its rep- 
 resentative in the interest of all persons concerned in the prop- 
 erty. There can be no interference with his possession except 
 with leave of court. Any person claiming the property, or any 
 interest in it, may present his claim to the court by petition, or 
 may be made a party to the pending suit, and litigate his claim 
 in that ; or he may, by leave of court, bring a suit at law for the 
 recovery of the property. The receiver will not be ordered to 
 deliver the property to a claimant until his right is established in 
 one of these modes ; and care will always be taken to protect the 
 receiver from personal liability or loss. In accordance with these 
 general principles, one who claims rolling stock in possession of a 
 receiver should try his title to it either by an equitable proceed- 
 ing by petition, or in the pending suit ; or, upon obtaining leave 
 of court, by a suit at law for possession. An action of trover is 
 not an appropriate remedy for trying the question of title, because 
 that is not a suit for the possession, but is an attempt to hold the 
 receiver personally liable for the value of the property. A de- 
 mand upon the receiver for possession and his refusal to deliver it 
 do not constitute a conversion on his part, and lay the foundation 
 
 1 St. Joseph & Denver City R. It. Co. v Smith, 19 Kans. 225. 
 480
 
 CANNOT BE SUED WITHOUT LEAVE OF COURT. [§§ 503, 504. 
 
 for such a suit. 1 Whether in any case an action of trespass or 
 trover can be maintained against a receiver, when he rightfully 
 takes possession of the property, is questionable. If the property 
 be real estate, so that the title can be tried in an action of trespass 
 without changing such title, or rendering the receiver liable for 
 the value, perhaps there would be no objection to its maintenance. 
 Or, if he has received the rents of real estate, or has sold personal 
 property, by order of the court, perhaps the amount in his hands 
 may be claimed in a suit at law. But a claim to cars, engines, or 
 like property in the possession of a receiver, cannot be enforced as 
 a claim for damages. 2 
 
 An original bill against a receiver by a party to the suit in 
 which the receiver was appointed is unnecessary, and a contempt 
 of court. The proper mode of proceeding is by petition in the 
 same cause, or by motion in that cause to obtain leave to prosecute 
 an independent suit either at law or in equity. 3 
 
 503. A statute authorizing suits against receivers does not 
 avail against this rule. — The settled rule, that a suit cannot be 
 commenced against a receiver without leave being first obtained 
 from the court appointing such receiver, is not changed, as regards 
 the courts of the United States, by a statute of a state 4 which pro- 
 vides that all receivers appointed by any court, and trustees and 
 assignees running or operating railroad trains in that state, carry- 
 ing either freight or passengers, may be sued in the several courts 
 of that state in all matters ex contractu and ex delicto arising 
 after their appointment, without leave of the court appointing or 
 controlling them being first had ; and that such suits may be 
 prosecuted to final judgment, and satisfaction may be had out of 
 any property held by them in their fiduciary capacity. No state 
 can pass any law regulating, or in any manner affecting, the juris- 
 diction and practice of the federal courts. 5 
 
 504. An execution cannot be levied upon property in the 
 hands of a receiver without permission of the court whoso ollicer 
 
 1 Morrill v. Noyes, 56 Me. 458. leave to sue a receiver in thecourts of that 
 
 a Per Davis, J.j in .Morrill ». Noyes, state without leave previously granted. 
 
 mpra. Laws 1872, p. 31, § L. 
 
 s Payne -•• Baxter, ^ Tenn. Ch. 517. ' Bale v. Di an, V. s. Circuit Ct. N. 
 
 4 Act of Jan. 6, 1877, of Mississippi. A Dist. of Miss. 7 Cent. L. J 146. 
 similar statute of tin- State of Ohio gives 
 
 81 481
 
 § 505.] THE EIGHTS AND LIABILITIES OF A RECEIVER. 
 
 the receiver is. That court may order the sheriff to withdraw 
 his lev}- and answer for contempt in making it. 1 If it could be 
 taken piecemeal from the custody of the receiver, the remedy of 
 the creditors under the mortgage would be of little value. The 
 remedy of one who claims that the property was not legally cov- 
 ered by the mortgage, or that, for any reason, it is not legally 
 held by the receiver, is to apply to the court which appointed the 
 receiver to ask its discharge out of custody, in order that he may 
 proceed against it. 2 
 
 The fund in the hands of a receiver cannot be disposed of by 
 the mortgagor to the prejudice of the mortgagee ; and the cred- 
 itors of the mortgagor, having no greater rights in this respect 
 than the mortgagor himself, cannot reach this fund by attach- 
 ment or trustee process. 3 The possession of the receiver is the 
 possession of the court itself. This rule is applicable not only to 
 property actually in the hands of the receiver, but to that of 
 which he has constructive possession. Any unwarranted inter- 
 ference with the property, either by taking forcible possession of 
 it, or by legal proceedings begun without the sanction of the court 
 appointing the receiver, is a direct and immediate contempt of 
 court, punishable by attachment. 4 The commencement and pros- 
 ecution of a suit against the receiver by garnishee process, to 
 reach a debt or funds belonging to the company, of which he is 
 made receiver, without the sanction of the court appointing him, is 
 such an interference. Such a proceeding is an attempt to de- 
 prive the receiver of credits to which he, and he only, is lawfully 
 entitled, and hence is a direct interference with the court in its 
 administration of the estate over which it has appointed its re- 
 ceiver. 
 
 505. Any wilful interference with a receiver in the posses- 
 sion of the property placed in his charge is a contempt of the 
 
 1 Coe v. Columbus, Piqua & Ind. R. R. gation Co., Kay, 142 ; Bowen v. Brecon 
 Co. 10 Ohio St. 372 ; Russell v. East An- Ry. Co. L. R. 3 Eq. 541. 
 
 glian R. Co. 6 Railway Cases, 501 ; 3 Mac. 3 Newport & Cincinnati Bridge Co. v. 
 
 & G. 151 ; Skinner v. Maxwell, 68 N. C. Douglass, 12 Bush (Ky.), 673, 709. 
 
 400. 4 Richards v. People, 81 111. 551. In 
 
 2 Robinson v. Atlantic & Great West- this case an attorney, who persisted in a 
 ern Ry. Co. 66 Pa. St. 160. See Potts garnishee process against funds which the 
 v. Warwick & Birmingham Canal Navi- receiver was entitled to collect, was pun- 
 ished by fine and imprisonment. 
 
 482
 
 CANNOT BE SUED WITHOUT LEAVE OF COURT. [§ 506. 
 
 authority of the court, and punishable as such ; 1 and it matters 
 not whether such interference be under the form of law, as for in- 
 stance when one seizes the property by the process of another 
 court, or whether possession be forcibly taken by a violent mob, 
 as was the case during the railroad riots in the summer of 1877. 
 Accordingly rioters and strikers, who at that time prevented re- 
 ceivers from running trains upon roads under their charge by for- 
 cibly seizing the property, were rightly punished by imprisonment 
 for acting in contempt of court. 2 Although the power to punish 
 for contempt is limited to the misbehavior of persons in its pres- 
 ence, or so near as to obstruct the administration of justice, yet 
 the disobedience of or resistance by any person to any lawful writ, 
 process, order, rule, decree, or command of the court, anywhere 
 within the jurisdiction of the court, is treated in as summary a 
 manner as if the contempt were committed in the actual presence 
 of the court. The accused are not entitled as of right to a trial 
 by jury, but the court will proceed in a summary manner to hear 
 the case and order punishment. But the court will not take this 
 summary action except in cases free from doubt, and where the 
 overt acts of contempt are clearly and distinctly proved. 3 
 
 506. There are not wanting instances in ■which courts, jeal- 
 ous of their power and jurisdiction, have denied the rule that 
 a receiver is the agent and officer of the court by which he is ap- 
 pointed, and amenable to no other tribunal, and have undertaken 
 to exercise authority over receivers appointed by another court 
 without its consent. Thus, an injunction having been granted by 
 a court of the State of Illinois against the Cairo and Vincennes 
 Railroad Company restraining its agents from using in a partic- 
 ular way a street of the city of Cairo, receivers of the road were 
 subsequently appointed by the Circuit Court of the United Stales, 
 who entered upon their duties, and apparently used the street in 
 disregard of the injunction. A proceeding for contempt was there- 
 upon instituted in the state court against the receivers without 
 reference to the court appointing them. Upon appeal to the Su- 
 preme Courl of tin- state the judgment of the court below, holding 
 tie- receivers amenable to that, court, was affirmed. The decision 
 
 1 Robinson v. Atlantic & Great West- 2 Secor v. Toledo, Peoria & Warsaw 
 era Ft, i:. Co. 66 Pa. St. 160; Fripp v. Ky. Co. 7 liiss. r.i.'i. 
 Bridgewater, &c. By. Co. 3 W. I; 356. • King v. Ohio & Miss. Ky. Co. 7 Biss. 
 
 . r )29. 
 
 188
 
 § 507.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 proceeds upon the ground that receivers are the agents of the cor- 
 porations whose property they are put in charge of. 1 " The in- 
 i unction was against the corporation as a legal entity, and its 
 agents, servants, &c. When the receivers were appointed by the 
 federal court there was no change in the corporate body. Its ex- 
 istence was intact, with its legal functions unimpaired, but simply 
 its acts were performed by agents appointed by the court, and not 
 by the corporation. And the agents appointed by the court to 
 perform its duties and exercise its functions are legally its agents, 
 although they are under the direction of the court appointing 
 them within the limits of its charter. The court only authorizes 
 the receivers to exercise the privileges and perform the duties pre- 
 scribed by the charter." 
 
 But granting that a court assuming the management of a cor- 
 poration is bound to respect the limitations imposed upon it by 
 its charter and by the law, the question remains what tribunal 
 shall control the agents of the court, and determine whether they 
 are acting within the limits of the charter and of the law ? Upon 
 sound legal principles it has been established that the court ap- 
 pointing the receivers is the only one that can exercise any author- 
 ity over them. If other courts, without the consent of the court 
 appointing the receivers, were allowed to exercise authority over 
 its agents, this court would in fact submit itself to the control of 
 every other court which might be invoked to sit in judgment upon 
 the acts of receivers. These officers would cease to be the agents 
 of the court that appointed them ; and whose agents they would 
 be it might be difficult to determine. The administration of 
 equity through this instrumentality would thus become impos- 
 sible. 
 
 507. The courts of Wisconsin and Iowa have also departed 
 from this doctrine, and held that in all cases where there is no 
 attempt to interfere with the actual possession of the receiver, a 
 suit may be prosecuted against him, in any court of competent 
 jurisdiction, without the permission of the court from which the 
 receiver derived his appointment. In the former state, 2 an action 
 in its courts against a receiver who was operating a railroad under 
 
 1 Safford v. People, 85 111. 558; 5 Cent, see St. Jo. & Denver City R. R. Co. v. 
 L. J. 384; 17 Albany Law J. 209. Smith, Sup. Ct. Kansas, July T. 1877, 6 
 
 2 Kinney v. Crocker, 18 Wis. 74; and Cent. L. J. 59; 19 Kans. 225. 
 
 484
 
 CANNOT BE SUED WITHOUT LEAVE OF COURT. [§ 508. 
 
 the appointment of the District Court of the United States, for 
 personal injuries occasioned through the negligence of his servants, 
 was maintained without previous leave obtained from the latter 
 court to prosecute the action. The Supreme Court of the state 
 declared that, although a plaintiff desiring to prosecute a legal 
 claim for damages against a receiver might, in order to relieve 
 himself from liability to have his proceedings arrested under the 
 authority of a court of equity to restrain suits at law under some 
 circumstances, very properly obtain leave to prosecute, yet his 
 failure to do so is no bar to the jurisdiction of the court at law. 
 The court object that, inasmuch as the federal courts have juris- 
 diction of proceedings against railroads, the result of a require- 
 ment that leave should be first obtained to prosecute a suit against- 
 a receiver would be to draw into those courts not only the juris- 
 diction of all actions respecting the title to property in the cus- 
 tody of a receiver, but all actions for the non-performance of con- 
 tracts by him, and the state courts would be absolutely divested 
 of jurisdiction unless the federal courts saw fit to grant it. 
 
 This case was cited, and its doctrine approved, in the recent 
 case of Allen v. Central Railroad Company in Iowa. 1 
 
 508. These cases were assailed with much vigor, and their 
 doctrine denied in a recent case before the Circuit Court of the 
 United States for the District of Iowa. There was an attachment 
 for contempt in commencing a suit in a court of the State of Iowa 
 against a receiver appointed by the United States Circuit Court. 
 Judge Love, after referring to these cases, said : 2 " In my judg- 
 ment, the doctrine of the Iowa decision contravenes the whole 
 scheme of equity jurisdiction in the matter of appointing receivers, 
 and in the taking of possession, through them, of the property in 
 litigation. The Court of Equity takes cognizance of a suit against 
 an insolvent company or corporation, and where danger exists 
 that the litigation may prove fruitless to creditors, by waste or a 
 fraudulent disposition of the property, the court will take it into 
 ii by the appointment of a receiver. The property thus 
 becomes a fund subject to the disposition of the court, and under 
 
 1 42 Iowa, 08.1. The COUrt in tliis ca^e arc very far from being authorities in mi]>. 
 
 also cite Paige '■. Smith, 99 Mass. 895, porl <>f it. 
 
 and Hills ,-. Parker, m Mass. 508, in - Thompson v. Bcott, 23 Int. Rev. Sec. 
 
 rapport of the position taken, bat they 876 ; i Dill. 508.
 
 § 508.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 its exclusive control. The principle that the court which has pos- 
 session and control of a fund has the exclusive right to determine 
 all claims and liens asserted against it is fundamental. Hence, 
 every court of equity, in such a case, assumes to decide all contro- 
 versies touching the subject matter of the suit and the fund ; to 
 determine the existence and priority of all liens ; to adjust and 
 settle all disputed claims ; marshal the assets, and, finally, to dis- 
 tribute the surplus among the general creditors pro rata, upon its 
 own principle of equality among creditors. The very ground and 
 reason of this jurisdiction is the inadequacy of mere legal reme- 
 dies. But, according to the Iowa decision, there is no reason why 
 any party claiming satisfaction out of the fund may not, without 
 the consent of the receiver's court, assert his rights in any compe- 
 tent court, provided he does not attempt to disturb the possession 
 of the receiver; and thus may the decision of the claims and con- 
 troversies involved in the litigation be withdrawn from the Court 
 of Equit} r , where they properly belong, and transferred to the 
 courts of law. And the result would be that claims against the 
 fund would be determined, not by the court having jurisdiction of 
 the case and control of the fund, but by other and different tribu- 
 nals The view thus presented applies with redoubled force 
 
 to railroad foreclosure suits in the United States Circuit Court. 
 The non-resident citizen comes here to set up and enforce the lien 
 of his mortgage, for the very reason that he thinks he would be 
 exposed to injustice in the state courts from local prejudice. But 
 no sooner does he get the railroad property in the hands of a re- 
 ceiver than that officer, if the doctrine of the Iowa court be sound, 
 is exposed to suits in the state courts upon claims and demands of 
 all kinds, and thus the substantial end for which the non-resident 
 complainant comes here is practically defeated. The receiver him- 
 self has no beneficial interest in the controversies waged against 
 him in the local courts, and the litigation is practically between 
 the non-resident citizen and the citizen of Iowa. Suits may be 
 brought, and judgments innumerable rendered, against the re- 
 ceiver, all along the line of the railway, by justices of the peace and 
 other local courts. These judgments may, if valid, be made liens 
 upon the railway property, and the federal court must recognize 
 and pay them; the state courts thus take from the former court 
 the power of determining, first, what debt shall be paid out of the 
 funds in its hands ; second, what claims shall be made liens upon 
 486
 
 LIABILITY TO SUIT FOR NEGLIGENCE OF EMPLOYEES. [§ 509. 
 
 the mortgaged property. Thus would the federal court sit merely 
 to register and pay the judgment and decrees of the state courts. 
 .... But assuming that this court would not sit here merely to 
 register the judgments and decrees of the state courts, and to pay 
 them without inquiry out of the trust fund in our possession, it 
 may be asked what harm will result to the non-resident creditors 
 from permitting suits to proceed against receivers ? I answer that 
 such judgments, even if we repudiate them and refuse to pay them, 
 would cast a cloud upon our title, and seriously affect a sale of the 
 railroad property. When the receivership is at an end, and the 
 property no longer under our control, but in the hands of a pur- 
 chaser at the foreclosure sale, I know of no reason why the state 
 court might not proceed to enforce the judgment by execution and 
 sale. At all events, the apprehension of such a result would cast 
 such a cloud upon the title as effectually to defeat an advantageous 
 sale, and this furnishes an all-sufficient reason why we should, by 
 injunction and by process of contempt, prevent the prosecution of 
 suits against our receivers." 
 
 The soundness of the doctrine set forth in this judgment is be- 
 yond question, and the position of the state courts to the contrary 
 is wholly indefensible. 
 
 III. A Receiver's Liability to Suit for the Negligence of his 
 
 Employees. 
 509. Whether a receiver is liable for the negligence of his 
 employees. — There is much diversity of opinion upon the ques- 
 tion whether a receiver is liable for the negligence of his em- 
 ployees in the same manner and to the same extent that a railway 
 company, operating its road, is liable. On the one hand, a re- 
 ceiver, in operating the road, is said to exercise the powers and 
 rights of a common carrier, and is, therefore, subject to all the 
 duties and liabilities of a common carrier. 1 Whet her the receiver 
 is regarded as the officer of the law, or the representative of the 
 proprietors of the corporation or its creditors, or as combining 
 all these characters, it is said he is intrusted with the powers of 
 the corporation, and must, therefore, necessarily be burdened with 
 its duties, and subjeet to its liabilities. There can be no such 
 
 i Blumenthal v. Brainerd, 88 Vt. 402 ; brook, 20 Ohio St. 187; 5 Am. R. 638; 
 Paige >■. Smith, 99 Mass. 395; Klein v. Kinney v. Crocker, is Wis. 80; Allen v. 
 
 Jewett, 20 X. J. Eq. 474; Meara v. Hoi- Central Ii. It. < !o. l-! Iowa, 683. 
 
 487
 
 § 510.] TIIE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 thing as an irresponsible power, exerting force or authority, with- 
 out being subject to duty, under any system of laws framed to do 
 justice. It is an inseparable condition of every grant of power 
 by the state, whether expressed or not, that it shall be properly 
 exercised, and that the grantee shall be liable for injuries result- 
 ing directly and exclusively from his negligence in its use. 1 In a 
 recent case in Kentucky, in which, however, the question under 
 consideration was not involved, Mr. Justice Lindsay, upon the 
 functions of a receiver as a common carrier, said : " The receiver 
 of a line of railways is not the mere passive agent or officer 
 of the court, charged with the simple duty of preserving the 
 property intrusted to his care, and of collecting the rents and 
 profits arising directly out of the thing mortgaged, and holding 
 them until the rights of the litigants shall be determined. His 
 duties comprise the management and operation of the roads. He, 
 ex necessitate, becomes a common carrier, and, in order to preserve 
 the mortgaged property, is compelled to discharge the duties of 
 a quasi public corporation." 2 
 
 On the other hand, the position of a receiver while operating a 
 railroad in his official capacity is regarded as analogous to that 
 of a public officer, who is not responsible for the negligence of 
 others through whom he may be compelled in part to act. 3 
 
 510. If a receiver be liable as a common carrier, it is no 
 defence at law that the defendant is a receiver acting under 
 the authority of a Court of Chancery. When, therefore, a suit 
 at law is brought against a person who is in fact a receiver, for 
 loss and damage sustained under his management of a railroad, 
 the Court of Chancery which appointed him may in its discretion 
 enjoin the prosecution of the suit at law. 4 If, however, a receiver 
 desires the protection of the court, whose officer he is, he should 
 apply for an injunction, and in case he fail so to do, the action at 
 law may proceed as though permission to bring it had been ob- 
 tained from such court. 5 He is deemed to have waived, if need 
 be, such ground of objection to the action, or to have voluntarily 
 elected to defend the action at law. The mere fact that the de- 
 
 1 Klein v. Jewett, supra, per Van Fleet, 8 See § 511. 
 
 V. C. 4 Morse v. Brainerd, 41 Vt. 550. 
 
 2 Douglass v. Cline, 12 Bush (Ky.), 608, 6 Camp v. Barney, 4 Hun (N. Y.), 373. 
 628, per Lindsay, J. 
 
 488
 
 LIABILITY TO SUIT FOR NEGLIGENCE OF EMPLOYEES. [§ 510. 
 
 fendant was acting as a receiver under the appointment of a Court 
 of Chancery is not recognized as a defence to a suit at law for a 
 breach of any obligation or duty which had been assumed by him 
 while acting as such receiver. 1 "As between a receiver and the 
 parties interested in the trust, the receiver would *be responsible 
 for negligence ; but he might be liable to other parties in a larger 
 or stricter degree of responsibility. The assumption by the de- 
 fendants of the peculiar duties and extraordinary responsibilities 
 arising from the relation of common carriers, is not to be consid- 
 ered as necessarily, if at all, incompatible with any duty or re- 
 sponsibility imposed upon them as receivers. The plaintiff's evi- 
 dence tended to show that the defendants were managing and 
 controlling a long line of railroad, and conducted and held them- 
 selves out as common carriers over that line. If in fact they 
 were common carriers over that line of railroad, we think that it 
 is no defence to an action at law, for a breach of a duty or obli- 
 gation arising out of business intrusted to them in that relation, 
 that they were running and managing the line of railroad as re- 
 ceivers under an appointment of the Court of Chancery." 2 
 
 Primarily, any person having possession and control of, and 
 actually operating a railroad, is at law liable as a common car- 
 rier for injuries to passengers or freight occasioned b}' his mis- 
 conduct or negligence, or that of any of his servants. He is thus 
 the acting, directing, and governing power in operating the road, 
 and is the only tangible principal known to the public. It mat- 
 ters not whether he be a trustee, a lessee, or a mere intruder 
 into the franchise of the corporation. 3 The only exception in 
 favor of a receiver, or distinction between them or any other 
 trustee, is, that he is an officer of the court appointing him, and 
 is under its control and protection. 4 
 
 Receivers in chancery in operating and managing railroads are 
 thus regarded as sustaining to persons dealing with them the char- 
 acter of common carriers. They may at all times invoke the aid 
 of the court appointing them in any matter affecting their duty 
 or liability under their receivership; yet, waiving this, they are 
 amenable in the common law courts to actions for negligence as 
 carriers. 6 This liability is extended to losses or damages to prop- 
 
 1 Blnmenthal <•. Brainerd, 38 Vt. 402. * Camp v. Barney, supra, 
 
 ~ Per Kellogg, .J., in Blumenthal v. 6 Newell v. Smith, 49 Vt. 2:>:> ; Cutts 
 
 Brainerd, supra. v, Brainerd, 42 Vt 
 
 3 Bpragoe v. Smith, 29 Vt. 421. i, ()
 
 § 511.] THE RIGHTS AND LIABILITIES 0* A RECEIVER. 
 
 erty taken charge of by such receivers, although happening after 
 the property has passed over their own road, and while in the 
 charge of other carriers over whose line of road the property was 
 destined and directed. 1 
 
 511. According to another view a receiver as the agent of 
 the court occupies a position analogous to that of a public 
 officer who is not answerable for the acts of those under him. 
 The Court of Appeals of New York, in a recent case, 2 held that 
 a receiver operating a road in his official capacity is not liable in 
 an action for negligence causing the death of a passenger, where 
 no personal neglect is imputed to him, either in the selection of 
 agents or in the performance of any duty, but where the negli- 
 gence charged is that of a subordinate whom he necessarily and 
 properly employed in compliance with the order of the court. 
 It is conceded that trustees and mortgagees in possession of roads, 
 and operating them for the benefit of the bondholders, are liable 
 for injuries sustained by reason of the negligence of persons em- 
 ployed by them. 3 They are regarded as the owners of the roads, 
 and the real principals, receiving the earnings, and having the 
 benefit of the services of the employees, and the fact that they 
 act in a representative capacity is unimportant. The employees 
 are their servants, and whether they operate the road as mort- 
 gagees in possession, trustees, or lessees, is not material, so long 
 as they take the earnings for themselves or for those they repre- 
 sent. 4 But there is no principle upon which a receiver or other 
 officer of a court, merely obeying the orders of the court, hav- 
 ing no interest in the prosecution of the work, and deriving no 
 profit from it, should be answerable except for his own acts and 
 neglects. 
 
 These views were applied by the Supreme Court of New York 
 to the case of an injury received by the plaintiff upon the Ogdens- 
 burgh and Lake Champlain Railroad, a New York corporation, 
 but leased to the defendant and others as receivers of the Ver- 
 
 1 Morse v. Brainerd, 41 Vt. 550; Cutts 4 Citing and distinguishing upon this 
 v- Brainerd, supra ; Newell v. Smith, supra, ground Ballou v. Farnum, 9 Allen (Mass.), 
 
 2 Cardot v. Barney, 63 N. Y. 281, Chief 47 ; Lamphear v. Buckingham, 33 Conn. 
 Justice Church dissenting. 237 ; Barter v. Wheeler, 49 N. H. 9; Rog- 
 
 3 Rogers »>. Wheeler, 43 N. Y. 602 ; ers v. Wheeler, 43 N. Y. 598 ; Sprague 
 S. C. 2 Lans. 486; Ballou v. Farnum, 9 v. Smith, 29 Vt. 421. 
 
 Allen (Mass.), 47. 
 
 490
 
 LIABILITY TO SUIT FOR NEGLIGENCE OF EMPLOYEES. [§ 512. 
 
 mont and Canada Railroad Company, a Vermont corporation, 
 placed in their bands by the Court of Chancery of that state. 1 
 The receiver was held not to be liable, because in making the 
 lease he acted officially and as the agent of the Vermont cor- 
 poration. 
 
 512. Upon the debated question of a receiver's liability as 
 a common carrier, it would seem at first sight that the weight of 
 authority is very decidedly in favor of such liability ; that the 
 courts of Vermont, Massachusetts, New Jersey, Ohio, Wisconsin, 
 and Iowa favor this view of the law, while opposed to it are the 
 courts of New York alone. But it is to be observed that in all 
 the several Vermont cases the defendants were receivers of the 
 same railroads, the Vermont Central and Vermont and Canada ; 
 that in several of the cases they are described not merely as re- 
 ceivers, but as trustees ; and that ultimately the Supreme Court 
 of that state has decided that the persons who have been in pos- 
 session of these railroads for sixteen years and more were not in 
 possession as receivers of the Court of Chancery, but as trustees 
 for the bondholders ; 2 and there is no doubt that trustees oper- 
 ating a railroad are liable as common carriers in the same way 
 that the railroad company itself would be liable. The Massachu- 
 setts case was an action against the trustees or receivers of the 
 same railroad, and expressly followed the case of Blumenthal v. 
 Brainerd, without affirming its soundness, upon the ground that 
 it was impossible to accord to the defendants in Massachusetts an 
 exemption from the ordinary common law liabilities of common 
 carriers more extensive than they are allowed in the state in 
 which they were appointed receivers, and in which the accident 
 occurred. 8 In the Ohio case, 4 the receiver was appointed under 
 
 ! Kain v. Smith, 1 1 I Inn, 552. Learned, lie receives the earnings, to be disposed of* 
 
 P. J., dissenting, said : " Whatever may as he directs, lie is, as it seem-; to mc, the 
 
 he the defendant's liability in respect to owner and proprietor, during the time 
 
 the management, in Vermont, of the road agreed upon, of the property, and the 
 
 of which he is supposed to be receiver, master of the persons employed by him 
 
 when he comes into this Mute and obtains in performing the duties thus assumed." 
 
 completi control of a railroad, not by \ir- - Vermont & Canada K. R. Co. v, Ver- 
 
 tue of his appointment as receiver, but by mont Central K. li. Co. 50 Vt. 500. 
 
 a contract which he voluntarily made; 3 Paige t>. Smith, 99 Mass. 395. 
 
 when he taki on of this railroad, 4 Meara v. Holbrook, 20 Ohio St. 187, 
 
 Mine the duties of the citing and relying npon Blumenthal v. 
 
 company as a common carrier, and when Braincrd, sujira, and Paige V. Smith, supra, 
 
 491
 
 § 512.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 the express authority of a statute which conferred upon him, with 
 other powers, that of bringing and defending suits " in his own 
 name, as receiver," and the suit was brought against him in his 
 official capacity. In Kinney v. Crocker, 1 the Supreme Court of 
 Wisconsin assumed the liability of a receiver for the negligence of 
 his employees, but did not discuss this question, — the principal 
 question considered being whether a state court could take juris- 
 diction of the action without leave of the federal court which had 
 appointed the receiver. In Allen v. Central Railroad Company, 2 
 the negligence complained of occurred before the receiver had as- 
 sumed control of the road, and the suit was not against the re- 
 ceiver but against the company. The decision in Klein v. Jewett 3 
 was by the Vice Chancellor of New Jersey, who, while relying 
 upon the authority of the cases above mentioned, strongly main 
 tains the liability of the receiver upon principle. 
 
 In conclusion it seems proper to remark that on principle the 
 case of Cardot v. Barney 4 is sound ; that the doctrine of re- 
 spondeat siqierior, as between a receiver acting under the direction 
 of a Court of Chancery and his employees, has no application. 
 But considerations of policy may very likely lead to the adoption 
 of the rule, that a receiver shall not be allowed to exercise the 
 rights and powers of a common carrier without also being held 
 subject to a common carrier's duties and liabilities. 
 
 Under a statute of the State of Georgia, allowing an employee 
 of a railway company to recover damages against the road for a 
 personal injury done him through the negligence of another em- 
 ployee in the same service, it was held that the employee of a 
 receiver is not an employee of a railroad company within the 
 terms of that statute, so as to make the receiver liable to action in 
 such case. 5 
 
 But even if it be regarded as an open question whether the re- 
 ceiver of a railroad, appointed by a court and operating the road 
 under its direction, is liable for injuries done upon the road to 
 person or property, it is regarded as certain that a receiver ap- 
 pointed hy the governor of the state, under a law providing for 
 such appointment, is a public agent, and, as such, is not liable for 
 
 1 18 Wis. 80. See § 507. 5 Henderson v. Walker, 55 Ga. 481; 
 
 2 42 Iowa, 683. Thurman v. Cherokee R. R. Co. 56 Ga. 
 
 3 26 N. J. Eq. 474. 376. 
 
 4 63 If. Y. 281. 
 
 492
 
 LIABILITY" TO SUIT FOR NEGLIGENCE OF EMPLOYEES. [§§ 513, 514. 
 
 the wrongs or negligence of his employees, but onty for his own 
 wrongful acts or delinquencies. 1 
 
 513. A receiver is not personally liable for injuries done 
 through the neglect or misconduct of those employed by him 
 in the performance of the duties of his office. 2 He is only liahle in 
 an action brought against him as receiver, and any judgment re- 
 covered must be made payable out of the fund in his hands as 
 receiver. He is not individually the owner of the property in his 
 charge, and he has neither a general nor special property in the 
 road or its earnings. The property is in court for management 
 and administration, and the receiver is an officer of the court, 
 obeying its orders and carrying out its directions. It would be a 
 great hardship to impose upon him the hazards and responsibili- 
 ties which attach to individuals acting by agents appointed for 
 their own convenience and profit. The receiver of a railroad must 
 of necessity operate the road through the employment of agents, 
 and when he has prudently selected his agents he has discharged 
 his full duty, and ought not to be held to guarantee the acts of 
 the agents employed. While there is good reason that one em- 
 ploying another in his business should be responsible for his acts, 
 there is no principle upon which a receiver or other officer of a 
 court should be answerable except for his own neglect and mis- 
 conduct. Where, therefore, a suit was brought, and a judgment 
 entered against a receiver personally, upon appeal the record and 
 proceeding were ordered to be modified so as to make the judg- 
 ment stand against him as receiver only. 3 But as will presently 
 be noticed, a judgment against a receiver for damages occasioned 
 through the negligence of his employees cannot be enforced as 
 against the assets in his hands in preference to the claims of mort- 
 gage bondholders. 4 
 
 514. Receivers who have wilfully and corruptly exceeded 
 their power are liable for the actual damage sustained by 
 reason of their misconduct, bul for nothing more. Where, for iu- 
 
 1 Ei-win v. Davenport, 9 Ileisk. (Tenn.) per Mullin, I'. J.; Cardol v. Barney, 63 
 44; Hopkins v. Connell, 2 Tenn. Ch. 323, N". Y. 281. 
 
 citing Mersey Duck?,' Trustees v. Gibbs, :; Camp v. Barney, supra. 
 L. B. I II. L. 93. * See § 515. 
 
 2 Camp v. Barncv, 4 Ilun (N. Y.), 373, 
 
 198
 
 § 515.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 stance, they have been authorized to issue certificates of indebted- 
 ness payable in ten years at eight per cent, interest, under the re- 
 striction that they should no't sell them for less than ninety cents 
 on the dollar, and they hypothecated them for a half or a third of 
 their value, the court held that they were not chargeable in their 
 account for the full value of the certificates so hypothecated, or 
 even with their value at ninety cents on the dollar ; for the 
 lenders were bound to take notice of the terms upon which the 
 certificates were authorized, and were bound to return so many of 
 them as were not necessary to secure the amounts advanced. The 
 actual damage sustained by the conduct of the receivers would 
 therefore be merely nominal. If they acted in good faith, but 
 under a mistaken view of their powers, they would perhaps not 
 be liable at all. 1 
 
 515. A judgment for negligence cannot be enforced as 
 against rights of mortgagees. — Under another view of the sub- 
 ject, although a judgment may be obtained against a receiver for 
 negligence, on the part of employees, yet the judgment cannot 
 be enforced as against mortgagees. The appointment of a re- 
 ceiver does not derange the priority of existing liens upon the 
 property, or in any way impair or postpone them, except so far as 
 the court may find it necessary, for the preservation of the prop- 
 erty, to authorize the borrowing of money upon a pledge of it.' 2 
 Consequently, it has been held that a person who has recovered a 
 judgment against the receivers of a road, for injuries received by 
 him while travelling upon the road under their management, is not 
 entitled to payment out of the earnings of the road, or out of the 
 proceeds of a sale of it, in preference to the mortgage creditors. 
 " It is too clear for argument," says Judge Woods, 3 " that, if the 
 road had been run by the president and directors when the injury 
 was sustained, no such claim could have priority. The party 
 would have travelled over the road, taking the risk of the ability 
 of the company to respond, just as every man who obtains a right 
 or contract does so with the risk of the ability of the party to 
 answer to him. The receivers of the court were merely appointed 
 
 1 Stanton v. Ala. & Chattanooga R. R. 3 Davenport v. Alabama & Chattanooga 
 Co. 2 Woods, 506. R. R. Co. 2 Woods, 519. 
 
 2 Norway v. Rowe, 19 Ves. Jun. 144, 
 153, per Lord Eldon. 
 
 494
 
 COMPANY NOT LIABLE AFTER RECEIVER ASSUMES CONTROL. [§ 516. 
 
 to act instead of the president and directors, except so far as the 
 orders of the court otherwise direct, and the liability stands on the 
 same footing as if it had been created by the president and direc- 
 tors, unless a higher right can be assigned to it under the orders of 
 the court It is clear that such a lien is not one of the inci- 
 dents to running a road, nor was its creation necessary to procure 
 traffic and travel ; nothing of the kind is intimated in the applica- 
 tion for a receiver, and no such view or idea is presented in the 
 
 order The exercise of power by a court to displace liens 
 
 can only be sustained on the ground of actual necessity, and surely 
 there can be no necessity to append, as an incident to running a 
 railroad, a lien for damages that displaces existing contracts. The 
 party has a right to be allowed his claim, to be paid from an ex- 
 cess remaining. He has the same right against the property 
 which he could have had if the road had been run by the presi- 
 dent and directors when his right accrued, and none other." 
 
 IV. The Company itself is not liable after the Receiver has 
 
 assumed Control. 
 
 516. The railroad company itself, whose property is in the 
 hands of a receiver is not ordinarily liable for injuries received 
 through the acts of persons under his control or through the run- 
 ning of the road under his charge. 1 His acts are not the acts of 
 the corporation, nor is his possession the possession of the corpora- 
 tion. He is under the control of the court that appointed him, and 
 his possession is the possession of the court. It would be a severe 
 rule, and one founded on no principle, that would render the rail- 
 road company responsible for the negligence of the agent of the 
 court that had deprived it of the possession of the road. To an 
 action against the company, it is sufficient to answer that at the 
 time the injuries were inflicted on the plaintiff the railroad, with 
 the rolling stock and all the company's property, was in the actual 
 control of a receiver duly appointed. It is not necessary that the 
 answer should set forth a copy of the order appointing the re- 
 ceiver. 2 The corporation itself cannot be held liable for goods 
 lost or not delivered under a contract made with receivers for 
 their transportation and safe delivery ; the road being in the hands 
 
 1 Bell v. Indianapolis, Cincinnati & La- 2 Boll v. Indianapolis, Cincinnati & La- 
 fayette B R. Co. 53 [nd. r>7 ; Ohio & Mis- fayette R. R. <''>■ supra. 
 M».si|ipi R. R. Co. V. Davis, 88 Ind. 553. 
 
 495
 
 §§ 517, 518.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 of receivers. The action only lies against the receivers, and no 
 personal judgment can be rendered against them, but only one 
 against them in their official capacity. 1 
 
 517. But unless the possession of the receiver under a de- 
 cree of court is exclusive, and the servants of the road are 
 wholly employed and controlled by him, the company is not re- 
 lieved from liability for injuries done by the servants employed in 
 working the road. Where, for instance, a road is run on the joint 
 account of a receiver of part of it, and of a lessee of the remain- 
 ing part, the company, as well as the lessee, is liable for injuries 
 committed by a servant employed upon the road upon a passen- 
 ger, in improperly expelling him from a car, especially where the 
 company has allowed tickets to be issued in its own name, in the 
 same form as it had done before the road was leased, and the pas- 
 senger apparently having no reason to know that the road was not 
 still under the company's management. 2 
 
 It is not necessary, of course, to obtain authority from the court 
 which has appointed a receiver of a railroad to commence an ac- 
 tion against the company itself. Nor is such consent necessary to 
 continuing a suit commenced against a railroad company before 
 the appointment of the receiver. Such appointment has not the 
 effect to abate, bar, or continue an existing suit against the 
 company. The receiver may interpose, however, when the plain- 
 tiff undertakes to interfere with the property by enforcing an exe- 
 cution. 3 
 
 518. In determining the question whether the corporation 
 is liable for injuries done after the appointment of a receiver, 
 it is important to inquire whether the receiver has at the time of 
 the injury entered upon the discharge of his duties and assumed 
 control of the road. Thus a receiver of the Central Railroad of 
 Iowa was appointed by the Circuit Court of the United States 
 on the seventh day of January, 1875, and he was allowed fifteen 
 days within which to give bonds. In a suit against the company 
 for an injury which occurred to a passenger on the eighteenth day 
 of the same month, there was no proof that the receiver had at 
 
 1 Ellis v. Indianapolis, Cincinnati & 2 Railroad Co. v. Brown, 17 Wall. 445. 
 Lafayette R. R. Co. 6 Am. Law Record, 3 Toledo, Wabash & Western Ry. Co. 
 288. v. Beggs, 85 111. 80. 
 
 496
 
 COMPANY NOT LIABLE AFTER RECEIVER ASSUMES CONTROL. [§ 520. 
 
 that time assumed control of the road. Upon the contrary, there 
 was some testimony tending to show that the defendant company 
 was operating the road at that time. At any rate the Supreme 
 Court of Iowa did not consider the question whether a railroad 
 company could be made liable for damages resulting from the im- 
 proper management of the road while in the hands of a receiver, 
 involved in the record of the case. 1 
 
 519. Liability of company as affected by statute. — Under a 
 statute making receivers or other persons running or controlling 
 any railroad in the corporate name of the company liable jointly 
 or severally with such company, for stock killed or injured by the 
 locomotive, cars, or other carriages of such company, an action may 
 be brought against the company alone for such acts done while a 
 receiver is in possession. The appointment of a receiver does not 
 destroy the corporate existence. Its corporate powers and fran- 
 chises are for the time being, so far as necessary for the operating 
 of the road, conferred upon the receiver, but the corporate exist- 
 ence is left intact. Suits may be prosecuted against the corpora- 
 tion after the decree appointing a receiver, just as well as before. 2 
 
 Where negligence on the part of those operating the road is not 
 an element that is at all essential to a recovery, as for instance 
 where a statute makes a railroad liable for cattle killed upon its 
 track, in case this is not fenced, a railroad company has been 
 held liable for stock thus killed, although the road is at the time 
 operated by a receiver duly appointed by a competent court. 
 Such a statute is regarded as in the nature of a police regulation, 
 designed to promote the security of persons and property passing 
 upon the road ; and not only the terms of the law, but the reason 
 of it as well, are regarded as applicable to roads operated by a 
 receiver, equally with those operated by the servants of the com- 
 pany. 3 
 
 520. A special receiver or assignee of the property of a 
 railroad corporation, appointed in bankruptcy proceedings, 
 involuntary on its part, is not an agent or servant of the cor- 
 
 i Allen v. Centra] R. R. Co. 42 Iowa, 8 McKinncy V. Ohio & Miss. R. R <'<>. 
 683 22 IikI. 99; Ohio ,< Miss. R. R. Co. v. 
 
 2 Louisvill.-, New Allmny & Chicago R. Fitch, 20 fad. 498. 
 
 R. Co. v. Canble, -u; fad. 277. 
 
 32 -1«.I7
 
 § 520.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 poration, and therefore the corporation is not liable for damages 
 occasioned by his negligence and that of persons employed by 
 him in operating the road. In a suit against the Buffalo, Corry, 
 and Pittsburg Railroad Company, it appeared that the accident, 
 which was the occasion of the suit, occurred after the date of a 
 sale made under an order of court by the receiver or assignee, 
 but before the confirmation of the sale and delivery of the deed 
 to the purchasers. It was contended in behalf of the plaintiff 
 that the property and franchises and legal entity of the corpora- 
 tion had at the time of the accident passed to the purchasers who 
 thereby became the corporators constituting the corporation, tak- 
 ing the place of the former stockholders ; and that although the 
 sale was not then confirmed, the deed, when given, related back 
 to the time of the purchase. The Court of Appeals of New 
 York replied, that, conceding this to be so, it did not follow that 
 the purchasers were responsible for the negligence in operating 
 the road, inasmuch as they then had no right to intermeddle 
 with the road and had not in fact clone so. 1 The persons operat- 
 ing the road were not employed by them, nor were they subject in 
 any respect to their control. Neither had the purchasers taken 
 the place of the preexisting stockholders, becoming its corpora- 
 tors, and acquiring the corporate entity, although they acquired 
 the property and the franchise of using it subject to the public ob- 
 ligations which had rested upon the defendant corporation. The 
 statute authorizing purchasers under a foreclosure sale 2 to organ- 
 ize a new corporation does not make them stockholders in the ex- 
 isting corporation ; were this so, the property purchased would 
 be liable to all the existing debts of the corporation, and both the 
 mortgage security and the rights of the purchasers might thus be 
 entirely defeated. 
 
 Moreover, the defendant corporation in this case had been de- 
 prived, by the act of the law, of the possession of the road and 
 of all control over those engaged in operating it ; and by like act, 
 the possession and control had been given to others. The de- 
 fendant had nothing to do with operating the road. The fact 
 that the profits earned became assets for the payment of the 
 
 1 Metz v. Buffalo, Corry & Pittsburg Pa. St. 506 ; Wellsborough & Tioga Plank 
 
 R. E. Co. 58 N. Y. 61 ; and see, to same Road Co. v. Griffin, 57 Pa. St. 417. 
 
 effect, as to liability of purchasers, Com- 2 Laws 1857, ch. 444. 
 monwealth v. Central Passenger Ry. 52 
 
 498
 
 DISCHARGE AND REMOVAL. [§ 521. 
 
 debts of the corporation did not make it liable for the conduct 
 of those who were in no sense its employees or servants. 
 
 V. Discharge and Removal of Receiver. 
 
 521. A receiver will be discharged when it appears that 
 the security of the creditor no longer requires his continu- 
 ance. — Upon the application of the Milwaukee and Minnesota 
 Railroad Company for the discharge of a receiver of a portion 
 of its line extending from Milwaukee to Portage, it appeared 
 that this section of ninety-five miles constituted a link in an im- 
 portant route, which was in good condition, and whose gross an- 
 nual earnings were $800,000 ; that the whole mortgage debt upon 
 this was $2,200,000, upon which the interest was wholly paid ; 
 and the company proposed, on receiving possession, to pay to the 
 second mortgagees, at whose instance the receiver was appointed, 
 $300,000 or more. Judge Miller, sitting in the Circuit Court, 
 was of opinion that there was no reason why the receiver should 
 longer retain control of the property, especially as the decree in 
 favor of the mortgagee would stand as security for his further 
 claim, on which he could have an order of sale for any instalment 
 of interest. 1 
 
 In the same case a judgment creditor whose claim was less 
 than twenty thousand dollars objected to the discharge of the 
 receiver; but the judge did not consider the objection valid in 
 view of the fact that this creditor had all the ordinary remedies 
 for enforcing his lien, and had received only $1,000 for four years, 
 during which the receiver had been in possession. 
 
 A lessee of a railroad holding the lease as security for a large 
 debt, from whom the possession was taken by a receiver appointed 
 at the instance of a mortgagee, upon the discharge of the re- 
 ceiver is entitled to have possession restored to him. Hut a cred- 
 itor holding such lease, who has failed to pay sums which he stipu- 
 lated to pay, and who has lost possession by reason of such failure, 
 and has permitted the property to remain out of his possession for 
 four years, is not, entitled to have the possession restored to him. 2 
 After the appointmenl of a receiver, upon the subsequent pay- 
 
 1 Howard v La Crone & Milwaukee R. 2 Howard v. La Crosse & Milwaukee It. 
 R. Co. 1 Woolworth, 49. See, also, Inre It. Co. 1 Woolworth, 49. 
 Long Branch & Seaside R. R. Co. 24 N. 
 J. Bq. 398. 
 
 I'J'.I
 
 §§ 522, 523.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 ment of a part of the debt, the security being ample for the bal- 
 ance of the debt, and the decree being allowed to stand as a 
 means of enforcing the mortgage upon a subsequent default, the 
 receiver was discharged. 1 
 
 In New York it is provided by statute 2 that neither the sale of 
 the mortgaged property under foreclosure, nor the formation of 
 a new corporation by the purchaser, shall interfere with the au- 
 thority or possession of any receiver of the property and fran- 
 chises aforesaid, but he shall remain liable to be removed or dis- 
 charged at such time as the court may deem proper. 
 
 522. The discharge of a receiver, like his appointment, is 
 ordinarily a matter resting wholly within the discretion of 
 the court from which he received his appointment, and of course 
 no appeal ordinarily lies from the order to the appellate court. 
 But this is not always and absolutely so. Thus, while the parties 
 to a foreclosure suit are litigating the amount of the mortgage 
 debt, the appointment of a receiver of the property, and his dis- 
 charge as well, belong properly to the discretion of the court in 
 which the litigation is pending. But when the amount due has 
 been passed upon by that court, and upon appeal has been finally 
 fixed by the appellate court, the right of the mortgagor to pay 
 that sum, and have a restoration of his property by a discharge of 
 the receiver, is clear, and does not depend upon the discretion of 
 the court. It is a right which the party can claim ; and a refusal 
 of the court to grant it is a judicial error which the appellate 
 court is bound to correct, when the whole case is fairly before 
 it. a 
 
 523. Upon a motion to vacate an order previously made 
 appointing a receiver he should not be heard in opposition, 
 as he has no standing in court for such purpose. It is not within 
 his province to intermeddle in questions affecting the rights of the 
 parties in interest, or the disposition of the property in his hands, 
 except so far as his own rights are concerned in the adjustment 
 of his accounts. Where, therefore, all the parties in interest con- 
 curred in the vacating of the receivership, but the court, upon the 
 
 1 Souter v. La Crosse & Milwaukee R. 8 Milwaukee & Minn. R. R. Co. v. 
 R. Co. 1 Woolworth, 49. Soutter, 2 Wall 510. 
 
 2 Laws 1876, ch. 446, p. 482. 
 
 500
 
 DISCHARGE AND REMOVAL. [§§ 524, 525. 
 
 objection of the receiver himself, while ordering the restoration of 
 the railroad and its appurtenances to the company, required him 
 still to receive and disburse its earnings and income, the order 
 upon appeal was adjudged erroneous. The motion should have 
 been granted so as to fully restore the possession, management, 
 and control of the road to the owner, including, of course, the 
 receipt and disbursement of its earnings. 1 
 
 524. The rescission of an order appointing a receiver after 
 the commencement of an action of replevin or possessory 
 ■warrant against him for an engine, or other property, does not 
 free him from liability upon a judgment against him, although he 
 has surrendered the property to the railroad company of which he 
 had been receiver ; for when the suit was commenced he was in 
 possession of the engine as the receiver of the company, and the 
 plaintiff's rights against him were fixed as of that time. When 
 he voluntarily turned over the engine to the possession of the 
 company while the suit was pending against him for the posses- 
 sion of it, he did so at his own peril. The company could not 
 have compelled him to surrender it until the plaintiff's claim to 
 the possession of it had been decided. 2 
 
 525. Specific complaints against a receiver of maladminis- 
 tration of his trust will receive the attention of the court, 
 although brought to its notice in an irregular way, as for instance 
 by a petition under an order for leave to answer in the name of 
 the receiver in a foreclosure suit. 3 
 
 The power to vacate an appointment of a receiver is implied in 
 the power to appoint. 4 Like the power of appointing a receiver, 
 the power to remove him rests in the discretion of the court ; but 
 this power should be exercised only for cause grounded in some 
 consideration of justice or convenience. " It might be difficult," 
 said Van Fleet, V. C, in a case before the Court of Chancery of 
 New Jersey, 6 " if not impossible, to say what will be esteemed 
 sufficient cause in every imaginable case; but it may he said gen- 
 
 i L'Engle v. Florida Cent. It. B. (o. u 8 Coc v. N. J. Midland Ky. Co. 28 N. 
 Fla. 26G. J. Eq. ::i ; S. C. i i Am. Railw. Rep. 9. 
 
 2 Peacock v. Pittsburg Locomotive & * llailroini Co. v. Sloan, 81 Ohio St. 1. 
 Car Works, 52 Ga. 417. ft McCullough v. Merchants' Loan >< 
 
 Trust Co. 29 N. J. Eq. 217. 
 
 501
 
 § 526.] THE EIGHTS AND LIABILITIES OF A RECEIVER. 
 
 erally, if the receiver was an officer of the corporation at the time 
 it became insolvent, and it appears proper that his conduct, as 
 such officer, should be investigated, to see whether he has not ob- 
 tained a benefit or advantage, which in equity he ought not to be 
 permitted to retain, sufficient cause for his removal exists." 
 
 526. It is ground for the removal of two receivers of a rail- 
 road that they have become hostile to each other in the man- 
 agement of the road. Two receivers of the Kansas Pacific Rail- 
 way, who had been appointed at the instance of the parties in 
 interest for the purpose of representing the opposing views of the 
 parties, having disagreed about the management of the road, were 
 for this, in connection with other reasons, removed. 1 Among the 
 other reasons given by the court were that the receivers had es- 
 tablished separate places of business a thousand miles apart, and 
 that neither of them was within two hundred miles of the road 
 whose operations they controlled. " There is no necessity," said 
 Mr. Justice Miller, " and a manifest impropriety, in having a re- 
 ceiver located in New York. It is true many such western corpo- 
 rations as this have officers in New York, at which most of the 
 financial business of the companies is transacted ; but this has 
 always been felt to be a grievance by the people of the West, 
 whose business the road does, and by the income of which it can 
 live; and where such a company comes under the control of a 
 court by reason of its insolvency, and a receiver is appointed to 
 take charge of it, such control as the court can exercise over the 
 operations of the road, and in collecting and disbursing its receipts, 
 can be most safely and wisely exercised, and more strictly, under 
 the eye of the court, by an officer residing within its jurisdiction. 
 I think, therefore, on general principles, and on the facts of this 
 case, there was no necessity for a receiver in the city of New York. 
 I am of the opinion that the receivership in New York should be 
 abolished in the interest of economy. Its expenses are unneces- 
 sary, and, as administered, excessive." 
 
 But the controlling consideration with the court in this case was 
 that the receivers had become antagonistic, so that they repre- 
 sented two hostile camps, each bent upon securing the whole or 
 the larger share of the spoils. It therefore became the duty of 
 
 i Meier v. Kansas Pacific Ry. Co. U. S. Legal News (Oct. 26, 1878), p. 41; 6 
 Circuit Court, Dist. of Kansas, Chicago Reporter, 642. 
 
 502
 
 COMPENSATION AND ACCOUNT. [§ 527. 
 
 the court to see that its powers are exercised on principles of strict 
 neutrality as regards the belligerents, and this could only be done 
 by removing the representatives of the hostile interests, and ap- 
 pointing an impartial receiver in their place. 
 
 VI. Compensation and Account of Receiver. 
 
 527. The question of the compensation to be allowed a re- 
 ceiver is one that properly belongs to the master to whom his 
 accounts are referred, and not to the court; but, of course, is de- 
 termined by the court when its decision is desired or rendered 
 necessary. Want of foresight in the receiver of a railroad in re- 
 gard to the future developments of business is no reason for de- 
 nying him compensation, or reducing the amount of it, when the 
 trust has been administered with reasonable success, and with in- 
 tegrity and good faith. 1 
 
 When the accounts of a receiver have been referred to a master 
 for examination and report, no exceptions to the report will be 
 considered by the court unless they have first been made before 
 the master. 2 This is required in justice both to the master and 
 to the receiver. To the master, that he may have an opportunity 
 to reconsider his decision ; to the receiver, that he may sustain his 
 account, if he can, by additional evidence, or make such explana- 
 tion as the case may require. This rule would not deter the court 
 from directing an account to be reformed, which contains manifest 
 errors or plainly improper charges ; but such errors or improper 
 charges ought to be clearly shown to exist, and their character as 
 such ought to be evinced by the proofs in the case, or by their in- 
 trinsic nature. 3 
 
 A receiver is as much an officer of court as a master is, and 
 when under an order of court he states his own account, and sub- 
 mits it to the master, the latter acts in place of the court in a ju- 
 dicial rather than a ministerial capacity. Strictly speaking, ex- 
 ceptions to his report in such cases do not properly lie, as they do 
 to an account stated by himself, as for instance when he states the 
 account of trustees or partners. Nevertheless, if the master adopt 
 any erroneous principle in allowing a receiver's account, the court, 
 on petition of the proper parties, will refer the matter bad; to him 
 
 1 Cowdrey v. Railroad Co. l Woods, 8 Per Mr. Justice Bradley, in Cowdrej 
 331. v. Knilroad Co. supra, 
 
 a Cowdrey v. Riiilrond Co. supra. 
 
 603
 
 §§ 528, 529.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 for correction. The duty of the court, therefore, consists in re- 
 viewing the principles and rules adopted and followed by the 
 master in allowing the receiver's accounts, rather than in exam- 
 ining the items of the account in detail, or the evidence on which 
 those items are severally founded, — the latter duty belonging 
 more especially to the province of the master acting in his judi- 
 cial capacity, analogous to the province and duty of a jury on 
 questions of fact. 1 
 
 528. The amount of compensation allowed to a receiver is 
 graduated somewhat by his duties, and somewhat by the responsi- 
 bilities of the situation. 2 In ordinary receiverships of moderate 
 amount, five per cent, on the receipts and disbursements has been 
 allowed ; but where the amounts received and disbursed are large, 
 as is usually the case where the property is a railroad, it is not 
 the practice to allow a percentage, but to fix the compensation in 
 some other manner. The receiver of a railroad is a manager as 
 well as a receiver ; and the business of a railroad is one of the 
 most difficult and responsible duties that a receiver is charged 
 with. The peculiar duties, responsibilities, and accountability of 
 a receiver entitle him to a larger amount than would be demanded 
 by the president or head officer of the same railroad. In the 
 matter of the receivership of the Galveston Railroad Company, Mr. 
 Justice Bradley allowed the receiver the sum of $10,000 per an- 
 num .in coin, although the previous salaries given by the com- 
 pany to the president of the road had not exceeded $5,000. 3 
 
 529. A receiver's expenses for counsel and witness fees, in- 
 curred in resisting a motion for his removal, were allowed as a 
 charge against the trust fund, in a case where it appeared that he 
 had acted in good faith and with integrity of purpose, although it 
 also appeared that there were apparent grounds for the motion. 4 
 The receiver's accounts in this case had been referred to two dif- 
 ferent masters, who found such confusion and vagueness in them 
 that no satisfactory conclusion could be formed as to the condition 
 
 1 Cowdrey v. Railroad Co. 1 Woods, v. Keen, 115 Mass. 170; Corey v. Long, 
 331, per Bradley, J. 12 Abb. (N. Y.) Pr. N. S. 427. 
 
 2 Bank Comm'rs v. Franklin Inst, for 8 Cowdrey v. Railroad Co. 1 Woods, 
 Savings, 11 R. I. 557; McArthur v. 331. 
 
 Montclair Ry. Co. 27 N. J. Eq. 77 ; Jones * Cowdrey v. Railroad Co. snpra. 
 
 604
 
 COMPENSATION AND ACCOUNT. [§ 529. 
 
 of the trust, or as to the state of accounts with another railroad 
 company. After repeated complaints one of the masters refused 
 to pass the receiver's account until they were rendered in a form 
 calculated to give the information desired. After this was done a 
 more satisfactory exhibit was made, but this was after the applica- 
 tion for removal had been made. " I cannot say that the demands 
 of the defendants for a more specific statement of the accounts were 
 unreasonable ; nor that the difficulties which were experienced in 
 getting at an explanation of the various items were not calculated, 
 in connection with other things, to raise suspicion as to the faith- 
 ful management of the receivership. I think that these circum- 
 stances are sufficient to exonerate the defendants from the burden 
 of paying the costs and expenses incurred by the receiver. Are 
 they sufficient to cast the burden on the receiver himself ? If the 
 receiver acted in good faith, and was ever ready, as far as he was 
 able, to make any explanations that were personally required, but 
 was unskilful in the manner of keeping his accounts, he ought not 
 for that cause to be visited with a penalty. It is not every good 
 business man, or engineer, or superintendent, that understands 
 book-keeping. It requires a peculiar aptitude to state and keep 
 accounts with clearness and accuracy, especially where the trans- 
 actions are varied, extensive, and complicated. I should not feel 
 disposed, therefore, to cast the burden of the expenses referred to 
 on the receiver personally, unless satisfied that his method of 
 keeping his accounts was adopted for the purpose of producing 
 confusion and covering up the nature of his transactions. I do 
 not see any sufficient evidence that this was the case. On the con- 
 trary, it seems to have been the endeavor of the receiver to keep 
 regular books and a constant record of his transactions ; and for 
 this purpose employed competent clerical assistance. But the in- 
 trinsic difficulties of the case may well afford some excuse for a 
 defective exhibition of all the aspects of the various receipts and 
 expenditures. If I were satisfied that the receiver was unfaithful 
 to his trust, and did not, according to the best of his ability and 
 understanding, perform the duties thereof, I should feel that I 
 ought to cast the burden of these expenses on him ; for that 
 would have furnished good ground for his removal. But I cannot 
 say, from anything which has l>''<'ii developed in the case, that he 
 has not acted with entire integrity of purpose." 1 
 
 1 JYr Mr. Justice Bradley, IB Cowdruy v. Railroad Co. tupra. 
 
 505
 
 § 530.] THE RIGHTS AND LIABILITIES OF A RECEIVER. 
 
 A receiver of a railroad was not allowed to charge in his 
 account payments for advertising the accommodations of the 
 road, when the advertisement contained a favorable reference to a 
 firm of which he was a member, as proper persons to facilitate the 
 forwarding of freight, and had for its object, in whole or in part, 
 the promotion of the interests of that firm. 1 
 
 530. A receiver may appeal from a decree directing him to 
 pay into court a certain sum as the balance due from him on 
 the settlement of his accounts. 2 In taking such appeal he does 
 not attempt to appeal from the decree of foreclosure, or from any 
 order or decree of court, except such as relates to the settlement 
 of his accounts. " To that extent," says Mr. Chief Justice Waite, 
 of the Supreme Court of the United States, " he has been sub- 
 jected to the jurisdiction of the court, and made liable to its 
 orders and decrees. He has, therefore, the corresponding right to 
 contend against all claims made against him. For this purpose he 
 occupies the position of a party to the suit, although an officer of 
 the court, and after the final decree below has the right to his 
 appeal here." 
 
 1 Cowdrey v. Railroad Co. 1 Woods, 2 Hinckley v. Gilman, Clinton & Spring- 
 331. field R. R. Co. 94 U. S. 467. 
 
 506
 
 CHAPTER XVII. 
 
 receivers' debts and certificates. 
 
 I. For what purposes receivers maybe au- 
 thorized to incur debts and issue certifi- 
 cates, 533-538. 
 
 II. Priority of receivers' certificates, 539- 
 544. 
 
 III. Negotiability of receivers' certificates, 
 545, 546. 
 
 I. For ivhat Purposes Receivers may be authorized to incur Debts 
 and issue Certificates. 
 
 In the enforcement of railroad mortgages there is frequent oc- 
 casion to invoke the aid of courts of equity to take possession of 
 the property for its preservation. As shown in the preceding 
 chapters, this is done through the agency of receivers. It may be 
 necessary for receivers, in the proper management of the prop- 
 erty, to use money beyond the current income of it ; and it is 
 usual for the courts to authorize receivers, for specific purposes, 
 to negotiate loans upon the credit of the property. This author- 
 ity of the courts, when properly exercised, is highly beneficial to 
 the mortgage bondholders. What are the proper occasions for 
 the exercise of this power is the first subject for consideration. 
 
 533. General principles. — Under the common law rules a 
 mortgagee in possession has authority to make necessary and 
 reasonable repairs, and to protect the title from other incum- 
 brances. He has, however, no right to make the estate better by 
 expenditures for convenience or ornament. He has no right to 
 lay out money in ways not essential to the preservation of the 
 property, although lie may think that the value of it will thus 
 be increased. This would Ik- improving a mortgagor out of his 
 estate. 1 
 
 This principle <>f tin- general law of mortgages governs courts 
 and receivers in the management of railroad property, pending 
 
 1 Sancton v. Hooper, 6 IJeav. 246 j '2. Junes on Biortg. § 1186. 
 
 607
 
 § 533.] receivers' debts and certificates. 
 
 litigation respecting it. A receiver is generally appointed at the 
 instance of a mortgagee, and the receiver's possession is only a 
 substitute for the possession of the mortgagee. As against the 
 mortgagor, the same rules govern as to the expenditures a re- 
 ceiver may make and charge upon the property that govern when 
 a mortgagee is himself in possession. A receiver has no greater 
 right than a mortgagee to improve the mortgagor out of his es- 
 tate. It does not alter the rule in this respect, that generally 
 when the affairs of a railroad company become so embarrassed 
 that the mortgagee is obliged to assume possession of the road, 
 either directly or through the intervention of a receiver, in order 
 to protect the mortgage title and interest, the company itself 
 practically ceases to have any interest in the road, and rarely is 
 able to redeem. The right of redemption remains until finally 
 barred by foreclosure proceedings, and must be protected, though 
 it be seldom or never exercised. 
 
 Complaint as to the management of railroad receivers has gen- 
 erally come, not from the stockholders of the corporation, because 
 it is seldom they care to redeem, but from mortgage bondholders ; 
 and as often, perhaps, from those at whose solicitation the re- 
 ceiver was appointed as from others who may hold under junior 
 mortgages, and who, therefore, have a right to redeem. The his- 
 tory of such management in this country shows that the bond- 
 holders chiefly interested have sometimes found themselves im- 
 proved out of their interest in the property. The management 
 of mortgage trustees in possession has sometimes been open to the 
 same criticism ; but in such case the remedy is more completely 
 in the hands of the bondholders themselves. 1 
 
 The power, therefore, of a Court of Chancery to authorize a re- 
 ceiver to create liens upon a railroad should, upon principle, be 
 limited to cases in which the creation of such liens is indispensa- 
 ble to the preservation of the property pending litigation. 2 The 
 
 1 Judge Baxter is reported to have ex- were not sufficient to pay the certificates, 
 
 pressed himself strongly, in a recent case In another case, in Detroit, a road cost 
 
 before the Circuit Court of the United over $8,000,000. When the road came to 
 
 States, against the practice of placing be sold, eminent counsel requested the 
 
 railroads in the hands of receivers. He judge to fix the minimum price for the 
 
 cited the case of a railroad in Georgia sale, suggesting that such price should be 
 
 which cost $15,000,000. The receiver, who a sum sufficient to cover the charges of 
 
 was in charge for three years, issued cer- the receiver and his counsel. 11 Chicago 
 
 tificates to the value of $1,500,000, and Legal News, 8. 
 
 when the road was sold the proceeds 2 Meyer v. Johnston, 53 Ala. 237. 
 
 508
 
 FOR WHAT PURPOSES RECEIVERS MAY INCUR DEBTS. [§ 534. 
 
 nature of railroad property is such, however, that a liberal con- 
 struction must be given to the power to authorize repairs ; for a 
 railroad already in operation must be kept in operation, so that 
 it may be sold as a going concern, else the property itself would 
 seriously deteriorate in value, and its business would be lost. In 
 analogy to the right of a mortgagee in possession to supply things 
 necessary to put a house upon the estate in a condition to be 
 rented, or to be occupied, the receiver of a railroad may supply it 
 with rolling stock, or with other things essential to the operating 
 of the road. 
 
 534. For what purposes a receiver may be authorized to 
 borrow money and create liens therefor upon the property in 
 his charge. — The legitimate object of a court of equity in the 
 assumption of the management of a railroad being the preserva- 
 tion of the property, and the enforcement of the right of creditors 
 and others interested in it, the power of the court over the prop- 
 erty should be limited to preserving the property as it is, and 
 there is no principle of law or of public policy which will justify 
 a court in engaging in the completion of unfinished roads, and in 
 authorizing the expenditure of large sums of money for this pur- 
 pose, except with the consent of the mortgage creditors whose 
 interests may be thereby affected. Such a course is open to the 
 objections that the liens of mortgage creditors are thus, without 
 their consent, displaced by new liens ; and that, in engaging in 
 such new undertakings, the court lays aside its judicial character 
 and functions. The whole power of the court, when exercised to 
 its fullest extent, is confined to making necessary repairs and pro- 
 tecting the property as it is v The nature of the property being 
 such that, to prevent serious injury and depreciation in value, the 
 road must be continued in operation and sold as a going concern, 
 the court may continue the running of trains and the usual busi- 
 ness of the road. For the economical conservation of the property 
 in this way, the court may, perhaps, under some circumstances, 
 authorize expenditures for rolling stock, and for other things es- 
 sential to the operation of the road; and, if the income of the road 
 is insufficient for such purpose, may provide the requisite means 
 by creating charges upon the property. 1 
 
 This equitable power may be exercised nol only when a receiver 
 1 Meyer v. Johnston, 53 Ala. 287, 346, and cases cited. 
 
 50y
 
 § 535.] receivers' debts and certificates. 
 
 has been appointed upon the application of a mortgagee, but also 
 when the appointment has been made under proceedings in insol- 
 vency instituted against a railroad company. There can be no 
 doubt of the duty of the court in such case to order the receiver 
 to keep the road in repair, so that it may be operated with safety 
 to the public, and without impairing the value of the trust estate ; 
 and it may be the duty of the court to provide the means of 
 making such repairs by a pledge of the property. The power of 
 the court to act in such case does not depend upon the statute, 
 but upon the general equity jurisdiction of the court. 1 
 
 535. To preserve the road as a whole, and to prevent loss 
 or depreciation, it may be necessary to rebuild, or even to 
 build anew, in considerable portions of it. Thus, where it was 
 necessary to complete a road before a certain date, in order to se- 
 cure a land grant, which was a very material part of the security 
 of the bondholders, Judge Dillon authorized a receiver to borrow 
 money, and complete the road within the time limited. The exi- 
 gency of the case demanded an unusual exercise of power for the 
 preservation of the security. 2 " It is manifest," said Judge Dil- 
 lon, " that unless a receiver is appointed, no further work will be 
 done on the extension lines, and that the land grant, which is the 
 only security of any considerable value which the plaintiffs and 
 the other bondholders have for their large advances, will lapse and 
 be wholly lost. In order to save this land grant, the road must 
 be completed by December third ensuing, and it seems to me that 
 the exigencies of the case are such as, under the circumstances, to 
 warrant the court, upon the application of the parties chiefly in- 
 terested, to appoint a receiver and clothe him with the authority 
 desired." Both the opinion of the court and the order made 
 show the urgent necessity of appointing a receiver for the protec- 
 tion and preservation of the security. 
 
 1 Hoover v. Montclair & Greenwood other things it explicitly states that "the 
 Lake Ry. Co. 29 N. J. Eq. 4. main effect of this order is to insure the 
 
 2 Kennedy v. St. Paul & Pacific Pi. R. completion of said roads by the third day 
 Co. 2 Dill. 448. In this case a sum not of December next, and the receiver is in- 
 exceeding 85,000,000 was authorized. See structed so to act, under the limitations 
 note to this case for form of the order of aforesaid, as to see that this object shall 
 court, and form of certificate authorized be accomplished, and to proceed at once, 
 to be given for the money borrowed. The and with expedition." 2 Dill. 454. 
 order is most carefully drawn. Among 
 
 510
 
 FOR WHAT PURPOSES RECEIVERS MAY INCUR DEBTS. [§ 535. 
 
 The Supreme Court of the United States in a recent case ap- 
 proved of receivers' certificates issued for the completion of a 
 canal, in aid of which the United States had made a large grant 
 of land conditioned upon the completion of the canal within a 
 fixed time. 1 " Hence there was a necessity for making the order 
 which the court made, — a necessity attending the administration 
 of the trust which the court had undertaken. The order was 
 necessary alike for the lien creditors and for the mortgagors." 2 
 
 In a case before the Supreme Court of Iowa it appeared that 
 the receiver had been authorized to complete and build all the un- 
 constructed portions of the railroad in his hands, from Clinton to 
 Iowa City, in that state, and to that end to borrow such sums of 
 money as might be necessary, not exceeding eight thousand dol- 
 lars per mile upon the whole line of road, completed and to be 
 completed, and to make the same a first lien upon the property. 
 The propriety of constructing portions of the road was not, how- 
 ever, a question before the court. 3 
 
 Mr. Justice Bradley appointed receivers, pending a foreclosure 
 suit, of a railroad which had been built so far as to enable trains 
 to run over the road, but a portion of which had been built in a 
 hasty and temporary manner, and needed to be completed in a 
 substantial way in order to insure the safety of the trains ; and 
 authorized them to put the road in repair, and to complete any 
 incomplete portion of it, to procure rolling stock, machinery, and 
 other things necessary for operating the road to the best advan- 
 tage, and save and preserve it for the benefit of the mortgage 
 bondholders. They were authorized to borrow money for these 
 purposes, and make the payment of it a first lien upon the prop- 
 erty. The order for the borrowing of this money was asked for 
 by the mortgagees themselves ; and consequently they were pre- 
 cluded from objecting to the effect of what they had asked for 
 and consented to. 4 
 
 The necessity of the expenditure for the protection of t lie prop- 
 erty is the criterion of its propriety. Thus, the Circuit Court of 
 the United States, after an appeal of the principal cause to the 
 Supreme Court of the United States, refused to authorize a re- 
 
 i Jerome v. McCarter, 94 U. S. 7.34, s Bank of Montreal v. Chicago, Clinton 
 738 &, Western R. R. " Cent I- J. 267. 
 
 « Per Stron-, J., in Jerome i'. McCarter, * Stanton <■. Ala. & Chattanooga R. R. 
 
 supra Co. 1> Woodfl, 506. 
 
 .Ml
 
 § 536.] receivers' debts and certificates. 
 
 ceiver in possession of the property to make any radical change 
 in the condition of the railroad property, such as purchasing a 
 bridge across Galveston Bay, or building or contracting to use a 
 new junction road through the city of Houston. 1 
 
 536. The case of the Vermont and Canada Railroad Com- 
 pany v. The Vermont Central Railroad Company, 2 which will 
 be noticed more fully in the next chapter, is a very instructive 
 one in relation to the proper functions of a Court of Chancery in 
 the management of a railroad through a receiver, and the crea- 
 tion through him of liens which shall override previously existing 
 mortgages. Mr. Justice Barrett, upon these points, said : " It is 
 fundamental that, in a receivership involving and requiring the 
 carrying on of a business, in order to meet the exigency which 
 caused the necessity for it, and made it the duty of the court to 
 create and maintain it, such receivership should not go outside of 
 the subject and purpose of it, and what is necessarily incidental 
 thereto. Rent in arrear, to be paid by the earnings of the two 
 roads, run as one, was the purpose of the receivership of 1861 ; 
 and those roads, with fixtures and equipments, were the property 
 in the hands of the receivers, to be used by them in making the 
 contemplated earnings. Of course, while thus in their hands, the 
 property was to be used and treated upon the same considerations 
 as would properly have been entertained and acted on by the 
 owners, using it for the same purpose, namely, legitimate earn- 
 ings. This would involve the condition of the track, the depot 
 accommodations, the equipments for service, the force of help 
 to be employed, and the relation to and connection with other 
 roads, as affecting the business and earnings of the road in hand. 
 While the current use of the property looked especially to the re- 
 alizing of net income, the property itself has not, for that reason, 
 to be subjected to deterioration and waste ; but it should be kept 
 
 1 Cowdrey v. Railroad Co. 1 Woods, of claims to be adjudged in each case, and 
 331. so great are the difficulties in arranging 
 
 2 Supreme Court of Vt. Oct. 30, 1877, conBicting rights among the mortgagees 
 14 Am. Railw. Rep. 497, 546, 552. But preparatory to a sale and reorganization 
 it does not follow that a long continued that it sometimes happens, in spite of the 
 receivership is not sometimes necessary, earnest efforts of the court to hasten the 
 " The theory is that our possession is only sale by foreclosure, that they remain in 
 temporary," remarked Judge Drummoud, the custody of the court for some years." 
 in a recent case in the Seventh Circuit, Secor v. Toledo, Peoria & Warsaw Ry. 
 "but there is generally such a multitude Co. 7 Biss. 513, 
 
 512
 
 FOR WHAT PURPOSES RECEIVERS MAY INCUR DEBTS. [§ 537. 
 
 in proper condition, not only for doing the current business dur- 
 ing the receivership, but for continuing to do it, without the ne- 
 cessity for special and extraordinary outlay on passing back to 
 the possession and use of the owners. But, for any legitimate 
 purpose, the receivership could not be extended to the control 
 and maintaining and repairing and equipping other roads, or to 
 the building or buying of other roads, or to the control and oper- 
 ating of lines of steamboats, or steamboats in the line of other 
 roads, even with the view of larger earnings, and larger net in- 
 come of the property which is the subject of the receivership. 
 .... It is fundamental in the law that a receivership is tempo- 
 rary, — to serve an existing exigency of a temporary nature ; 
 and, when that is done, it is to cease. The idea that a court, in 
 virtue of its prerogative in that behalf, is to take upon itself the 
 office of instituting a receivership to be perpetual, and to do the 
 duty of a court in controlling, directing, and enforcing the ad- 
 ministration in the management of a business, for the profit and 
 emolument of the parties interested, and not to serve a present 
 exigency, rendering it necessary in order to prevent a failure of 
 legal justice and right, has not yet been propounded in any book 
 on the subject, nor entertained and acted upon in any case." 
 
 537. When it is necessary for the receiver to raise money 
 for the purpose of repairing or operating a railroad, the court 
 may authorize him to issue negotiable certificates of indebt- 
 edness, which shall constitute a first lien upon the property or 
 the proceeds of it, and shall be redeemable within a limited time, 
 or when the property is sold by the court. The issuing of such 
 certificates is a matter of hardly less importance than the ap- 
 pointment of receivers, and should not be authorized except after 
 full notice to the parties interested, and ample opportunity for 
 them to be heard. The receiver should make a detailed state- 
 ment of the sums needed, and the purposes for which they are 
 needed, and clear proof should be adduced of the correctness of 
 this statement, and of the necessity of raising the money. Such 
 certificates are not debts of the company, but of the receivers, 
 backed by the pledged faith of the court that the property on 
 which they are made a charge is in the possession <>t the court, 
 and that it will provide for the payment <»f such certificates he- 
 fore the property or the proceeds of it shall pass out «»f its 0OH- 
 33 518
 
 § 538.] receivers' debts and certificates. 
 
 trol. They should, therefore, be issued with the utmost circum- 
 spection, and never in excess of the urgent present need. 1 
 
 538. Such certificates may be issued for material furnished 
 or for labor performed, as well as for money borrowed, provided 
 they are issued for an adequate consideration received. The re- 
 ceivers of the New Jersey Midland Railway Company, upon their 
 appointment, found in the possession of the company several loco- 
 motive engines and tenders, held under a lease from the makers, 
 which provided that, upon the payment in full of all the rent re- 
 served, the property should belong to the railway company. The 
 receivers requested the owners of the engines and tenders to leave 
 them in their possession for the use of the road, promising to 
 apply to the court for authority to pay the rent due under the 
 lease, and on the faith of this promise the owners permitted the 
 property to remain in their hands. The receivers afterwards 
 obtained authority to issue certain certificates of indebtedness, to 
 be used for the purposes of their trust, among which was the pay- 
 ment of the rent which had become due upon the engines. 
 
 The receivers offered to deliver certificates so obtained in pay- 
 ment for the rent, and the offer was accepted. They were, how- 
 ever, notified by persons interested in the mortgage bonds of the 
 road not to deliver the certificates, because the property was not 
 worth the amount agreed to be paid for it, and the receivers ac- 
 cordingly refused to deliver the certificates. An application was 
 made by the owners of the engines to compel the receivers to 
 deliver the certificates to them, but the chancellor held that the 
 receivers were not bound to deliver the certificates in payment of 
 particular items of expense, the propriety of the payment of which 
 was not before the court ; but they were authorized by the court 
 to purchase the locomotives and tenders at their true value, and 
 to pay for them in the certificates ; otherwise the owners of this 
 rolling stock, having the power at any time to take the property, 
 might do so, and they should be allowed just compensation for 
 the use of it since it had been in the hands of the receivers. 3 
 
 i Meyer v. Johnston, 53 Ala. 237, 346 ; to be the first lien upon it, and on the net 
 
 Hoover v. Montclair & Greenwood Lake receipts, rents, income, and profits of the 
 
 Ry. Co. 29 N. J. Eq. 4. The order an- railroad ; the net receipts, &c, to be ap- 
 
 thorizing the certificates in the latter case plied to the payment thereof before recourse 
 
 declared them to be a debt incurred for the is had to the property itself. 
 
 benefit and protection of the property, and 8 Coe v. N. J. Midland Ry. Co. 27 N. J. 
 
 514 Eq. 37.
 
 PRIORITY OF CERTIFICATES. [§ 539. 
 
 II. Priority of Receivers' Certificates. 
 
 539. The question of the priority of receivers* certificates 
 and loans over existing mortgage liens has not very often been 
 a matter of litigation ; because in almost all instances in which 
 the courts have authorized receivers to borrow money and make 
 their obligations a first lien upon the property, the mortgagees 
 have themselves asked for the orders for these purposes in ad- 
 vance, 1 or have expressly assented to the making of them, and, of 
 course, they are in such cases precluded from afterwards claiming 
 any priority over the lien thus created for the purpose of pre- 
 serving the mortgaged property. But it is claimed that courts of 
 equity have authority, without the consent of mortgagees, to order 
 receivers to borrow money, and to bind the property in their 
 hands for the payment of the loans. This authority, if it exists 
 at all, is not, however, altogether discretionary ; the judicial dis- 
 cretion is limited by settled principles of equity. 2 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 mortgagee in possession to incur charges for the pres- 
 ervation and repair of the property it has taken possession of 
 through its receiver, a Court of Chancery 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 permit the obligation of contracts to be im- 
 paired. " The Constitution of the United States inhibits even a 
 state from doing an act which shall have that effect. And, cer- 
 tainly, a court, which is a portion of the government of the state, 
 cannot have a power which is denied to the state in convention 
 assembled. If, therefore, the action of a chancellor in this cause 
 goes to the extent of taking the property of the defendant corpo- 
 ration into his hands for the purpose, through his appointees, of 
 completing an unfinished work, or of enlarging or improving a 
 finished one, beyond what is necessary for its preservation, and to 
 that end of raising money, by charging the railroad and its appUT- 
 
 i As in Kennedy v. St. Paul & Pacific B. Co. supra; and Hoover v. Montdalr 
 k. R. Co. supra; Stanton v. Ala. & Chat- & Greenwood Lake By. Co. tupra. 
 tanooga B. B. Co. supra; Vermont & * Meyer v. Johnston, 68 Ala. 287. 
 
 Canada U. B. Co. v. Vermout Central li. 
 
 515
 
 §§ 540, 541.] receivers' debts and certificates. 
 
 tenances with liens which are to supersede older ones, without the 
 consent of the holders of these, he has inadvertently passed be- 
 yond the boundaries of a chancellor's jurisdiction. In our opin- 
 ion, no such power is vested or resides in any judicial tribunal." 1 
 The question of the priority of receivers' certificates may arise 
 with reference to three classes of creditors : first, with reference 
 to the bondholders secured by the mortgage for the enforcement 
 of which the receiver was appointed ; second, with reference to 
 prior mortgagees ; and, third, with reference to subsequent mort- 
 gagees. Owners of the equity of redemption stand in the same 
 legal relation to such certificates as subsequent mortgagees, since 
 they have the same right of redemption. 
 
 540. When bondholders, or trustees in their behalf, after 
 obtaining the appointment of receivers, have petitioned that 
 they might be allowed to borrow money on the credit of the 
 property, there can be no question that they waive the priority 
 secured to them by their mortgage in favor of such debts. Even 
 when their waiver is not expressly made, it is implied under such 
 circumstances. Moreover, even if such petition be not made by 
 or in behalf of such bondholders, but by the receiver himself, or 
 by any other creditors, if the bondholders or mortgage trustees, 
 being parties to the proceedings and before the court, make no 
 objection to the creating of such debts and liens upon the prop- 
 erty by the receivers, they cannot afterwards object to according 
 priority to the liens so created. 2 
 
 541. Upon the question of the power of courts to give re- 
 ceivers' loans precedence over existing mortgages there are 
 no satisfactory adjudications. It is claimed on the one hand that 
 this power is confined to cases in which the prior mortgagees, 
 either expressly or impliedly, consent to the making of such loans ; 
 and that to attempt this without such consent would be an inva- 
 sion of the right of property by the tribunals whose duty it is to 
 protect this fundamental right. But, on the other hand, it is 
 claimed that where it is necessary to raise money, not to extend 
 or improve an existing road, but to repair and preserve a road 
 which the court has taken custody of at the suit of a junior mort- 
 
 1 Per Manning, J., in Meyer v. John- 2 See §§ 639, 543. 
 ston, supra. 
 
 516
 
 PRIORITY OF CERTIFICATES. [§ 541. 
 
 gagee, it would be competent for the court to authorize the rais- 
 ing of money by loans upon the credit of the entire property, 
 making them a lien upon it in preference to the senior mortgages. 
 Otherwise, it is said, it might be practically impossible for the 
 court to give any protection to a junior mortgagee. The prop- 
 erty might be amply sufficient to meet a prior mortgage in any 
 event, so that the bondholders under it might be opposed to any 
 expenditure upon the property, even to keep it in repair and in 
 operation, when such expenditure might involve the raising of 
 money, by creating liens therefor which should override their 
 mortgage ; while it might be evident that, by judiciously repair- 
 ing and operating the road, the property might finally be disposed 
 of at a price sufficient to pay not only the first mortgage, but as 
 well the junior mortgage. Moreover, after the court has once 
 taken the property into its custody, it would be its duty, in behalf 
 of all the parties in interest, to take care of it, and not allow it to 
 go to decay ; and, if this cannot be done out of the income of the 
 property, it would seem to follow that it would then be the duty 
 of the court to authorize, for this purpose, the raising of money 
 upon the credit of the property itself. 
 
 Such was the course adopted by the Supreme Court of Alabama 
 in the recent important case of Meyer v. Johnston. 1 A receiver 
 having been appointed upon the application of a junior mortgagee, 
 the court approved his issuing of first lien certificates of indebted- 
 ness, under the chancellor's direction, in opposition to the will of 
 prior lien-holders. In addition to the duty of the court to preserve 
 the property in its custody, the public nature of railroads was con- 
 sidered. " If it were not for the public quality belonging to them, 
 for the injury that would be done to the interests of whole com- 
 munities that have become dependent on a railroad for accommo- 
 dation in a thousand things, a chancellor might say to the parties 
 most interested, Unless you furnish means for the protection of 
 this property, which does not itself afford an adequate income for 
 the purpose, it may become a dilapidated and useless wreck, l'.ut 
 tin- inconvenience and loss which this would inflict on the popu- 
 lation of large districts, coupled with the benefit t<> parties who, 
 perhaps, are powerless to take care of themselves, of preventing 
 the rapid diminution of value, and derangement and disorganiza- 
 tion that would otherwise result, seem to require — not for the 
 
 i 53 Ala. 237, 34G. 
 
 .',17
 
 § 542.] receivers' debts and certificates. 
 
 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 railroad property, if the court has 
 been obliged to take possession of it — that the court should bor- 
 row money for that purpose, if it cannot otherwise do so in suffi- 
 ciently large sums, by causing negotiable certificates of indebted- 
 ness 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." 
 
 542. The principle is clear that a mortgage cannot be dis- 
 placed or postponed without the consent of the mortgagee. — 
 The court cannot, by authorizing a receiver to create liens upon the 
 property, displace or impair the mortgagee's rights of property, any 
 more than the legislature can impair the obligation of a contract. 
 The court has power while in possession of property to protect it 
 from loss and destruction, and to preserve it in the condition in 
 which it was received ; and for this purpose it may authorize the 
 expenditure from the property itself of whatever is absolutely 
 necessary for its preservation ; and may do this as against any 
 and all parties interested. The extent of this power is measured 
 by the absolute necessity of the expenditure for the protection 
 of the property of which the court has taken charge. This ex- 
 penditure is a matter of duty with the court, and not a matter of 
 discretion. When the limit of such actual necessity is passed, the 
 consent, express or implied, of those whose rights of property will 
 be affected, must be had. If large expenditures are to be made to 
 put a railroad into condition to be operated by a receiver, if a new 
 road is to be built, or a part of the existing road is to be rebuilt, or 
 if new rolling stock is to be purchased for it, the debts incurred for 
 these purposes should have the sanction of the mortgagees, of the 
 property. If such mortgagees are not parties to the suit in which 
 the receiver was appointed, they should be summoned in before the 
 granting of any petition to charge the property with such debts. 1 
 When prior mortgagees do not assent to receivers' liens, these 
 should be made expressly subject to the prior mortgages. 2 
 
 i See Regent's Canal Iron Works Co. in 1878, on "Postponing Priorities of First 
 re, L. R. 3 Ch. D. 41 1 ; stated in § 552 ; and Mortgage Liens," by Judge Clayton, 
 see article 13 Am. Law Rer. 40, October, 2 As was done In re U. S. Rolling 
 
 Stock Co. 55 How. (N. Y.) Pr. 286. 
 
 518
 
 PRIORITY OF CERTIFICATES. [§ 543. 
 
 543. Neither the mortgagor nor his assignees can ques- 
 tion the priority of receivers' certificates. — In a recent case 
 before the Supreme Court of the United States, 1 it appeared that 
 the Lake Superior Ship Canal, Railroad, and Iron Company, after 
 executing two mortgages of its property, including a large land 
 grant from the United States, made default in the payment of in- 
 terest, and a receiver was appointed. The receiver, in order to 
 obtain money necessary for completing the canal, and to save the 
 land grant, obtained an order of court authorizing him to create 
 and sell certificates of indebtedness to the amount of $500,000, 
 secured by a mortgage of all the property, which was to be prior 
 in right to all other mortgages. The creditors secured by the ex- 
 isting mortgages appear not to have asked for this order, but they 
 were all there in court and did not object to it. The company 
 afterwards having gone into bankruptcy, the assignees were made 
 parties to the foreclosure suit, and objected to the priority ac- 
 corded by the decree of foreclosure to the certificates issued by the 
 receiver. But the court held that neither the mortgagor nor his 
 assignee in bankruptcy could object to the order in which the pri- 
 ority of valid and subsisting liens on the premises is fixed by the 
 decree. It could make no difference to them whether the certifi- 
 cates are paid before other liens are dischai'ged, or after all the 
 debts seciu'ed by mortgage have been satisfied. The assignees 
 can take nothing until all liens on the assigned property have 
 been removed. " It would be superfluous," said Mr. Justice 
 Strong, delivering the judgment of the court, " to spend much 
 time in considering the power of the court to confer the authority 
 upon its receiver that it attempted to confer. As a Court of 
 Equity, having the mortgaged property in charge, it was its plain 
 duty to preserve it, not only for the benefit of the lien creditors, 
 but also for the benefit of the company whose possession the 
 court had displaced. Under the provisions of the acts of Con- 
 gress, granting the lands covered by the mortgages, the lands 
 reverted to the United States, unless the ship canal should be 
 finished within a fixed period, and that period was passing away 
 when tlic order was granted to the receiver to raise money £01 
 completing the canal, by tin; issue of certificates secured by his 
 mortgage. The canal was unfinished, and there were in the re- 
 ceiver's hands no funds to finish it. Hence, there was a oeces- 
 
 1 Jerome v. McCarter, 'J4 !'. B, 784. 
 
 511)
 
 § 544.] receivers' debts and certificates. 
 
 sity for making the order which the court made, — a necessity 
 attending the administration of the trust the court had under- 
 taken. The order was necessary alike for the lien creditors and 
 for the mortgagors ; whether the action of the court could make 
 the receiver's mortgage superior in right to the mortgages which 
 existed when it was made, it is hopeless to inquire. None of the 
 creditors secured by those other mortgages objected to the order 
 when it was made, though they were all then in court. None of 
 them object to its lien or its priority now. And we think the 
 appellants, either as representatives of their assignors or of gen- 
 eral creditors, cannot be heard to object. Beyond doubt, they 
 would not be entitled to a return of the property discharged from 
 liability for the receiver's certificates remaining unpaid, even if 
 all the other mortgages were satisfied. As against them the cer- 
 tificates are certainly charges upon the property, and they have, 
 therefore, no right to complain of the decree, which gives the 
 certificates priority to other liens." 
 
 544. Provision is made by statute in a few states that re- 
 ceivers may be authorized to borrow money and create liens upon 
 the property. Thus in Vermont x it is provided that the Court 
 of Chancery shall have power to authorize the receivers or mana- 
 gers of property in the course of administration in such court, 
 when the interest of the parties or property shall require it, to 
 borrow money as it may be needful for the proper and convenient 
 discharge of their duties, at a rate not exceeding eight per cent., 
 and on such other terms, conditions, limitations, and security as 
 shall to the court seem fit. But it is provided that nothing con- 
 tained in this act shall be construed to prevent such receivers or 
 managers from borrowing money for temporary purposes in the 
 same manner they could before the passage of this act. 
 
 In New Jersey 2 the receiver of an insolvent railroad company 
 is empowered to operate the road for the use of the public, and 
 all expenses incident to the operation of such road are declared 
 to be a first lien on the receipts, to be paid before any other in- 
 cumbrance whatever. 
 
 In Ohio 3 it is provided that the earnings of a railroad in the 
 
 1 Gen. Stat. 1870, p. 924; Acts 1866, a 1 K. S. 1877, p. 196, § 106 ; Laws 1874, 
 No. 41, page 53. p. 11. 
 
 3 Laws 1872, p. 31, §§ 1,3, 4. 
 520
 
 NEGOTIABILITY OF RECEIVERS' CERTIFICATES. [§ 545. 
 
 hands of a receiver, and all other moneys coming into his hands as 
 such receiver, shall be applied first to pay costs and expenses of 
 the suit in which he was appointed, and the expenses of operating 
 and managing the road, including all materials and supplies pro- 
 cured by him therefor, and also liabilities incurred by him in such 
 operation and management ; and that all judgments recovered 
 against the receiver of a railroad for injuries to person or property, 
 or for wages of employees, or work done, or materials furnished 
 while such receiver is operating or managing such railroad, shall 
 be a lien on the funds in his hands as receiver, but shall affect 
 him only in his trust capacity, and not individually. 
 
 When the line of railroad operated by a receiver lies wholly 
 within the State of Ohio, all moneys coming into the hands of 
 the receiver, whether arising from the operating of the road or 
 otherwise, shall be kept and deposited in such place within this 
 state as the court may direct, until properly disbursed ; but if any 
 portion of said railroad shall lie in another state or states, then 
 said receiver shall be required to deposit in this state at least such 
 share of the funds in his hands as is proportioned to the value of 
 the property of said road within the limits of Ohio. 
 
 II. Negotiability of Receivers' Certificates. 
 
 545. Such certificates, however, are not commercial paper, 
 good in the hands of a bond fide holder, without regard to any 
 irregularity or infirmity attending their original issue. They 
 must be governed according to the authority conferred upon the 
 receiver to issue them, and not according to the form which he 
 may choose to give them. Where receivers were authorized to dis- 
 pose of such certificates, payable ten years after date, for not less 
 than ninety cents on the dollar of their par value, and ;it a rate of 
 interest not exceeding eight per cent, per annum, and they hy- 
 pothecated them at an exorbitant rate of interest, and received 
 only a third, or, at most, half of the par value of the certificates, 
 it was held that the certificates were good in the hands of (he 
 holders of them for the amount <»f money actually advanoed upon 
 them, with interest according to the terms of the order of the 
 court under which they were issued ; but that the Lenders of t In* 
 money were not bound to sec; that the money was applied to the 
 purposes of the trust. The money they have actually advanoed 
 cannot he confiscated, because the officers appointed by the court 
 
 621
 
 § 546.] receivers' debts and certificates. 
 
 have been unfaithful to their trust. 1 The certificates in this case 
 were made payable to bearer, but on their face they recited that 
 they were made in pursuance of an order of Judge Bradley, on the 
 twenty-sixth day of August, 1872, in a suit in equity pending in 
 the Circuit Court of the United States at Mobile for the District 
 of Alabama, in the Fifth Judicial Circuit, between parties named. 
 The evidence showed that the money was advanced upon the 
 notes of the receivers, the certificates being pledged as collateral, 
 with power to sell them at public or private sale without notice. 
 But the court held that the lenders of money on the hypothecated 
 certificates might be compelled to allow their money to go on the 
 terms prescribed by the orders of the court, both as to the rate of 
 interest and the time of payment, and ordered that the certificates 
 not necessary at ninety cents on the dollar, to secure the sums so 
 advanced, should be returned to the receivers. 
 
 546. Certificates issued without consideration are invalid 
 even in the hands of an innocent holder for value. Under a con- 
 tract for the purchase of iron rails, a receiver issued certificates 
 therefor, which recited the order of court, and were made payable 
 to bearer. The rails were never delivered or tendered to the re- 
 ceiver, but the certificates were transferred to an innocent holder 
 for value. In a suit by him it was adjudged that he could not 
 recover ; that the receiver had no powers except those derived 
 from the order of court authorizing the issuing of the certificates, 
 and therefore could issue certificates only " for money borrowed, 
 material furnished, labor performed, or on account of contracts 
 made by him for or on account of the construction or completion 
 of said road or any part thereof." 2 In the language of the court, 
 " When the material was furnished or labor performed he was 
 authorized to issue the certificates in payment therefor, and not 
 until then. And if he made a contract for the construction of the 
 road he might issue certificates as the material was furnished 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 
 
 1 Stanton v. Alabama & Chattanooga & Western R. R. Co., Supreme Court of 
 R. R. Co. 2 Woods, 506. Iowa, June Term, 1878, 7 Cent. L. J. 
 
 2 Bank of Montreal v. Chicago, Clinton 267 ; 6 Reporter, 616. 
 
 522
 
 NEGOTIABILITY OF RECEIVER'S CERTIFICATES. [§ 546. 
 
 it fairly appears he was prohibited from so doing. If the neces- 
 sity existed for enlarged powers, they should have been applied 
 for." Moreover the certificates referred on their face to the order 
 of court under which they were issued, and the holder was bound 
 to take notice of the limitation of the receiver's power, and bound 
 to know whether the certificates in question were issued in accord- 
 ance with the power conferred. 
 
 523
 
 CHAPTER XVIII. 
 
 DEBTS OF MORTGAGE TRUSTEES IN POSSESSION". 
 
 I. Right of trustees to repayment of their I II. Liability of trustees operating a rail- 
 debts and expenses out of the trust fund, | road as common carriers, 556. 
 547-555. 
 
 I. Right of Trustees to Repayment of their Debts and Expenses 
 out of the Trust Fund. 
 
 547. Trustees under railroad mortgages have an inherent 
 equitable right to be reimbursed all expenses reasonably in- 
 curred in the execution of the trust, and for such expenses they 
 have a lien upon the trust property. 1 Their rights go even far- 
 ther than this ; for, if the trust property prove insufficient to re- 
 imburse the trustees for their proper expenses and reasonable 
 compensation, they may call upon the bondholders in whose be- 
 half the trust was created to pay them. It is immaterial that the 
 deed of trust makes no provision for the payment of such expenses 
 and charges ; this is a legal right, which necessarily attends the 
 administration of the trust. The franchise and property conveyed 
 to the trustees become charged with a lien in their favor, and they 
 remain so charged until the trustees themselves do something that 
 operates as a discharge of such lien. If, after long litigation by 
 the trustees to establish the mortgage lien, and to enforce it by 
 foreclosure, subsequent mortgagees buy up the bonds secured by 
 the mortgage, and form a new corporation, instead of redeeming 
 the first mortgage by paying the amount fixed by the decree of 
 foreclosure, the right of the trustees to hold all the lien originally 
 existing in them for their services and expenses in administering 
 the trust is nowise affected. Decree of foreclosure, in such case, 
 would have full effect upon the title, as between mortgagor and 
 mortgagee ; and, although all the bondholders have been satisfied, 
 
 1 Rensselaer & Saratoga R. R. Co. v. Miller, 47 Vt. 146; Morison v. Morison, 
 7DeG., M. &G.214. 
 524
 
 RIGHT OF TRUSTEES TO REPAYMENT. [§§ 548, 549. 
 
 the legal title is in the trustees ; and if the new corporation, or 
 the subsequent mortgagees, would prevent the trustees asserting 
 their title, and entering into possession, they must satisfy the 
 proper claims they have upon the property. Their lien upon the 
 property extends not merely to claims for their own services, and 
 for payments actually made by them, but to advances made to 
 them by bondholders to supply them with funds in the course of 
 the administration of the trust ; for such advances are, in effect, 
 loans to the trustees for the benefit of the trust. 1 
 
 548. When the object of a receivership has been accom- 
 plished, and the occasion for it no longer exists, but it is nev- 
 ertheless continued, in form and name, by consent of the parties 
 in interest, the managing party is not regarded as a receiver in 
 the sense of the law, but as having the character and office of an 
 administrator of a trust, by agreement of the parties. Conse- 
 quently, the debts contracted by such manager, although having 
 the formal sanction of the court, cannot be established as receiver- 
 ship liens, but are debts which are a lien upon the trust property, 
 under the common doctrine that disbursements and expenses, 
 properly made and incurred by trustees, on account of the trust 
 property, are entitled to payment out of the trust property. A 
 decree entered by consent, after the occasion for the receivership 
 has ceased, for a new and continuing system of tenure and manage- 
 ment, does not make the manager the officer and representative of 
 
 he court, but merely the agent and representative of the parties. 
 
 549. These points are forcibly illustrated by the case of 
 the Vermont Central Railroad Company. 2 — In the year 1849, 
 the Vermont and Canada Railroad Company leased to the Ver- 
 mont Central Railroad Company its road and all its property, to 
 hold under a perpetual lease, reserving as rent eight per cent. 
 upon the cost of its road and property, payable semi-annually. 
 In the following year an addition was made to the lease, provid- 
 ing that, after four months' default in payment of the rent, the 
 Vermont ami Canada Railroad Company might take possession 
 of both roads, and all the property of both, and run them bill, out 
 
 1 Rensselaer &. Saratoga It. It. Co. v. mont Central B. R. Co., decided Oct. 80, 
 Miller, supra. 1877, so Vt. BOO; reported En li Am. By. 
 
 ' J Vermont & Canadu It. It. Co. t-. Ver- Bep. 4'J7-.">75.
 
 § 549.] DEBTS OF MORTGAGE TRUSTEES IN POSSESSION. 
 
 of the net income, the accrued rent should be paid ; and then pos- 
 session should be surrendered to and resumed by the Vermont 
 Central Railroad Company, and held and used under the original 
 lease. In 1851, the Vermont Central Railroad Company executed 
 a first mortgage of its road, and on the twentieth day of May, in 
 the following year, a second mortgage ; but both mortgages were 
 made expressly subject to the rights of the Vermont and Canada 
 Railroad Company under the lease. On the twenty-eighth day 
 of the following June, the Vermont Central Railroad surrendered 
 to the first mortgage trustees, who then took possession, and the 
 company has never since had possession. The last payment of 
 rent under the lease was made on the first day of June, 1854. 
 The following year, the Vermont and Canada Railroad Company 
 filed a bill in the Court of Chancery in Franklin County against 
 the Vermont Central Railroad Company, and the trustees under 
 both mortgages, and obtained the appointment of temporary re- 
 ceivers ; and after protracted litigation the Supreme Court, in 
 January, 1861, issued its mandate to the Court of Chancery, di- 
 recting that the receivers then in possession, or such as the court 
 might see fit to appoint, should continue in the possession and 
 management of the roads, and secure the tolls and income thereof, 
 and cause the same to be paid over in extinguishment of the rents 
 then due, or which might become due, until the same should be 
 fully satisfied. The Court of Chancery entered a decree accord- 
 ingly, continuing the receivers in the management of the prop- 
 erty, and directing them to pay over semi-annually, on the first 
 days of December and June, such sums as might accrue from the 
 earnings of the property, until the sums then due and growing 
 due for rent should be fully paid. Under this mandate and de- 
 cree the receivership was administered until 1864, when a com- 
 promise decree was entered in the Court of Chancery, by agree- 
 ment of the parties. By this compromise the construction account 
 of the Vermont and Canada Railroad Company was settled ; and 
 under the authority of an act of the legislature the back rent was 
 converted into stock, and the capital stock was increased to 
 $2,000,000. To carry this adjustment into effect, a decree was 
 entered January nineteenth, 1864, declaring the capital stock of 
 the Vermont and Canada Railroad Company to be $2,000,000, 
 which should be the basis for the computation of the rents pro- 
 vided for in the original lease, to be paid by the trustees and re- 
 526
 
 RIGHT OF TRUSTEES TO REPAYMENT. [§ 549. 
 
 ceivers from the income of the roads, in semi-annual payments, 
 beginning on the first day of June, 1864. The decree further 
 provided for a board, to be chosen annually by the stockholders, 
 to advise the trustees and receivers in respect to the management 
 of the roads and property, and to audit the accounts. This de- 
 cree was manifestly one of consent. 
 
 In 1865, upon the petition of the receivers, the court authorized 
 them to borrow 6700,000, and to pledge equipments of the road 
 as security. This decree was apparently made with the consent 
 of all the parties in interest. In 1867, a further equipment loan 
 of 8300,000 was authorized, and also a loan of §500,000, for the 
 payment of interest on the first and second mortgages. In 1869, 
 a third equipment loan was authorized of $500,000. In 1871, a 
 loan of §1,000,000 was authorized ; and in 1872, a loan of §2,500,- 
 000, part of which was to be applied to retiring the first equip- 
 ment loan. The decree authorizing the latter loan provided that 
 the notes issued under the decree should constitute a lien and 
 charge upon the trust property under the control of the trustees 
 and managers, and the earnings thereof. 
 
 From time to time, during the period of these decrees, there 
 had been sundry decrees and orders, changing and appointing 
 managers, and ratifying contracts of lease with other roads, — 
 the Ogdensburgh and Lake Champlain Railroad Company, the 
 Rutland Railroad Company, and the Missisquoi Railroad Com- 
 pany. 
 
 All these proceedings professed, and were represented to the 
 chancellor, to be amicable, and for the most part to have been de- 
 vised and agreed upon by leading parties. No one appeared in 
 any instance with protest or objection. No one made question or 
 objection afterwards, till adverse litigation was begun in 1873, 
 by the Vermont and Canada Company's petitioning for an order 
 for tin- payment of the overdue rent, and an order for the removal 
 of the managers. 
 
 In the mean time, a corporation by the name of tin- ( Jentral \ er- 
 mont Railroad Company had aucceeded to the managenienl of the 
 property as receivers. Finally, in 1876, this company and vain mis 
 individuals filed a petition, setting forth that for fifteen years the 
 Vermont and Canada and tin; Vermonl Centra] Railroad < !om- 
 panies had been under the administration of the courl in this 
 cause by managers appointed by the court; that during Bueh ad 
 
 527
 
 § 549.] DEBTS OF MORTGAGE TRUSTEES IN POSSESSION. 
 
 ministration large sums of money had been borrowed by the man- 
 agers, and bonds issued therefor under different decrees, amount- 
 ing in the whole to about $4,337,000, outstanding, on which was 
 also due about $175,000 of interest in default; that, in addition 
 to this funded debt, there was outstanding also a floating debt of 
 about $2,000,000 ; that the managers were without money and 
 without credit ; and therefore they prayed that these debts might 
 be declared a charge and first lien upon the property of these 
 roads, and that they might be sold, with all their equipments, for 
 the payment of these and other debts. This petition was dis- 
 missed by the chancellor ; and, on appeal to the Supreme Court of 
 the state, his decree was affirmed. Mr. Justice Barrett delivered 
 the opinion of the court, reviewing all the proceedings in the case 
 from the time they were commenced in 1861, and fully examining 
 all the legal questions involved. 1 The original receivership was 
 undeniably proper, as it was the only practicable remedy for en- 
 forcing the security of the Vermont and Canada Company upon 
 the earnings of the two roads for its rent, except putting this 
 company into the possession and management of the roads ; and 
 this the court declined to do, for the reason that the management 
 might be such as to render such possession unduly continued. It 
 was supposed that a receivership, interested to have this claim 
 satisfied at the earliest practicable day, so that subsequent rights 
 and interests might be served by the property, would result in the 
 earliest practicable enfranchisement of the property from judicial 
 control, and the final ceasing of the suit. 
 
 In what was provided in the compromise decree, as to the pos- 
 session and management of the property, the court was perform- 
 ing no duty, but merely accorded, ex gratia, assent and ratification. 
 It exercised no judicial judgment, and did not put forth the exer- 
 tion of its prerogative. It is fundamental in any idea of a receiv- 
 ership that the court is to have the active and responsible control 
 of the administration. That was not so in this case ; but, on the 
 contrary, the whole course, in general and in detail, was devised 
 and executed by the managers, and their associates and advisers 
 in interest, without any supposition on the part of themselves or 
 of the court that the court had any real office to perforin calling 
 into exercise judicial judgment, direction, or control. " The peti- 
 
 1 Oct. 30, 1877. Vermont & Canada 50 Vt. 500; 14 Am. Ry. Rep. 497, 559, 
 R. R. Co. v. Vermont Central R. R. Co. 565, 567, 568, 570. 
 528
 
 EIGHT OF TRUSTEES TO REPAYMENT. [§ 549. 
 
 tion cannot be maintained then, and the prayer thereof granted," 
 said the learned judge, " on grounds and reasons and rules of the 
 law peculiar to a receivership, as it is understood and provided for 
 and warranted by the law. If it were to be assumed that the 
 trust debts, as they are called, including what is called the floating 
 debt, would be a first lien on all the property, if incurred in the 
 administration of a proper receivership, and that it would be the 
 province and duty of the court to order the sale of the property, 
 as the only means of giving effect to that lien, in rightful satisfac- 
 tion of such debts, it would not follow that such is true in the case 
 
 as it is before us In the other cases of receiverships, where 
 
 allowances were upheld, the expenditures and services were in re- 
 ceiverships of necessity, and where the expenditures and services 
 were in the administration of the office, under the active and af- 
 firmative direction of the court. The other citations point to the 
 common doctrine of the lien of trustees for the proper expenses 
 and disbursements of administering the trust. 
 
 " It may now be said summarily, as the result in this respect, 
 that the Vermont and Canada Railroad Company stand upon their 
 lease, under the compromise decree, and the decrees and orders 
 following, with the right to have the stipulated rent paid out of 
 the net earnings. Subject to this, the mortgage bondholders of 
 the Vermont Central Railroad Company stand upon their mort- 
 gages, under the compromise decree, and the decrees and orders 
 following, with the right to have the net earnings appropriated 
 according to the respective provisions in that behalf. ' Net earn- 
 ings ' means what is left after paying the legitimate cost and ex- 
 pense of making earnings by the use of the property. The hold- 
 ers of the trust bonds stand upon the rights created and vested by 
 the respective transactions constituting the issue, appropriation, 
 and receipt thereof respectively, including a right to the security 
 provided, according to the legal effect of the provision making 
 such security. The bonds were taken for the required considera- 
 tion, in faith of the promise to pay interest and principal as stipu- 
 lated, and in reliance on the security provided and pledged. '1 bifl 
 vested in the bondholder the right resulting from the transaction 
 by the legal effect of the promise, and to the security pledged. 
 This is in no manner affected by tin' facl that the promise may 
 not be performed, and tin- security may prove inadequate ;md 
 worthless. Of course, the bond buyers knew what the) were buy- 
 
 m 529
 
 § 549.] DEBTS OF MORTGAGE TRUSTEES IN POSSESSION. 
 
 ing ; namely, a bond issued and secured in the carrying on of the 
 management of the property by the persons in charge, as such 
 management was shown by the records and files and official docu- 
 ments to have been created and carried on, and which might con- 
 tinue to go on indefinitely in the uncertain future. In view of 
 this, each bondholder took the hazard of both the present and 
 prospective value of his bonds, as depending on the ability of the 
 promisor and the value of the security. If it should turn out that 
 the pledged property had been used up or become worthless, and 
 the car service fruitless, and the guaranty of the Vermont and 
 Canada Railroad Company a barren resource, that would not 
 touch the validity and operative force of the contract and the 
 pledge. As to what is called the 'floating debt,' which rests upon 
 the credit given to the trust management, the reason is not ob- 
 vious why that debt should have precedence to any other of the 
 trust debts, — trust debts, as distinguished from the claims of the 
 Vermont and Canada Railroad Company and the Vermont Cen- 
 tral bondholders. The secured trust debts were contracted in the 
 carrying on of the business of the management, for the purposes 
 contemplated and sought to be accomplished by the managers, — 
 just as a floating debt has been contracted, and for the same pur- 
 poses. It can make no difference whether that debt is due to out- 
 side parties, or to the parties managing. It is equally on the 
 credit of the trust. The fact that it is without specific security 
 does not give it a higher rank or a different right from debts with 
 security. It stands upon the credit which induced the contracting 
 of it, namely, the promise of the managing party in view of ability 
 and means for payment, just as the secured debts stand on the 
 same credit and the security provided. What is now claimed is, 
 that that debt shall have precedence of the other trust debts, 
 making it first in right as to means of payment, even to the ap- 
 propriation of the security pledged for the payment of the other 
 debts. There would be no warrant for this, even in case of a 
 proper receivership. The trust is the debtor to each and all its 
 creditors. In the settlement of estates of deceased debtors, the 
 statute gives priority to doctors' bills, and other expenses of the 
 last sickness, and funeral charges. But we know of no statute 
 or rule of law that would warrant the priority claimed in this 
 
 case 
 
 " In view of that relation, is there any warrant of law for order- 
 530
 
 RIGHT OF TRUSTEES TO REPAYMENT. [§ 550. 
 
 ing a sale of the property ? No ease and no book has been pre- 
 sented or come to our notice in which it has been propounded or 
 held that, in a real receivership for managing property, to realize 
 profits by use, and not with a view to its ultimate sale, and the 
 realization of money assets thereby, the property lias been or 
 should be sold to realize means for paying charges incurred in 
 the management. The cases are numerous of sales b}^ receivers 
 under the order of the Court of Chancery. .But no case is found 
 in which such sale has been ordered as a means of reimbursing 
 
 receivership expenses, in virtue of a lien in that behalf If 
 
 it were to be now held that the property itself in the hands of 
 the Central Vermont Railroad Company is subject to the lien as 
 claimed, such lien would not warrant an order of sale in the first 
 instance. It would be a redeemable lien, resting upon the prop- 
 erty in the character of an equitable mortgage ; and a sale would 
 be ordered in any event only on failure to redeem, according to 
 the final decree in that behalf." 
 
 550. Policy of confining trustees in their management of 
 the property to the legitimate objects of the trust. — The 
 facts of the case and the grounds of the decision have thus been 
 stated at considerable length, because the case is a remarkable 
 one in many ways, and in its different phases has been a subject 
 of much controversy, out of court as well as in. It presents many 
 novel and interesting points. The case will be a warning to all 
 bondholders and other creditors of railroad corporations against 
 their allowing either receivers or trustees in the possession of 
 their property to manage it otherwise than to secure- its preser- 
 vation during temporary emergencies. The management in this 
 case resulted favorably, so long as it was confined to the operating 
 of the roads as they were when the receivers were first appointed ; 
 but, seeking to secure even better results, the trustees enlarged 
 the field of their operations, — they took possession under Leases 
 of several other railroads, and of a fleet of steamers on the west- 
 ern lakes. These new enterprises resulted disastrously ; and the 
 managers, after obtaining repeated Loans, at last found they had 
 incurred, in the management of the property, an indebtedness 
 which the entire ralue of the roads originally placed in the hands 
 of the receivers might prove inadequate to satisfy. The result 
 
 IS even worse than the improving of a mortgagor out 01 his S6- 
 
 531
 
 § 551.] DEBTS OF MORTGAGE TRUSTEES IN POSSESSION. 
 
 curity. The receivership was sought by the Vermont and Can- 
 ada Company, in the year 1855, as a means of obtaining the rent 
 of its own road, which the Vermont Central Company held under 
 a lease. The receivers, in 1861, took possession not only of the 
 road of the latter company, but of the road of the former, by 
 virtue of the lease. In 1877, the creditors to whom were due the 
 debts incurred in the management of the property were before 
 the court, asking for the sale of both roads to pay these debts ; 
 and the result may be, that not only the mortgage creditors of the 
 Vermont Central Company are improved out of their estate, but 
 that the Vermont and Canada Company, which as creditor sought 
 to collect the rent of its road, has been improved out of its own 
 road as well. 1 
 
 551. Debts contracted by trustees in possession for com- 
 pleting the road are preferred to the lien of the mortgage under 
 which the trust arose, when such completion was necessary in 
 order to preserve the value of the franchise. The Hempfield 
 Railroad Company of Pennsylvania issued coupon bonds, and se- 
 cured them by mortgage to trustees who were authorized by the 
 deed, upon default in payment of the coupons, to take possession 
 of the road for six months, and out of the profits to pay the bond- 
 holders. Authority was also given by the deed to the trustees to 
 contract debts for " preserving, repairing, and maintaining " the 
 road. The company by deed delivered possession to the trustees 
 for six months, and afterwards by deed continued the possession 
 until the bonds should be paid. The trustees contracted debts 
 to a large amount for work done and materials furnished, and 
 also completed the road by laying down rails after the road-bed 
 had already been constructed by the company. Upon a subse- 
 quent foreclosure sale, a master was appointed by the court to 
 distribute the fund, and he reported in favor of those creditors 
 whose claims had arisen during the trustees' possession, excluding 
 the bondholders and creditors whose debts had been contracted 
 
 1 Although there are some cases of im- those interested in the equity of redemp- 
 provident management of railroads by tion, yet there are not a few cases where 
 trustees and receivers, and others, where the management of trustees and receivers 
 they have apparently managed for their has been such as to produce profits where 
 own benefit first of all, and in the second no profits had been made before, or to re- 
 place for the mortgagees at whose instance store profits which corporate officers had 
 they were appointed, and last of all for failed to keep up. 
 
 532
 
 RIGHT OF TRUSTEES TO REPAYMENT. [§ 552. 
 
 before the delivery of the road to the trustees under the deed. 1 
 The bondholders having excepted to the report, Sharswood, J., at 
 nisi prius, dismissed the exceptions. 
 
 The iron for the rails laid down by the trustees on this road 
 they paid for partly in cash and partly in bonds of the company, 
 subject to redemption at par in one year. The holder of the 
 bonds so issued claimed that they were not taken in payment, but 
 that the right to redeem stamped them as collateral security, and 
 therefore that he was entitled to preference in the payment of the 
 debt as one contracted by the trustees in the performance of their 
 trust. His claim was allowed and charged upon the fund. 2 
 
 The right of the trustee in possession to repayment of his ad- 
 vances and expenses on account of the property takes priority of 
 the mortgage under which he acts, and of the claims of all subse- 
 quent creditors. He is the owner of the property at law, and when 
 called upon to account he may deduct out of the trust property 
 whatever sums he had expended or become liable for in the dis- 
 charge of his trust. His claim is the first charge upon the property. 3 
 
 552. A creditor or other person not holding the position of 
 trustee has no right to be reimbursed his advances to protect 
 a corporation in preference to mortgage creditors ; but one 
 who does not hold the legal title and does not legally represent 
 the bondholders in his possession #nd management of the prop- 
 erty, but being a creditor and stockholder in a company volun- 
 tarily advances money for the payment of wages, rents, and other 
 purposes essential to prevent the immediate sacrifice of the prop- 
 erty, has no claim to be repaid in preference to the mortgage 
 bondholders. A company, formed for the purpose of manufactur- 
 ing iron, mortgaged its property and afterwards borrowed money 
 from one Grissell, the former owner of the works and Hun a 
 shareholder in the company, under an agreement that all moneys 
 due to the company were to be received by him, and these 
 moneys, and also the money to be advanced by him, were f<» 
 be applied by him in paying wages and salaries and other out- 
 goings for tin- business of bhe company, and finally bo the repay- 
 ment of his advances. Subsequently tie- company resolved to 
 wind up voluntarily, and an order of court was made for this 
 
 i Patterson v. Hempfield R. R.Co.8a- '- Pattenon v. Hempficld R. B. Co. supra. 
 preme Couri of Pa. at N. I', l Weekly 3 Hall Coal Co. in ri 
 
 - . . . » 
 
 Notes of Cases, 127. •'"•'
 
 § 552.] DEBTS OF MORTGAGE TRUSTEES IN POSSESSION. 
 
 purpose. Afterwards Grissell and the liquidators, with the sanc- 
 tion of the vice chancellor, made an agreement for an advance by 
 Grissell of further sums on similar terms. He accordingly made 
 further advances for the payment of rent, wages, taxes, and out- 
 goings. A large balance remained due to him when the liquida- 
 tors sold the leasehold property, machinery and plant of the com- 
 pany. Grissell claimed the repayment of his advances in carrying 
 on the business in preference to the debenture holders, and the vice 
 chancellor allowed the claim as costs of preservation. But on ap- 
 peal it was held that the fund arising from the sale belonged to 
 the debenture holders in priority to the claims of Grissell or the 
 liquidators for the costs so incurred. The debenture holders were 
 not parties to the agreement with Grissell, and the sanction to 
 the agreement given by the court did not bind them. No debent- 
 ure holder was summoned before the court, or was asked whether 
 he approved the arrangement. No one represented the debenture 
 holders, and they were not affected by anything that was done. 1 
 James, L. J., delivering the principal judgment of the court, 
 clearly states the rights of the debenture holders : " It is said that 
 the transaction was for the benefit of the debenture holders, and 
 that if this property had been sold at that time, in all probability, 
 it would have sold badly, and therefore it was for their benefit 
 that the works should be carried on. But then the debenture 
 holders were the persons who had a right to express their opinion 
 whether the business should be carried on at their risk. Of 
 course as long as the company were minded to keep it on, the de- 
 benture holders might very reasonably be minded not to interfere 
 with what their mortgagors and debtors were doing, because their 
 security — the thing which constituted their security — was still 
 remaining in esse to answer their demands. Therefore they had 
 no occasion to apply their minds to the question whether it would 
 be to their benefit or not that the works should be carried on. 
 Their debtors, who acted with the sanction of the court, thought 
 it was for their own benefit that it should be carried on, but that 
 left the property still remaining liable to the charge." 
 
 The liquidators then claimed priority for their costs, expenses, 
 
 and remuneration ; but the court adjudged that their claim could 
 
 not be sustained. The same learned judge said that no doubt 
 
 it is a very hard case for them that they have had to deal with an 
 
 1 Regent's Canal Iron Works Co. in re, L. R. 3 Ch. D. 411. 
 
 534
 
 RIGHT OF TRUSTEES TO REPAYMENT. [§ 553. 
 
 insolvent company, but they ought to have looked into that mat- 
 ter before they incurred expenses and made themselves liable ; and 
 that they should not have incurred disbursements which they had 
 no means of reimbursing themselves. The debenture holders are 
 the creditors to whom the property belonged ; they had a specific 
 right to the property for the purpose of paying their debts. If 
 the property is realized in the proceedings to which they are par- 
 ties they must pay the costs of the realization, just as they would 
 have had to pay them if they had their own suit for the purpose 
 of realizing it. No doubt there were costs of preservation, which 
 means that by keeping the thing going for some years the prop- 
 erty ultimately realized more for the debenture holders than it 
 would have otherwise realized. But this is merely a surmise, and 
 if true it would really make no difference. The services rendered 
 in that way cannot create a charge against the mortgagee. The 
 only costs for the preservation of the property with which they 
 would be chargeable would be the repairing of the property, pay- 
 ing rates and taxes, which would be necessary to prevent any for- 
 feiture, and the care of the property. The liquidators in this case 
 never paid anything of the kind. The leaseholds, machinery, 
 ■ and plant were never the subject of expenditure on the part of 
 the liquidators." 
 
 553. Compensation of trustees. 1 — The Des Moines Valley 
 Railroad Company executed a mortgage upon its road and lauds, 
 which stipulated, among other things, that the holders of any of 
 the mortgage bonds should have the privilege of purchasing any 
 of the lands not required by the company for the necessary or 
 convenient operation of the road at the then minimum price lixed 
 by the company, and to pay therefor in bonds at their par value. 
 The mortgage also stipulated that the proceeds of the sales of 
 Lands should constitute a sinking fund for the discharge of the 
 mortgage debt; and that the bondholders should be required (■> 
 cancel the bonds so taken up, and thai for services in Belling and 
 conveying the lands, and applying the proceeds to tin; sinking 
 fund, the, trustees should receive two per cent, on the amounl of 
 the bonds cancelled. Upon a Bubsequenl foreclosure of the mort- 
 gage the trustees filed their account, showing thai they had can- 
 
 1 'in the genera] Bubjecl of the compensation oi 
 
 §§ 910-01 'J; and see §§ 527-530.
 
 §§ 554-556.] DEBTS OF MORTGAGE TRUSTEES IN POSSESSION. 
 
 celled bonds to a very large amount on which they claimed the 
 above named commission. Some of the bondholders appeared 
 and objected to the allowance of two per cent, on the face of the 
 bonds received by them in payment of lands sold, but the Su- 
 preme Court of Iowa held that the sale of lands and the payment 
 in bonds was equivalent to a sale for cash, and that therefore the 
 trustees were as much entitled to this commission upon the par 
 value of bonds received in exchange for lands and cancelled as 
 they were upon bonds cancelled upon purchase with the proceeds 
 of cash sales of the lands, the mortgage recognizing no distinction 
 between the modes of payment. 1 
 
 554. The funds in the hands of a receiver are chargeable 
 with the retainer and professional services of an attorney 
 employed by the trustees under a mortgage of a railway to 
 foreclose the mortgage, although the suit, without the fault of 
 the attorney, was not prosecuted with effect, and the funds in the 
 hands of the receiver have been obtained from a new suit, prose- 
 cuted by other trustees ; as for instance where the prosecution 
 of the first suit was prevented by the outbreak of the civil war, 
 and the trustees who authorized the suit having died, new trus- 
 tees were appointed upon the termination of the war, who com- 
 menced a new foreclosure suit. 2 
 
 555. Trustees managing a railroad are not liable for the 
 use and occupation of land outside the location of the rail- 
 road, in the absence of any evidence of a demise, whether the use 
 was by permission of the owner or not. A contract, express or 
 implied, is necessary to sustain the action. 3 
 
 II. Liability of Trustees operating a Railroad as Common Car- 
 riers. 
 
 556. Trustees operating a railroad for the benefit of the 
 bondholders are regarded as owners of the road, so far as to 
 render themselves liable as common carriers for loss or damage 
 to merchandise, or for damages to passengers occasioned by the 
 
 i Gilman v. Des Moines Valley R. R. Henderson R. R. Co. 93 U. S. 352 ; S. C. 
 Co. 41 Iowa, 22. 9 Am. Railway Rep. 361. 
 
 2 Cowdrey v. Galveston, Houston & 3 Central Mills Co. v. Hart, 124 Mass. 
 
 123. 
 536
 
 LIABILITY OF TRUSTEES AS COMMON CARRIERS. [§ 556. 
 
 negligence of their servants and employees. Thus, the trustees of 
 the second mortgage bondholders of the Northern Railroad Com- 
 pany having foreclosed their mortgage, by permission of court, 
 purchased the mortgaged property at the sale, and proceeded to 
 operate the road for the benefit of the bondholders. They under- 
 took to transport a large quantity of grain, -which was burned on 
 the road. In a suit against them for the loss of the goods, they 
 were held liable as common carriers. 1 The fact that, by the de- 
 cree authorizing the trustees to purchase at the foreclosure sale, 
 the court undertook to give directions as to the mode of execut- 
 ing the trust in respect to a subsequent sale, and in respect to 
 operating the road, was held not to change the character in 
 which they held the property, and make them receivers of the 
 property. They continued to hold the property as trustees, and 
 as such held the legal title to the property, and received the in- 
 come and profits of it for the benefit of their cestuis que trust. 2 
 
 The same liability attaches to a mortgage trustee who has en- 
 tered into possession of a railroad in pursuance of the provisions 
 of the mortgage, or in pursuance of a statute and decree of court, 
 and, before completing a foreclosure, operated the road for the 
 benefit of the bondholders. 3 In Connecticut, by statute, such trus- 
 tee is declared not to be personally liable for any cause or injury 
 arising from the operation of such road, except for his wilful mis- 
 management, or for any contracts made by him as such trustee ; 
 but all the trust property in his charge is liable for the acts and 
 proceedings of such trustee, in the execution of his trust, to the 
 extent of the interest of the creditors, for whose benefit lie acts; 
 and any proceedings for the purpose of making such property lia- 
 ble should be brought against such trustee, describing; him as 
 such. 4 Under a statute authorizing trustees in possession to ap- 
 ply the income of the road to the payment of the ".running and 
 operating expenses of the road," a claim for negligently injuring 
 property at a highway crossing would be properly included. 6 
 
 i Ro-ers v. Wheeler, 43 N. V. 598; * G. S. 1875, p. 383, § 85 ; G. 8. 1866, 
 
 Barter v. Wheeler, 49 N. II. 9 ; Sprague p. 196, § 513. 
 
 ith, 29 Vt 421. 6 Smith v. Eastern B. R Co 124 Mam. 
 
 2 Barter v. Wheeler, supra. 154. 
 
 15 Lamphearv. Buckingham, 33 Conn. 
 •s.n. 
 
 587
 
 CHAPTER XIX. 
 
 THE PRIORITY OF RAILROAD MORTGAGES NOT AFFECTED BY 
 EQUITIES ARISING SUBSEQUENTLY. 
 
 I. Equities of employees, 557-561. 
 
 II. Equities of contractors and material- 
 men, 562-565. 
 
 III. Equities under subsequent contracts 
 and leases, 566-569. 
 
 IV. Equities under judgments against re- 
 ceivers, 570-572. 
 
 I. Equities of Employees. 
 
 557. General statement. — Railroad bondholders have, within 
 the last few years, sometimes experienced much surprise, to say 
 nothing of other and stronger emotions, at finding, in the course 
 of events, that mortgage liens, which were nominally and actu- 
 ally, at the time they were created, first liens upon the mortgaged 
 property, have been adjudged by the courts to be subject to 
 other claims subsequently incurred. They have not merely seen 
 debts incurred by receivers and trustees in the management of 
 the property accorded a priority over their mortgages, but they 
 have also seen the same priority accorded to the claims of labor- 
 ers and mechanics, and to all that undefined indebtedness of a 
 railroad company, known as floating debts. It is proposed to ex- 
 amine, in the present chapter, the various ways in which it has 
 been sought to supersede the priority of railroad mortgages by 
 subsequent equities. 
 
 At the outset it is proper to state as a settled legal principle, 
 that a fixed legal right under a mortgage cannot be impaired by 
 any equities subsequently arising. Statutes in force at the time 
 of execution of a mortgage may give rights as against the mort- 
 gagee to other persons, under claims subsequently arising ; but in 
 such case the statutes become a part of the original mortgage con- 
 tract. Subsequent legislation could not affect the priority of an 
 existing mortgage. Even Congress cannot limit the tolls of a 
 canal company whose revenues are pledged to secure its bonds, 
 538
 
 EQUITIES OF EMPLOYEES. [§ 558. 
 
 so as to impair the rights of the bondholders. Mr. Justice Mil- 
 ler, construing an act relating to the Louisville and Portland Ca- 
 nal Company, emphatically said : " I have no hesitation in say- 
 ing, that that part of it which so limits the tolls is void, for the 
 plain reason that it is a legislative attempt to destroy vested 
 rights and a taking of private property for public use without 
 due compensation." x 
 
 The claims of employees of a railroad, due at the time it is 
 placed in the hands of a receiver, are, in New Jersey, provided 
 for by a statute, 2 which makes them a lien upon all unincumbered 
 personal effects, and all moneys which may be transferred to the 
 receiver at the time of his entering upon his duties, but limits the 
 payments to not more than two months' wages. Under such act, 
 however, the claims of employees are subject to incumbrances 
 upon such property existing when the act was passed. The lien 
 cannot be extended beyond the provisions of the act, which, 
 though it will receive construction, cannot, of course, be so con- 
 strued as to diminish or impair the obligation or lien of a previous 
 levy of an execution, or of a previous mortgage. 3 
 
 558. The most reasonable ground upon which a chancery- 
 court can order a receiver to pay the wages of employees of a 
 railroad company, due at the time the road is placed in the re- 
 ceiver's hands, is that taken by the Court of Appeals of Kentucky, 
 in the recent case of Douglass v. CIine. i The Louisville, Cincin- 
 nati, and Lexington Railroad Company executed a mortgage to a 
 trustee, which authorized him, upon default, to take possession of 
 the property, and by himself and agents, or by a receiver of court, 
 to use and operate the road and receive the earnings and income 
 of it, or to have the mortgaged property sold and conveyed under 
 a decree of court. No specific lien was given upon the earnings 
 of the road while held and operated by the company itself. 
 Upon default, the trustee, instead of taking possession of the road 
 himself, obtained the appointment of a receiver. Shortly after- 
 
 1 United States v. Louisville & Portland - Feh. 12, 1874, Actt 1874, p. 12; 9 
 
 Canal Co. 4 Dill. 601. Judge Dillon, in Rev. 1877, p. 948, § 181. 
 
 note to this case, says, that in England :i Williamson v. N- •' Southern R R' 
 
 parliament would possess this power, as Co. 28 N. J. Eq 277,800 
 
 ii by the case of Brown v. Mayor, * 12 Bush, 608. And see Newport & 
 
 &c. of London 9 C. B. (N. 8.) 726. Cincinnati Bridge Co I glass, l^ 
 
 Bnsh, 878.
 
 § 559.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 wards, the employees of the road, to whom wages were due at the 
 time of the appointment, obtained an order from the vice chan- 
 cellor, directing the receiver to pay them the amounts due them 
 out of the net earnings of the road ; and this order was sustained 
 upon appeal. The decision of the court had special reference to 
 the nature of a mortgage, as determined by the Code of Proced- 
 ure of that state, under which the mortgagee, although invested 
 with the legal title, cannot recover possession in an action at law. 
 Having no legal right to recover possession simply by reason of 
 holding the mortgage title, his right of possession must rest upon 
 express contract, or else must be sought in equity. But in this 
 case the trustee, either because the express contract in the mort- 
 gage could not be enforced, or because he did not see fit to enforce 
 it, sought his remedy in equity, and obtained the appointment of 
 a receiver. It was then insisted, in behalf of the mortgage bond- 
 holders, that inasmuch as it was made to appear to the satisfaction 
 of the chancellor that he ought to take possession of the mort- 
 gaged property, he was bound to do so unconditionally, and that 
 he had no discretion as to the application of the fund that might 
 come into the receiver's possession, but was bound, as matter of 
 law, to apply this fund to the extinguishment of the lien debts in 
 the order of their priority. But the court declared, that, while 
 the mortgagees had, in equity, a perfect right to have the prop- 
 erty protected and preserved while the actions to enforce their 
 mortgages were pending, yet the power of the court to do this 
 through the instrumentality of a receiver is discretionary in its 
 nature ; that the right of the mortgagees to have the fund raised 
 by the receiver applied for their security as against the general 
 unsecured creditors of the mortgagor is equitable only, and, there- 
 fore, that the chancellor is not bound to enforce it under all con- 
 tingencies, but may, in proper cases, attach to its enjoyment rea- 
 sonable conditions, and may do this either in the order appointing 
 the receiver, or by an order subsequently made. 
 
 559. The court lay stress upon the meritorious character 
 of the claims of the employees ; upon the fact that their ser- 
 vices in repairing and operating the road had preserved the prop- 
 erty, and enabled the company to retain its business and the pub- 
 lic confidence, and therefore had resulted in substantial advantage 
 to the mortgagees, who are insisting that the payment of the em- 
 540
 
 EQUITIES OF EMPLOYEES. [§ 559. 
 
 ployees out of a fund to which they have no legal or contract 
 right, and which they can reach only through the intervention of 
 the chancellor, is an abuse by that officer of his equitable discre- 
 tion. It was to the interest of the lien-holders, they say, that the. 
 receiver should be enabled, pending the litigation, to operate the 
 roads of the company successfully and profitably. To secure im- 
 mediate success in this regard, itw as desirable, if not indispen- 
 sably necessary, that he should be enabled to retain in his service 
 the force of employees he found in the service of the company 
 when he took possession of its roads. One of the grounds of the 
 application for a receiver was the discontent upon the part of the 
 employees, resulting from the non-payment of their wages. " It 
 was the duty of the chancellor to allay this discontent, and to 
 assist his receiver in securing the services of these people, and 
 thus insure the profitable management and operation of the roads 
 in his hands, if this could be accomplished by an act manifestly 
 just, certainly within the scope of his judicial powers, and to 
 which the appellants ought not, in good conscience and fair deal- 
 ing, to object." Moreover, the court declared, it is not strictly 
 accurate to say that the employees bear to the mortgagees the 
 same relation as that borne them by other general creditors of the 
 insolvent company. " The mortgagees accepted their securities 
 with knowledge that the railroad company, though technically 
 speaking a private corporation, was under obligations to the state 
 to render certain important public services. They knew that the 
 railroads were, in a certain sense, public highways, and that who- 
 ever owned them, or held them in pledge, was obliged to see that 
 they were at all times so operated as to subserve the public con- 
 venience. The interest the public has in the construction and 
 successful operation of lines of railway has influenced the courts 
 to treat railroad mortgagees as possessing rights superior to those 
 of beneficiaries under mortgages covering other kinds of property ; 
 and courts of equity have not hesitated to interfere Eor their pro- 
 tection in cases in which other mortgagees would have been left 
 to their remedy at law It was through the labor ami ser- 
 vices of these employees, performed and rendered after the rail- 
 road company had become notoriously unable to meet its indebt- 
 edness, and during a period when the mortgagees either could not 
 or would not interfere to proteel ami preserve their mortgage 
 security, that the company's roads were operated ami its duties t" 
 
 541
 
 § 559.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 the public discharged ; and, as we have already seen, it was by 
 this labor and these services that the mortgaged property during 
 this period was preserved and kept in repair. It is plain, there- 
 fore, that the debts due to the appellees were contracted for labor 
 which resulted in substantial advantage to the parties who are 
 here insisting that their payment out of a fund to which said 
 parties have no legal or contract claim, and which they can reach 
 only through the intervention of the chancellor, is an abuse by 
 that officer of his equitable discretion." 
 
 In conclusion, the court remark that it will not necessarily fol- 
 low from its decision that all the general creditors of the railroad 
 company will be able to assert successfully their right to be paid 
 out of the fund held by the receiver ; that each claim must rest 
 upon its own peculiar merits ; and that, as the mortgagees have 
 primd facie an equitable claim to the whole fund, the onus will 
 be upon each general creditor to establish a superior right upon 
 his part. 1 
 
 1 Mr. Justice Cofer delivered a dissent- 
 ing opinion, forcibly criticising the opinion 
 of the majority of the court. He claimed 
 that the maxim that " He who seeks equity 
 must do equity " had no application to 
 this case; that the mortgagees owed no 
 equity to the railroad company, and owed 
 none to the employees of the company ; 
 that the effect of the application of the 
 maxim to this case is that, if A. asks the 
 intervention of the chancellor in his behalf 
 against B., the chancellor may, as the con- 
 dition upon which he will grant the relief 
 asked, require A. to render to C. an equity 
 due him from B. ; that this is not the 
 meaning of the maxim ; but that it means 
 that a party seeking the aid of equity must 
 do equity to him against whom he seeks 
 relief in reference to the subject matter in- 
 volved in the litigation. He claimed that 
 the mortgagees had liens on the earnings 
 of the property while in the hands of the 
 receiver by express contract, which the 
 court was bound to enforce; and, more- 
 over, he claimed that, aside from any con- 
 tract, by well established rules of equity, 
 mortgagees have a lien upon -the earnings 
 of the property in the hands of a receiver, 
 pending a suit for foreclosure and sale, 
 
 542 
 
 and that the earnings are a part of their 
 security of which the chancellor has no 
 power to deprive them. In conclusion he 
 says : " I have been unable to discover the 
 line that is to separate the claim of the em- 
 ployees from the claim of other unsecured 
 creditors. Nor am I able to discern the 
 principle that is to distinguish the claim 
 of the employees of a railroad company to 
 be paid in preference to mortgagees from 
 the claim of any other class of laborers, to 
 be paid in like manner out of mortgaged 
 property upon which they have bestowed 
 labor for which they have not been paid. 
 If these appellees have any equity to be 
 paid out of the earnings in the receiver's 
 hands for labor done before his appoint- 
 ment, because they bestowed their labor on 
 the road, and thereby kept it up, why shall 
 not the material-man who furnished arti- 
 cles indispensable to the operating of the 
 road be paid also ? If the men who fur- 
 nished necessary material are entitled to 
 be paid, upon what principle of law or 
 morals shall the man who furnished money 
 to make cash purchases be refused 1 And 
 if these are to be paid out of the earnings, 
 to the exclusion of the mortgagees, there 
 will remain no debts to be paid but the
 
 EQUITIES OF EMPLOYEES. [§ 560. 
 
 An important element in this decision is the inability of a 
 mortgagee, under the present Code of Kentucky, to recover pos- 
 session of the mortgaged property after default by an action at 
 law. It would, therefore, be no authority in states where the 
 mortgagee's right of possession remains as it was at the common 
 law. The argument drawn from expediency, and from the meri- 
 torious nature of the claims of employees, is one which might well 
 be considered by the mortgagees themselves, but is entitled to no 
 consideration from the court, as against the positive legal rights 
 of mortgagees. There are numerous instances in which the mort- 
 gagees themselves have voluntarily assumed the payment of 
 wages, and other floating debts of railroad companies, at the time 
 of taking possession. This is their own affair, and is simply a 
 waiver of their own legal rights. But if they do not choose of 
 their own accord to do this, the courts have no right to compel 
 them to give priority to unsecured claims. 
 
 It is true, however, that the general result arrived at in this 
 case is supported by a decision by Judge Wellford, in the Circuit 
 Court of the city of Richmond. 1 The grounds of the decision are 
 that the officers of the insolvent company, having the right of 
 possession, and being allowed by the mortgage creditors to remain 
 in possession long after the company's default had become notori- 
 ous, might be in some sense regarded as the agents of the mort- 
 gagees in operating the road ; and that, at any rate, the claims of 
 employees, due at the time the mortgagee obtained the appoint- 
 ment of a receiver, are of such an equitable nature that the court 
 will require them to be satisfied out of the subsequent earnings of 
 the road, or out of the trust property. 
 
 560. It sometimes happens that mortgage creditors find it 
 a matter of policy to assume the payment of certain general 
 debts of railroad corporations, and to consent to the entry of de- 
 crees requiring their receivers to pay such debts out of the receipts 
 of the road or from the proceeds of sales of the mortgaged prop- 
 erty. 2 The claims of laborers and employees more frequently 
 than any others are so provided for. Aside from the equitable 
 
 mortgage debts, and, these being postponed l Duncan v. Chesapeake & Ohio R. R, 
 
 to all others, it will result that the only Co. 9 Am. Ry. Rep. 886. 
 
 persons not secured arc those who alone - Bee 4 Central L. J. pp. 458, 544. 
 
 had taken security for their dehts." 
 
 543
 
 § 560.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 consideration that their labor has benefited the property, there is 
 the practical consideration that it is generally necessary or at least 
 desirable that the receivers, and after them the purchasers, should 
 continue the operation of the roads by the aid of the services of the 
 same persons. Sometimes mortgage creditors even find it to their 
 advantage to compromise the claims of other general creditors. 
 Delay in obtaining the appointment of receivers, and through 
 them the possession of the property, may be avoided ; and such 
 delay is a serious matter when a road extends through several 
 states, and the aid of the courts of each must be sought and ob- 
 tained against the active efforts of creditors. Such considerations 
 doubtless led the mortgage creditors of the Atlantic and Great 
 Western Railway Company to consent that the decree appointing 
 a receiver of the road should provide for the payment, out of the 
 net earnings of the road, of claims for materials and supplies and 
 of arrearages owing to the laborers and employees of the company 
 " for labor and services actually done in connection with that com- 
 pany's railways." Under this decree Jeremiah S. Black, Esq., 
 claimed payment of $5,000 for professional services as counsel for 
 the company, rendered prior to the appointment of the receiver. 
 The referee to whom the claim was referred found it to be reason- 
 able in amount, but that the claimant was not included in the 
 class provided for in the order ; that the word " employees," as 
 there used, included only those persons who had been in the stated 
 and regular employment of the company. The Supreme Court 
 of New York also took this view of the claim, and disallowed it. 1 
 
 The Court of Appeals, however, reversed this decision and sus- 
 tained the claim. 2 The claimant was considered an employee 
 who had rendered services in connection with the company's rail- 
 ways within the terms of the order. Whether he should be so re- 
 garded or not was a question as to the intent of the order, and it 
 was regarded as more probable, from the terms of the order, that 
 the intent was to include rather than exclude the debt of the 
 claimant. This intent was moreover regarded as established by 
 evidence as to the sense in which the parties used the words, and 
 by the circumstances of the case. Debts for materials and supplies 
 were protected, and why might it not be supposed that the claim- 
 ant's demand was regarded to be as just and equitable as those, 
 
 1 Gurney u. Atlantic & Great Western 2 S. C. 58 N. Y. 358. See 24 N. Y. 482. 
 Ey. Co. 2 Thomp. & C. (N. Y.) 446. 
 
 544
 
 EQUITIES OF CONTRACTORS AND MATERIAL-MEN. [§§ 561, 562. 
 
 especially under the circumstances referred to ? The mortgage 
 creditors, by making these concessions, gained what they regarded 
 a great advantage, — the immediate appointment of a receiver ; 
 and the order should be liberally construed in favor of the cred- 
 itors, who are presumed to have assented to it and relied upon it 
 for the payment of their debts. 1 
 
 Notwithstanding the force of these views, upon which the ma- 
 jority of the court based its decision, it may well be questioned 
 whether the mortgagees in consenting to this order supposed that 
 any other than the usual meaning would be attached to the words 
 " laborer " and " employee ; " and the fact that three of the 
 judges of the Court of Appeals dissented from the allowance of 
 the claim at least weakens the authority of the decision. 
 
 561. In no case has any one of the federal courts allowed 
 claims for supplies or for labor in preference to existing mort- 
 gages when the mortgagees have not consented to such allowance. 
 In one case, indeed, after supply claims and other floating debts 
 to the amount of $700,000 had been audited and paid by the re- 
 ceivers with the consent of the parties in interest, objection was 
 finally made to a similar claim of small amount presented at the 
 eleventh hour, when Judge Treat, of the Circuit Court, followed 
 the settled rule of law and rejected the claim. 2 It does not 
 matter at how recent a period before the receivers took possession 
 the supplies were furnished, or how permanent in character they 
 may be, the court cannot order them to be paid if the beneficiaiu.s 
 under the mortgage object. 
 
 II. Equities of Contractors and Material-men. 
 
 562. It has sometimes been sought to establish equities in 
 favor of those who have furnished material or money for 
 building or repairing of railroads, on the ground that the prop- 
 erty has thus been conserved and rendered capable of profitable 
 use. This is, in fact, an attempt to apply t<> railroads the princi- 
 ple adopted by the civil and maritime laws of awarding priority 
 to the last creditor who furnishes necessary repairs and supplies 
 to a vessel. Thus, in Galveston /.'. /.'. Co. v. Cowdrey y 9 a person 
 
 1 Garney v. Atlantic & Great. Western - Ketchum v. Pacific II. EL Co. •» < '. 
 Ry. Co. 58 X. V. 858, per Church, C. J. L. .J. 458, -159. 
 
 a 11 Wall. 459, I 
 
 85 545
 
 § 563.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 who had furnished the iron laid upon a portion of the road claimed 
 therefor an equitable lien in preference to an existing mort- 
 gage: first, because the mortgage covered the iron only as after- 
 acquired property, and upon the principle of equitable estoppel, 
 which should yield when it comes in conflict with a superior 
 equity ; and, secondly, because his property applied to the road 
 had rendered it capable of being operated, when it otherwise could 
 not have been used. The Supreme Court of the United States 
 denied the claim on both points, declaring that the mortgage 
 attached to the property as soon as it was acquired, and that the 
 principle of maritime law contended for had no application. Mr. 
 Justice Manning, referring to this case, in giving the decision of 
 the Supreme Court of Alabama, in the recent case of Meyer v. 
 Johnston, 1 with reference to the latter principle, said : " A ship 
 far from home, in distress and without resource, must perish, and 
 perhaps her crew with her, if a bottomry bond given then for re- 
 pairs and supplies shall not have precedence of other liens upon 
 the vessel. But the court does not consider a railroad on terra 
 firma so beyond the reach of help from those who own it, or are 
 concerned in it, as to justify the adoption, in such a case, of the 
 rule relating to a ship abroad, and about to perish." 
 
 Accordingly the court, in this case, refused to give precedence 
 to the claim of a contractor for repairing and completing a rail- 
 road, although by contract with the company he was to have pos- 
 session of the property until his claims were paid. 
 
 563. A mortgage by a railway company of their " road, built 
 and to be built," has precedence, even as regards the unbuilt 
 part, of the claim of a contractor who has himself furnished a 
 portion of the road, under an agreement that he should retain 
 possession of the road, and apply its earnings to the liquidation of 
 the debt due him, and who has, in accordance with such agree- 
 ment, taken possession of the road, and retained it. The Supreme 
 Court of the United States so held upon a bill filed for the fore- 
 closure of such a mortgage, which had been duly recorded several 
 months before the contract for building the road was made. 2 
 Said Mr. Justice Clifford: "All of the bonds, except those sub- 
 
 1 53 Ala. 237, 345. 2 Dunham v. Cincinnati, Peru, &c. Ry. 
 
 Co. 1 Wall. 254. 
 546
 
 EQUITIES OF CONTRACTORS AND MATERIAL-MEN. [§ 564. 
 
 sequently delivered to the contractor, had long before that time 
 been issued, and were in the hands of innocent holders. The 
 contractor, under the circumstances, could acquire no greater in- 
 terest in the road than was held by the company. He did not 
 exact any formal conveyance ; but, if he had, and one had been 
 executed and delivered, the rule would be the same. Registry of 
 the first mortgage was notice to all the world of the lien of the 
 complainant ; and, in that point of view, the case does not even 
 show a hardship upon the contractor, as he must have known, 
 when he accepted the agreement, that he took the road subject 
 to the rights of the bondholders. Acting as he did, with a full 
 knowledge of all the circumstances, he has no right to complain 
 if his agreement is less remunerative than it would have been if 
 the bondholders had joined with the company in making the con- 
 tract. No effort appears to have been made to induce them to 
 become a party to the agreement, and it is now too late to remedy 
 the oversight. Conceding the general rules of law to be as here 
 laid down, still an attempt is made by the respondents to main- 
 tain that railroad mortgages made to secure the payment of bonds, 
 issued for the purpose of realizing means with which to construct 
 the road, stand upon a different footing from the ordinary mort- 
 gages to which such general rules of law are usually applied." 
 But the court say, that, although some authorities seem to favor 
 the supposed distinction, the argument, in their view, is not 
 sound, and the weight of judicial determination is greatly the 
 other way. 
 
 564. The order of priority of two or more railway mort- 
 gages is not affected by the fact that a part of the road was 
 wholly built by money raised by means of the junior mort- 
 gage. — The giving of priority to the last creditor is a rule which 
 is applicable only to marine cases, which stand on a particular 
 reason. The rule, Qui prior est tempore, potior est jure, gov- 
 erns as to the priority of mortgages at common law. 1 In a re- 
 cent case before the Supreme Court of Alabama, 2 an attempt was 
 made to reverse the order of priority of mortgages, upon the 
 ground that the prior bondholders could equitably claim only the 
 value of the railroad and its appurtenances in the condition they 
 
 1 Galveston R. U. Co. v. Cowdrey, U 2 Meyer v. Johnston, 53 Ala. 237. 
 Wall. 459, 482. 
 
 547
 
 § 565.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 were in before the road was reconstructed and completed by cap- 
 ital furnished for that purpose under a subsequent mortgage. It 
 was urged that, if this expenditure had not been made, a Court 
 of Equity would have authorized a lien upon the property for the 
 purpose of making it available ; and, therefore, the court should 
 not hesitate to approve and ratify what had been done volunta- 
 rily, and to protect those who had furnished money for the pres- 
 ervation and life of the road. But the court regarded it as well 
 settled, that a prior mortgagee could not be divested of his lien 
 in this way ; and that a junior mortgage could not, by force of 
 any lien for repairs, be given precedence of a senior one. 
 
 A junior mortgagee has no more right than the mortgagor 
 himself to charge for repairs and improvements made upon the 
 mortgaged property. The mortgagor not having this right, he 
 can confer no such right upon a junior mortgagee, as against a 
 prior mortgagee. Expenditures made by a junior mortgagee 
 stand, in this respect, upon the same basis as when made by the 
 mortgagor : they confer no equity whatever as against prior in- 
 cumbrances. 
 
 565. A claim for materials furnished an insolvent railway 
 company, which is not a lien by virtue of any statute, is not 
 entitled to payment out of the funds in the hands of a receiver, 
 arising from a sale of the property at the instance of prior mort- 
 gage bondholders, until the bonds are paid. 1 
 
 A promise by the receiver to make such payment does not 
 change the case. The ground of the application in this case was 
 that the supplies were furnished to the road while it was run by 
 a lessee, and that when the road came into the hands of the re- 
 ceiver, the parties who had furnished the supplies had an equi- 
 table lien upon the funds realized from the earnings of the road. 
 They had no specific lien, legal or equitable, upon the property. 
 The facts of the case were that there were large mortgages upon 
 the road, and the company had become hopelessly insolvent. Ap- 
 plication was made to the court to put it into the hands of a 
 receiver, in order that it might be operated for the payment of 
 these mortgages. This was done and the road remained in the 
 hands of the receiver for some years. Subsequently other cred- 
 itors applied to the court, it being manifest that the mortgages 
 1 Denniston v. Chicago, Alton & St. Louis R. R. Co. 4 Biss. 414. 
 
 548
 
 EQUITIES OF CONTRACTORS AND MATERIAL-MEN. [§ 566. 
 
 could not be paid in that way, or at any rate, that the time would 
 be so long that it was desirable for the interests of all that the 
 administration of the road should be changed; and a sale of the 
 property was ordered and made, so that the parties in interest 
 might realize upon their claims. The court held that the peti- 
 tioners had no equitable lien upon the proceeds of the sale, be- 
 cause the prior mortgage liens must prevail, and these would 
 sweep away the entire fund, and would then be only paid in part. 
 Judge Drummond, in making this decision, said, by way of illus- 
 tration : " It is precisely like the case of a man who furnishes to 
 the owner of a farm the means of carrying it on ; but there is 
 another party who has a lien upon that farm, and it is sold in 
 order that the party who has the prior lien may be paid. Now, 
 the fact that the mechanic or laborer has furnished the means of 
 carrying on the farm would not authorize him to come into a 
 Court of Equity and cut off the prior lien which exists on the 
 farm, and prevent it from being paid. These parties ought to be 
 paid. They have a just claim against this road. But it is against 
 an insolvent corporation, and they ask parties who have a prior 
 right and lien to pay them, because those with whom they have 
 dealt cannot do so." 
 
 566. Advances made by officers of the corporation. — The 
 president and directors of the New Jersey Midland Railway Com- 
 pany, previous to its insolvency, advanced money to pay for roll- 
 ing stock leased to the company, to be paid for by monthly in- 
 stalments, and to remain the property of the vendors until the 
 whole amount of the purchase money should be paid. They did 
 this to preserve the property for the benefit of the company and 
 its creditors, and with the understanding on their part that, upon 
 the payment of the balance due upon the rolling stock, they 
 should become the owners of it. Upon the appointment of a re- 
 ceiver in a foreclosure suit, they petitioned the court that tlx'y 
 might be subrogated to the rights of the vendors of the rolling 
 stock to the extent of the advance made by them on account of 
 it, and that the receivers should be ordered to pay to them the 
 amount so advanced, with interest. 1 The court, however, denied 
 the petition, because there could be no subrogation without an ex- 
 press agreement for the right, either with the debtor or the cred- 
 
 ' New Jcrsev Midland liy. Co. v. Wurtcndykc, 27 N. J. Eq. 058. 
 
 549
 
 § 566.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 itor ; and because the right could not be enforced until the whole 
 debt was paid. Moreover, the advances were made, and the peti- 
 tioners' rights accrued, long before the filing of the bill in the fore- 
 closure suit. The payment of these claims by the receivers was 
 nowise necessary for the preservation of the property, or the pro- 
 tection of the mortgagees or other creditors. The petitioners 
 stood in a different position from the owners of the rolling stock. 
 They had no power to embarrass the receivers by removing the 
 propertj r . " The duties of a receiver in a foreclosure suit," say 
 the court, " are in aid of the mortgagee, by collecting the rents 
 and preserving the property from loss and decay. In railway 
 foreclosures, his duties, though more extensive, are primarily the 
 same. The appointment is presumed to be for the benefit of the 
 mortgagees, and for the protection of their interests. In this case 
 it is claimed that the mortgage covers the rolling stock, and that 
 upon full and final payment by the company, or by the receivers, 
 to the owners of the stock, the title will vest in the company, or 
 their mortgagees, and enure to the benefit of the bondholders. 
 The petitioners seek, at this early stage of the foreclosure suit, 
 and in this irregular mode, to enforce a lien alleged by them to 
 be superior or prior to that of the mortgagees. In this view, it is 
 simply a contest for priority between parties claiming liens upon 
 the mortgaged premises." The court, therefore, declined to con- 
 sider their claim until, upon a hearing of the cause, the rights and 
 priorities of all parties claiming liens upon the mortgaged prem- 
 ises could be settled and adjusted. 
 
 One who has loaned money to a railway company, to enable it 
 to pay interest on its coupon bonds, has no equity entitling him 
 to be paid out of funds in the hands of a receiver of the road ap- 
 pointed in behalf of the bondholders. 1 A loan, however, made 
 for this purpose, upon the agreement or understanding that the 
 lender should be treated as the assignee of the holders of the cou- 
 pons, might have the effect to subrogate the lender to their rights, 
 and entitle him to hold the coupons as part of the debt secured 
 by the mortgage. 2 
 
 1 Newport & Cincinnati Bridge Co. v. 2 See § 331. 
 Douglass, 12 Bush (Ky.), 673, 714. 
 550
 
 EQUITIES UNDER CONTRACTS AND LEASES. [§ 567. 
 
 III. Equities under Contracts and Leases made subsequently to 
 
 Mortgages. 
 
 567. Contracts made by a railway company subsequently 
 to a mortgage are not binding upon the mortgagees, or upon 
 receivers of the road who are appointed in their behalf, although 
 the contracts relate to the carrying of freight in payment of a 
 loan made to the company. Thus, the Boston, Hartford, and 
 Erie Railroad Company, 1 having mortgaged its property to se- 
 cure certain bonds, entered into a contract with the Adams Ex- 
 press Company, whereby the latter company loaned the former 
 the sum of $200,000, and it was agreed that the sum should be 
 paid by carrying freight for the express company at certain rates. 
 Before this loan was fully repaid the mortgagees obtained the ap- 
 pointment of receivers, who, after entering upon their trust, gave 
 notice to the express company that they would decline to be 
 bound by the contract. The express company thereupon applied 
 to the court for an order to compel the receivers to carry the 
 freight in accordance with the contract made with the railroad 
 company. The court held, however, that the contract was not 
 binding upon the mortgagees, and that the receivers should dis- 
 regard the contract, and should recover of the express company 
 compensation for carrying freight, without reference to the terms 
 fixed by the agreement. The court, upon this question, say : 
 " The payment of the debts of the corporation previously con- 
 tracted would be inconsistent as well with the nature and pur- 
 pose of the office of the receivers, as with the terms of their 
 appointment. They have no right to appropriate the property 
 and assets of the corporation for that purpose, nor the earnings 
 of the road while operated by them. The amounts to be allowed 
 under the contract of the corporation with the petitioners are 
 earnings of the road, to be acquired by services requiring outlays 
 by the receivers, and are a part of its legitimate assets as much 
 as if due in money. By the terms of the contract they are to be 
 applied to the debt of the corporation. But that contract con- 
 stitutes no lien upon the property or franchise of the corporation J 
 and it is no more obligatory upon the receivers either t<» make 
 the application or to render the service than the debt itself is. 
 To fulfil that contract in all its terms will be, in substance and 
 1 Ellis v. Boston, Hartford & Eric R. It. Co. 107 Mnss. 1,17. 
 
 651
 
 § 567.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 effect, to appropriate the use of the property and the earnings 
 of the road, pro tanto, to the payment of the debt to the peti- 
 tioners in preference to all others." 
 
 The question of the right of the mortgagees to the income of 
 the property during the pendency of the foreclosure suit is de- 
 clared by the court to depend upon the provisions of the mort- 
 gage ; and the only mode provided by that whereby the trustees 
 may reach and control the use of the corporate property, and ap- 
 propriate the income of it, being an entry by them into possession, 
 and the filing and recording of written notice of their possession, 
 they cannot acquire any lien upon the income of the road in any 
 other mode. And, therefore, it was held that the lien of the 
 mortgagees attached to the earnings of the road only from the 
 time the trustees were themselves put into possession by the 
 court ; that the railroad company having in the mean time been 
 adjudged bankrupt, the income belonged to the assignees from 
 that time until the trustees were put in possession, and that, as 
 to the 'compensation earned under the contract with the express 
 company prior to the bankruptcy, the express company was bound 
 to pay to the receivers only so much of it as might be required to 
 reimburse the receivers for their expenses and charges, and that 
 the express company could apply the balance to the reduction of 
 the debt of the railroad company to them. 
 
 One clause of the mortgage provided that the remedy therein 
 given should not deprive the mortgagees of their full rights and 
 remedies, as they then existed, at law and in equity. " Whether 
 this provision would authorize a foreclosure and sale of the prop- 
 erty and franchises of the corporation, for the benefit of the bond- 
 holders, without the intervention of the trustees provided for in the 
 mortgage; and whether, in such case, the income, from the time 
 the receivers took possession, would be treated as incident to, and 
 part of, the fund distributable to the mortgagees or bondholders, 
 we need not determine, because these proceedings have not been 
 conducted to that result. The suit having been directed to, and 
 having resulted in possession by the trustees, for the purpose of a 
 foreclosure in pais, in pursuance of the provisions of the mort- 
 gage first quoted, the effect upon the rights of all parties must be 
 determined accordingly. The lien of the mortgagees attaches to 
 the income only from the time of thus taking possession of the 
 corporate property and franchises." 
 552
 
 EQUITIES UNDER CONTRACTS AND LEASES. [§§ 568, 569. 
 
 568. It has even been attempted to establish an equitable 
 lien in behalf of a railroad company for carrying done for con- 
 necting lines, upon the foreclosure of mortgages upon such lines 
 and the sale of the property. The Atlantic and Pacific Railroad 
 Company, lessees of the Pacific Railroad of Missouri, had, before 
 the institution of proceedings to foreclose mortgages on both 
 roads, become indebted to the Atchison and Nebraska Railroad 
 Company on account of services rendered by that company, in 
 carrying freight on " through " bills of lading, and passengers on 
 " through " tickets. This company intervened in the foreclosure 
 proceedings, and asked payment in preference to the bondholders, 
 on the ground that the claim was similar in its nature to the 
 claims of employees for their wages, and also on the ground that 
 the proportion of freight and passage money earned by the pe- 
 titioning company under the contracts in question had been col- 
 lected in advance by the Atlantic and Pacific Railroad Company, 
 and was in the nature of a trust fund held by the latter company 
 for the benefit of the former, and which, upon the appointment of 
 the receivers, passed into their hands charged with the trust. 
 But the court rejected the claim on the ground that it was merely 
 an ordinary unsecured debt. 1 
 
 569. There is no legal principle by which contracts made 
 by a railroad company, after the execution of a mortgage, 
 without the consent of the mortagees, and without a positive stat- 
 ute which enters into the mortgage contract, can be made binding 
 upon the mortgagees or upon receivers appointed in their behalf. 
 Such a contract, although made for the carrying of freight in pay- 
 ment of a loan to the company, does not bind a prior mortgagee. 2 
 
 In a recent case before the United States Circuit Court for Vir- 
 ginia, upon a petition that the receivers be ordered to pay certain 
 bills for iron and supplies furnished the company, the court de- 
 cided that inasmuch as these claims rested solely upon the credit 
 of the company, they could not be made prior to the mortgages 
 upon the road, and that the petitioners must, therefore, wait until 
 
 i Ketchumr. Pacific Railroad Co. U.S. toll, was held OOt binding upon B prior 
 
 Circuit Court for E. Dist. of Mo. 3 Cent, mortgagee in Newporl & Cincinnati Bridge 
 
 ■q.j.637. Co. v. Douglass, L2 Bush (Ky.), 673, 712. 
 
 a Ellis ». Boston, Hartford & E.ie It. Bee, el o, Elmira [ron & Steel Rolling 
 
 R (Jo. 107 MabS. 1, 17. A guaranty of Mill Co. V. Erie Ry. Co. 26 V -J. Eq. 284.
 
 § 570.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 the road is sold, when their claims could be paid out of the sur- 
 plus, if any, remaining after the mortgage should be satisfied. 
 The court also held that claims for wages accruing before the ap- 
 pointment of the receivers were in the same position, and could 
 not be made a lien prior to the mortgages. 1 
 
 Although a receiver is not bound by a contract made by the 
 company after the execution of the mortgage for the enforcement 
 of which the receivership was created, j'et if he ratifies the con- 
 tract, it seems that the rights under such contract are not affected 
 by the foreclosure proceedings. 2 
 
 A contract between a railway company and a bridge company, 
 made subsequent to the mortgage, whereby the former company 
 guaranteed that the tolls of the latter company for the use of its 
 bridge across the Ohio River should amount annually to a certain 
 sum, does not affect the rights of the mortgagee, and the bridge 
 company cannot require that the order of sale shall provide that 
 the purchaser shall carry out the terms of this contract. 3 
 
 When another road has, by contract, the right to run over a 
 road in the hands of a receiver, upon the payment of a stipulated 
 rent, and the rent is not paid to the receiver according to the 
 terms of the contract, he may, after proper notice, sever the con- 
 nection between the roads. 4 
 
 With the consent of the court, the receiver may pay out of the 
 funds in his hands sums collected by the insolvent company in 
 trust for connecting railroad companies, to which the money be- 
 longed. The withholding of these moneys would be not only a 
 breach of trust, but would probably result in the refusal of these 
 companies to keep up business relations with the company or its 
 receivers, and in a consequent loss of business to the road ; and, 
 therefore, the payment is justifiable as a business measure, to keep 
 up the traffic of the road. 5 
 
 570. A mortgage made after the execution of a lease of the 
 property by the mortgagor, of which the mortgagee has notice 
 
 1 In re Atlantic, Miss. & Ohio R. R. Co. 3 Newport & Cincinnati Bridge Co. v. 
 26 Financial Chronicle, 444, May 4, 1878. Douglass, 12 Bush (Ky.), 673, 712. 
 
 To same effect, see Denniston v. Chicago, 4 Elmira Iron & Steel Kolling Mill Co. 
 
 Alton & St. Louis R. R. Co. 4 Biss. 414. v. Erie Ry. Co. 26 N. J. Eq. 284. 
 
 2 Western Union Telegraph Co. v. At- 5 Meyer v. Johnston, 53 Ala. 237, 353 
 lantic & Pacific Telegraph Co. 7 Biss. 
 
 367. 
 
 554
 
 JUDGMENTS AGAINST RECEIVERS. [§ 571. 
 
 either actual or constructive, is of course subject to the obligation 
 of the lease. When a railroad company which has taken a lease 
 of another road afterwards executes a mortgage, a more interest- 
 ing inquiry arises, whether the mortgagee is bound by the con- 
 tract of the lease or can question its validity, or foreclose the 
 mortgage and -disregard the contract. If the lease be binding 
 upon the corporation itself, and the mortgage was given in express 
 recognition of the contract and in subjection to it, the mortgagee 
 cannot, any more than the corporation itself, object to the validity 
 of the lease on account of the incapacity of the corporation to 
 make it. A bondholder under such mortgage is necessarily in the 
 same wa} r bound by the contract. Neither can he avoid the effect 
 of the lease in any particular by showing that as between himself 
 and the mortgagor it would be prejudicial and unjust to him, to 
 give the contract the effect the parties themselves intended it to 
 have, and which governs as between them. To make his defence 
 effectual he must show that it would be inequitable for the lessor 
 as against him to claim this construction of the lease. 1 
 
 IV. Judgments against Receivers. 
 571. A judgment or claim against a receiver for personal 
 injuries sustained by a passenger upon the road, while it is 
 run by the receiver for the benefit of mortgage bondholders, 
 might possibly, at first sight, be regarded as an incident to the 
 running of the road, and, therefore, entitled to payment out of 
 the fund in the receiver's hands. It is certainly a claim upon 
 such part of the fund as is not required to satisfy prior mortgage 
 liens ; but when it is sought to make such a claim superior to 
 mortgages in existence when the right to the damages accrued, 
 the claimant has to meet the objection, that such a lien is not one 
 of the incidents to running a road; and it is not necessary to 
 create such a lien in order to procure traffic and travel upon the 
 road. It is not usual for a passenger, before purchasing a ticket 
 over a road, to inquire whether it is in the hands of a receiver, 
 and whether any claim that he may have for injuries will take 
 precedence of existing mortgages upon the road. Neither do pas- 
 sengers inquire, in case the road be not in the hands of receivers, 
 whether it is subject to mortgage or not; although it. is evident 
 enough that, in such case, a judgment againsf the railroad com- 
 
 1 Vermont & Canada It. It. Co. v. Vermont Central K. R, Co. 84 Vt. 1. 
 
 565
 
 § 571.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 pany would bind only the corporation and its property, and might 
 be rendered valueless by the action of the mortgagees in taking 
 possession of the property, and applying the whole of it to the 
 payment of their liens. As a matter of fact, the railroads in the 
 United States are very generally subject to mortgage ; and pas- 
 sengers, without inquiry, take their risk of the roads being so in- 
 cumbered that judgments against them could not be collected. 
 Why, then, upon the appointment of a receiver and the recovery 
 of a judgment against him, should the claim be superior to exist- 
 ing mortgages, when it would not have been superior to them if 
 the judgment had been rendered prior to the appointment of the 
 receiver ? The appointment does not prejudice the rights of 
 mortgagees, or derange or affect in any way the priority of their 
 liens. 
 
 Such was substantially the view taken by the Circuit Court of 
 the United States in reference to a judgment rendered as damages 
 for an injury to a passenger on the Alabama and Chattanooga 
 Road, while it was in the hands of receivers. 1 It was regarded 
 as too clear for argument, that, if the road had been run by the 
 president and directors when the injury was sustained, such claim 
 could not possibly have priority ; but the receivers act merely in 
 place of the president and directors, except so far onty as the 
 court may otherwise direct. They are appointed to take care of 
 the property, and are like administrators, who cannot override 
 existing liens, and who are under no personal liability to respond, 
 except for their own personal neglect. The court in this case 
 examined the orders appointing the receivers and directing their 
 administration, and found nothing in them to establish any prior 
 lien in behalf of such a judgment creditor. These orders appoint 
 a receiver to take charge of the entire property of the road, to 
 complete it and put it in repair, and to procure rolling stock and 
 other things necessary to operate it to the best advantage, so as 
 to prevent the property from further deteriorating, and to save 
 and preserve it for the benefit and interest of the first mortgage 
 bondholders, and all others interested in it. For these purposes 
 the receivers are authorized to borrow money and make the pay- 
 ment of the loan a first lien upon the property. The funds raised 
 by loan, or received from any other source, and which may not be 
 required for the purposes before mentioned, or for their own ser- 
 1 Davenport v. Alabama & Chattanooga R. R. Co. 2 Woods, 519. 
 
 556
 
 JUDGMENTS AGAINST RECEIVERS. [§ 572. 
 
 vices, are to be paid into court for the use of the bondholders. 
 In conclusion, Judge Woods says : " The exercise of power by a 
 court to displace liens can only be sustained on the ground of act- 
 ual necessity ; and surely there can be no necessity to append, as 
 an incident to running a railroad, a lien for damages that dis- 
 places existing contracts. The party has a right to be paid from 
 the fund remaining after satisfying prior rights. He has a right 
 to be allowed his claim to be paid from an excess remaining. He 
 has the same right against the property which he could have had 
 if the road had been run by the president and directors when his 
 
 right accrued, and none other It cannot be said that the 
 
 giving of a prior lien to a traveller for damages is an expense in- 
 cident to the execution of the trust which was created in behalf of 
 the mortgagees. Such a claim is, in fact, no ' expense ' at all, in 
 the proper or ordinary sense of the word. It is a liability result- 
 ing secondarily from operating the road, and that is all." 
 
 572. A claim or judgment, however, against a receiver for 
 the value of goods lost in transportation, or for damages done 
 to property while the road was in his hands, is regarded as an 
 expense incidental to the management, and therefore payable out 
 of the earnings of the road, or other funds in the receiver's 
 hands. 1 
 
 There is no exemption of property in the hands of a receiver 
 from the operation of the tax laws of the government within 
 whose jurisdiction such property is situated. The Circuit Court 
 of the United States for the Southern District of New York hav- 
 ing appointed receivers of the New York and Oswego Midland 
 Railroad Company, pending a suit for the foreclosure of a mort- 
 gage upon the road, the receivers applied to the court to enjoin 
 tax-collectors from executing warrants for taxes assessed on the 
 mortgaged property, on the ground of irregularities in the a 
 ment of the taxes ; but, the warrants appearing to be regular, 
 and the collectors acting in good faith in the discharge of their 
 duty, the court refused to enjoin them. Judge Blatchford, ren- 
 dering the decision of the court, said: 2 "There is no prerogative 
 of sovereignty which is of higher importance than the power oi 
 taxation, which includes the collection as well aa the assessing of 
 
 i Cowdrey v. Galveston, Houston & 2 Stevens v. New York & Oswego Mid- 
 Henderson it. K. Co. 93 U. S. 352. lund U. K. Co. 13 Blatchf. L04. 
 
 I
 
 § 572.] MORTGAGES NOT AFFECTED BY SUBSEQUENT EQUITIES. 
 
 the taxes. The very existence of the state as a government de- 
 pends upon the exercise of such power. Except under very spe- 
 cial circumstances, such power ought not to be interfered with by 
 injunction. If any person is aggrieved by the exercise of the au- 
 thority of the tax-collector, he has an adequate ultimate remedy 
 in an action against the wrong-doer, with the preliminary remedy 
 afforded of directly reviewing the proceedings according to the 
 method, and before the tribunal, provided by the laws of the gov- 
 ernment under wdiose authority the proceeding takes place." 
 
 The priority of mortgages over judgment and other creditors 
 is in England established by statute, 1 which provides that all 
 money borrowed or to be borrowed by a company on mortgage or 
 bond, or debenture stock, under the provisions of any act author- 
 izing the borrowing of it, shall have priority against the company, 
 and the property from time to time of the company, over all other 
 claims, on account of any debts incurred or engagements entered 
 into by them after the passing of the act, provided that this pri- 
 ority shall not affect any rent charge or any claim for land taken, 
 used, or occupied by the company for the purposes of the railway. 
 
 i Railway Companies Act 1867, 30 &31 Vict, c .127, §23. 
 558
 
 CHAPTER XX. 
 
 LIENS AFFECTING THE PRIORITY OF RAILROAD MORTGAGES. 
 
 L Application of general lien laws to rail- 
 roails, 573-578. 
 
 II. Special lien laws applicable to rail- 
 roads, 579-582. 
 
 III. Statutes of the several states giving 
 liens upon railroads, 583-G10. 
 
 IV. Vendor's lien, Gil. 
 
 V. Transportation certificates, 612. 
 
 VI. Judgment lien, 613. 
 
 I. Application of General Lien Laivs to Railroads. 
 
 573. The general lien laws in favor of mechanics and 
 others who perform labor and furnish material for the construc- 
 tion of buildings are usually regarded as having no application to 
 railroads, except so far as they give a lien for structures connected 
 with railroads, which come strictly within the designation of build- 
 ings. Objection has sometimes been made to the application of 
 the general lien laws to railroads even to this extent, for the 
 reason that it is regarded as contrary to public policy to allow 
 them to be sold in pieces and destroyed, when they are so neces- 
 sary to public use and convenience. 1 
 
 Although this view seems to prevail in Pennsylvania, 2 and has 
 at times been entertained elsewhere, and on this ground buildings 
 of a railroad or other public corporation have been held not to be 
 subject to lien under the general lien laws, yet the prevailing 
 view is otherwise, and a building erected for a railroad company 
 is generally regarded as within a statute giving a lien for work 
 done and materials furnished in the construction of " any dwell- 
 ing-house or other building." 3 The doctrine that a railroad Is an 
 entire thing cannot be applied so as to cut off such a lien, because 
 the property to which it attaches dues not become a part of the 
 
 1 McPheetera v. Merimac Bridge Co. (Pa.) 5 Leg. & Ins. K. lo7 ; 11 Pitts. L. 
 28 Mo. 465 ; Dunn v. North Mo. It. B. 24 J. 4. 
 
 Mo. 403. ;1 Hill r. La Crossefi Milwaukee B. B. 
 
 2 Foster t;. Fowler, 60 l*a. St. 27 ; Mc- Co. 11 Wis. 21 I ; Botsford r. N. u Haven, 
 Ilvain v. Hestonville & Mantua It. It. Middletown & Willimantio It. B. Co. 41 
 Co. 5 1'hila. (Pa.) 13 ; Fvans v. It. It. Co. Conn. 454.
 
 §§ 574, 575.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 entirety for that purpose, until the lien is discharged, any more 
 than it would if the lien had been created by a mortgage executed 
 by the company. 1 
 
 574. A railroad bridge is not a building within the mean- 
 ing of the word in a general lien law. — Thus, under a statute 
 giving a lien for work done, or materials furnished, in the erection 
 or construction of " any dwelling-house or other building, " a rail- 
 road bridge is not included as subject to the lien. 2 A bridge is 
 not a " building." This word in common usage, and in its exact 
 signification as well, means a structure designed for the habitation 
 of man or animals, or for the sheltering of property. A bridge 
 may be built, but the structure is not a building. A railroad may 
 be built, and the structure is just as much a building as is a 
 bridge. The statute, also, by speaking of the lot on which the 
 building stands, and making the interest of the owner therein, to 
 an amount not exceeding one acre in a city, or forty acres in the 
 country, liable to the lien, indicates that it did not contemplate 
 any such structure as a bridge. 
 
 575. A railroad bridge is not an improvement within the 
 meaning of that word as used in a general lien law. Under a 
 former lien law of Missouri, applicable to the county of St. Louis, 
 it was held that there could be no lien for labor performed, or 
 materials furnished, for the construction of bridges and culverts 
 upon a railroad, although the law gave such a lien for " improve- 
 ments" as well as buildings. The decision was placed upon the 
 ground that a railroad is a public work, established by public au- 
 thority for the public use and benefit ; and that a lien, with a 
 power of enforcing it by execution, would subject the portion of 
 the road affected by it to sale, and might deprive the public of 
 the benefit contemplated in the grant of the corporate franchises. 
 The Constitution of the state then required the fostering of public 
 improvements, and the state had assumed great responsibilities in 
 building railroads for the public use, and it was regarded as un- 
 reasonable to suppose a power remained in any individual to 
 deprive the public of the benefit of such improvements. 3 
 
 1 Hill v. La Crosse & Milwaukee R. E. 2 La Crosse & Milwaukee E. E. Co. v. 
 Co. supra. Vanderpool, 11 Wis. 119. 
 
 s Dunn v. North Mo. E. E. 24 Mo. 493. 
 560
 
 APPLICATION OF GENERAL LIEN LAWS TO RAILROADS. [§§ 576, 577. 
 
 576. The terms structure, erection, or improvement. — The 
 general lien laws in some of the states give a lien for labor done 
 and materials furnished in the erection or alteration, not only of a 
 house or other building, but so of any " structure," " erection," 
 or " improvement " upon land. 1 Under these ambiguous terms it 
 is of course possible to establish a lien for almost anything that 
 can be attached to the realty. Accordingly, under such a statute, 
 a lien has been established against a railroad for ties furnished the 
 company; 2 and doubtless a lien might be established for almost 
 any part of a railroad, such for instance as the grading of the 
 line of road as an " improvement " upon land. The application 
 of such statutes has not often been the subject of adjudication, be- 
 cause in nearly all the states there are now statutes which apply 
 specifically to railroads, giving liens for labor performed and ma- 
 terials supplied in their construction and repair. 
 
 577. Under a statute of Iowa, providing that a mechan- 
 ic's lien for work and material shall attach from the com- 
 mencement of " the building, erection, or other improvement," 
 it has been held that a lien for railroad ties may be sustained 
 against a mortgage made before such ties were furnished to the 
 company or contracted for, in case the construction of the road 
 had been commenced before the making of the mortgage, and was 
 not then completed, although the person who furnished the ties 
 and claimed the lien had nothing to do with the previous construc- 
 tion of the road. 3 In the case before the court, sixteen miles of 
 road had been graded before the making of the mortgage, and 
 the ties were, some months afterwards, furnished, apparently, to a 
 
 1 As in Arkansas, " erection or other 2 Neilson v. Iowa Eastern Ry. Co. 44 
 
 improvement," Dig. of Stat. 1874, §S 405G- Iowa, 71. The decision in this case is fully 
 
 4062; Tennessee, " erection or improve- stated and examined in the following 
 
 ment," Acts 1808, pp. 61-67; South tion. Other states have similar statutes. 
 
 Carolina, 'Structure," R. S. 1873, p. 3 Neilson v. Iowa Eastern Ry. Co, 4 i 
 
 550; Delaware, " house, building, or Iowa, 71. And see Taylor v. Burlington, 
 
 structure," Laws 1875, ch. 184, p. 308; Cedar Rapids & Minn. Ry. Co. in I'. S. 
 
 Kansas, " building, erection, or improve- ('. C. for District of [owa, Maj Term, 
 
 ment," Dassler's Stats. 1876, §3861; 1877,11 West. Jur. 337; 4 Cent. L.J. 536; 
 
 Mississippi, "buildings, bridge, or mill;" 4 Dill. 571. It must l"' confessed that, 
 
 Michigan, "building, wharf, machin- under this statute, or under this construc- 
 
 ery," Compiled Laws 1871, § 6789 ; Acts tion <>i it,a mortgageof an unfinished rail- 
 
 1877, p. 145; Iowa, " erection or other im- road is, in [owa, averj | r security. 
 
 provement," Code 1873, §§ 2139-2141. 
 
 30 561
 
 § 577.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 contractor who had undertaken to equip the road. Upon the first 
 argument of the case before the Supreme Court, the lien was 
 established against the road, subject to the mortgage ; 1 but upon 
 a reargument of the case, the lien was given priority of the mort- 
 gage, by reason of the terms of the statute, which was inter- 
 preted to mean something different from a statute providing that 
 the lien shall attach only from the commencement of the work, 
 or of the furnishing of the materials. 2 In the latter decision, in 
 reply to the suggestion that it would be unjust to the mortgagee 
 to make his mortgage subject to liens for work subsequently com- 
 menced, it is urged that a person who takes a mortgage upon a 
 partially constructed building or other improvement has notice, 
 from the condition of the property, of the possibility that me- 
 chanics' liens may attach upon it ; that, although he cannot know 
 the amount of the lien, or whether the work will be completed in 
 pursuance of the plan of the mortgagor, according to which the 
 work was commenced, yet, having elected to deal with the mort- 
 gagor, he may be required to rely upon his good faith and pru- 
 dence ; and that, although hardship might sometimes result from 
 such a construction, yet the danger to be apprehended is not such 
 as to control the construction of a statute ' having so little am- 
 biguity. " In regard to the policy of the statute, as we construe 
 it," say the court, " this may be said : it is not desirable that the 
 execution of a mortgage upon land upon which a building or other 
 improvement is in process of construction should arrest the work 
 and prevent its completion. Both mortgagor and mortgagee are 
 interested in its completion. Without it, the money already ex- 
 pended must, ordinarily, to a great extent, be lost. Take the 
 present case as illustration. The intervenors are holders of mort- 
 gage bonds upon a road, sixteen miles of which had been graded 
 at the time the mortgage was made. The value of their secu- 
 rity depended upon the further construction of the road. They 
 foresaw that work and materials must be furnished by some- 
 body, or nothing could be realized from what had been done. 
 Yet the construction of the statute which they contend for would 
 
 1 Nelson v. Iowa Eastern Ry. Co. 8 or improvement, and to the land on which 
 Am. Ry. Rep. 82. the same is situated, or either of them, 
 
 2 Code 1873, § 2139, provides that such made subsequent to the commencement 
 liens " shall be preferred to all other of said building, erection, or improve- 
 liens and incumbrances which may be at- ment." See § 591. 
 
 tached to or upon such building, erection, 
 
 562
 
 APPLICATION OF GENERAL LIEN LAWS TO RAILROADS. [§ 578. 
 
 require the mortgagor to keep a fund on band for the daily pay- 
 ment of the laborers and material-men, or that the work and ma- 
 terials should be furnished practically without security." 
 
 The construction of this statute adopted by the court proceeds 
 upon the ground that a railroad is an entirety; so that, if the 
 work of construction of any portion of the road has been com- 
 menced before the execution of the mortgage, it does not matter 
 that the particular work for which the lien is claimed was done, 
 or the materials furnished, for some other portion of the road, and 
 after the execution of the mortgage. The claim relates back to 
 the commencement of the work. 1 
 
 This same statute even provides for giving priority to a lien 
 for labor or materials over a mortgage executed before the com- 
 mencement of the "building, erection, or other improvement." 
 The lien attaches in preference to any prior mortgage ; " and 
 any person enforcing such lien may have such building, erection, 
 or other improvement sold under execution, and the purchaser 
 may remove the same within a reasonable time thereafter." 2 
 The relative rights of a mortgagee of a railroad and a mechanic, 
 in this case, would be that the mortgagee would retain his prior- 
 ity as to the land ; but the mechanic would have priorit}^ over the 
 mortgagee as to the buildings, erections, or improvements put 
 upon the land subsequent to the mortgage, and might enforce his 
 lien upon the building or other independent structure, by causing 
 it to be sold and removed. 3 
 
 578. A further question has arisen under this statute as 
 to the rights of the mortgagee and the mechanic, when re- 
 pairs are made upon a structure already completed, which, 
 with the land, is covered by mortgage. The statute gives a lien 
 for repairs; but when the lien attaches, and how it is to be en- 
 forced, are questions which have given the courts of Iowa much 
 trouble. 4 This question came before the Circuit Court of the 
 United States for the District of Iowa, in a foreclosure suit 
 against the Burlington, Cedar Rapids, and Minnesota Railway 
 Company, upon a petition of a firm of bridge-makers, to establish 
 
 1 See § 591. Minn. Ry. Co. s>t r r.i, per Dillon, .1. And 
 
 2 Code 1873, § 2141. Getchellv. Allen, 84 [owa, 559. 
 
 » Taylor v. Burlington, Cedar Rapids ft ' Neilson '•. [owa Eastern By. Co. 
 
 supra ; Getchell v, Allen, supra, 
 
 568
 
 § 579.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 a lien for one span of a bridge furnished this road after it had 
 been fully completed and was in operation. 1 A portion of a 
 bridge had been broken down or carried away by high water, and 
 the span for which a lien was claimed was to replace this. The 
 court held that any lien which could be claimed would be subject 
 to the mortgage. Judge Dillon, delivering the opinion of the 
 court, said : " As against the owner, the lien attaches from the 
 time the repairs are begun. This is plain enough, and just. But 
 when does this lien attach, as against a prior mortgagee of land 
 and building ? The answer is, at the same time it attaches as 
 against the owner. The result is, that repairs on a previously 
 completed building or railway, on which a mortgage rested prior 
 to the commencement of such repairs, do not give a lien which 
 will override the lien of the mortgage. The legislature has not 
 authorized the owner of a building or railway, on which such 
 owner has given a mortgage, to improve the mortgage out of ex- 
 istence, by making repairs ad libitum, and furnishing the owner 
 the necessary credit therefor, by giving the mechanic and mate- 
 rial-man a lien paramount to the mortgage. Such a view has 
 neither law, justice, equity, nor public policy to recommend it." 
 
 The same rule is applicable in respect to any repairs made 
 upon a mortgaged railroad already completed and in operation, 
 such as the laying of new steel or iron rails. There is a lien for 
 such repairs, but it is subject to the lien of the mortgage. 2 
 
 It would seem that there could be no mechanics' lien upon a 
 railroad for cars furnished for use upon it. 3 
 
 II. Special Lien Laws applicable to Railroads. 
 
 579. It is within the legitimate scope of legislative power 
 
 to provide that laborers and contractors may have a lien for 
 
 labor performed and for materials furnished in the construction 
 
 or improvement of a railroad in preference to all mortgages or 
 
 1 Taylor v. Burlington, Cedar Rapids upon the property covered by the railway 
 
 & Minn. Ry. Co. 11 West. Jur. 337; 4 mortgages. 
 
 Dill. 570. Judge Dillon, in this case, re- 2 Taylor v. Burlington, Cedar Rapids 
 
 marked that there were probably forty in- & Minn. Ry. Co. supra. 
 
 tervening petitions filed in the various 3 See New England Car Spring Co. v. 
 
 railway foreclosure cases pending at that Baltimore & Ohio R. R. Co. 11 Md. 81 ; 
 
 time, in that court, seeking to establish, Taylor v. Burlington, Cedar Rapids & 
 
 on behalf of claimants, mechanics' liens Minn. Ry. Co. 11 West. Jur. 337 ; 4 Cent. 
 
 L. J. 536. 
 
 564
 
 SPECIAL LIEN LAWS APPLICABLE TO RAILROADS. [§§ 580, 581. 
 
 other incumbrances placed upon the property subsequent to the 
 passage of the act. The statute of the State of Missouri to this 
 effect was held by the Circuit Court of the United States to be 
 constitutional, and to give priority to such claims over a mortgage 
 executed just after the passage of the act ; the phrase " subse- 
 quent to the passage of this act " being interpreted to mean sub- 
 sequent to the approval of it by the governor, and not subsequent 
 to the expiration of ninety days from the passage of the act, at 
 which time by general law every act takes effect, unless a differ- 
 ent time is therein appointed. 1 
 
 580. Who is a laborer. — A general agent or superintendent 
 of a corporation employed at a stipulated salary is not entitled to 
 the benefit of a lien in favor of mechanics, builders, lumbermen, 
 artisans, workmen, laborers, or other persons who may perform 
 any work upon or furnish materials for any building. Such an 
 agent or superintendent stands in the place of the corporation 
 itself toward others intended to be protected by the law. 2 Nor is 
 a contractor who agrees to build a railroad, or to furnish the labor 
 of others, a laborer or servant ; 3 nor is the secretary of a corpora- 
 tion a laborer or servant ; 4 nor is a consulting engineer a laborer 
 or operative ; 6 nor is a civil engineer a laborer or workman ; 6 
 nor is a time-keeper and superintendent in the employ of a con- 
 tractor a laborer ; 7 nor is a sub-contractor an employee. 8 
 
 581. The right conferred by a lien in favor of laborers is 
 personal, and cannot be availed of by one who furnishes labor. 
 Under the statute of New Jersey, 9 giving to the laborers in the 
 employ of any corporation, in case of its insolvency, a lien upon 
 its assets for the amount of wages due them, it is held that the 
 right conferred is personal, inhering alone in the person who 
 actually performs labor or service, and not in one who furnishes 
 
 1 Walker v. Miss. Valley & Western R. 6 Ericsson v. Brown, 38 Barb. (X. V.) 
 R. Co. 2 Cent. L.J. 481. 390. 
 
 2 Smallhouse v. Kt. & Mon. Gold & ° Pennsylvania & Del. R. R. Co. v. 
 Silver Mining Co. 2 Mon. T. 443 ; Blakey Leuffer, 84 Pa. St. 1C8. 
 
 v. Blakey, 27 Mo. 39. ' Missouri, Cans. S Tex By. Co. u. 
 
 3 Balch v. N. Y. & Oswego Midland R. Baker, 14 Sana 563. 
 
 R. Co. 4G N. Y. 521 ; Aikin v. Wasson, " Ncy v. Dnbnqne, &c. R. R. Co. 20 
 24 X. V. 482. Iowa, :u7. 
 
 < Coffin v. Reynolds, 37 N. Y. 640. 9 Kov. Sts. 1877, p. 188. 
 
 565
 
 § 582.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 the labor of others under a contract. Thus one who has con- 
 tracted with a railroad company, whose road is located in New 
 Jersey and has its terminus at Jersey City, to transfer by his own 
 teams or drays over the company's ferry all freight received in 
 New York for transportation over the road, and all freight re- 
 ceived in Jersey City to be delivered in New York, is not an em- 
 ployee entitled to such lien, but a contractor. 1 " I think it very 
 plain," said the vice chancellor, " the legislature did not intend 
 to give a lien or preference for wages due for vicarious labor or 
 service, or to confer upon one person the power to depute or dele- 
 gate to himself the labor of many others, so that he can be an 
 employee of a corporation to the extent of one hundred or one 
 thousand men daily. Such a purpose would have been expressed 
 by giving preference to the debt, as that all debts due for labor or 
 service should be a lien, and not to the creditor, as it now stands, 
 that the employees in the employ of a corporation shall have 
 a lien upon its assets for the wages due to them respectively." 
 Moreover the obvious purpose of the statute was in the first place 
 to render it certain that the laborers whose services are essential 
 to the continued operation of a railroad or like enterprise should 
 be paid in any event, so that there should not be even a tem- 
 porary suspension of the business ; and in the second place to pro- 
 tect a class of persons who are dependent upon their wages for 
 support, and who are unable to protect themselves against the 
 misfortune or fraud of the company. The preference given by 
 the statute grows out of the character of the creditor, and not out 
 of the character of the debt. 
 
 582. No lien can be claimed for money advanced to labor- 
 ers at the request of a railroad company. Thus, if certificates of 
 indebtedness issued by a railroad company to its laborers for 
 work are taken up by a third person, at the request of the com- 
 pany and on its agreement to settle with him for the same, he is 
 entitled to recover of the company for money advanced ; but he 
 cannot claim a lien for goods and supplies furnished necessary for 
 the operation of its road, under contract therefor. The fact that 
 the certificates were issued to enable the laborers to procure board, 
 and to enable boarding-house keepers to obtain groceries and pro- 
 visions for hands engaged in the construction of the road does not 
 
 1 Lehigh Coal & Navigation Co. v. Central R. R. Co. of N. J. 29 N. J. Eq. 252. 
 566
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 583. 
 
 enable one who has advanced money to take up such certificates 
 to claim that he has supplied goods under contract necessary for 
 the operation of the road. The statute embraces materials used, 
 supplies furnished, and labor performed, in constructing, repair- 
 ing, operating, or maintaining a railroad ; but not money loaned 
 to the company or paid to its creditors at its request. A person 
 advancing money upon such certificates cannot stand in the place 
 of the former holders in respect to their lien, because the lien is 
 not assignable at law. 1 
 
 III. Statutes of the several States giving Lieris upon Railroads. 
 
 In a great majority of the states there are now statutes giving 
 liens specifically upon railroads for labor performed and materials 
 supplied in their construction or operation. These statutes are so 
 diverse in their operation, and have a bearing so important upon 
 the value of the securities issued by companies whose roads are 
 subject to these laws, that it is deemed best to give the leading 
 provisions of these statutes in full. 
 
 583. Alabama. 2 — Under the general lien law any person per- 
 forming any work upon or furnishing any material, fixtures, en- 
 gine, boiler, or machinery for any building, erection, or improve- 
 ment upon land, under any contract with the owner or his con- 
 tractor or 'sub-contractor, has a lien for the same, in preference 
 to all other incumbrances which may attach subsequently to the 
 commencement of such buildings or improvements. Such lien 
 attaches to the buildings, erections, or improvements only, in pref- 
 erence to any prior lien, incumbrance, or mortgage upon the land ; 
 and any person enforcing such lien, where there is a prior mort- 
 gage or lien upon the land, may have such building, erection, or 
 improvement sold under execution, and the purchaser may remove 
 the same within a reasonable time. Every original contractor 
 within six months, and every day laborer within thirty days, and 
 every other person within four months, after the indebtedness 
 has accrued, must file a statement of the demand with the judge 
 of probate of (he county. 
 
 Alien is also created 3 in favor of laborers and employees of 
 
 i Cairo & Vincennes R. It. Co. v. Fack- 8 6ode 1870, § 3181 ; Act March 19, 
 ney, 78 III. 116. 1875. 
 
 a Code 187G, pp. 777-782, §§ 3440-34G1. 
 
 5G7
 
 §§ 584, 585.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 any railroad company operated in the state, except the officers of 
 said companies, for all debts due to them for work and labor done 
 and performed by them for such railroad company ; and such lien 
 extends to all the property, rights, effects, and credits of every 
 description of such railroad company situated in this state. 
 
 584. California. 1 — Every person performing labor upon, or 
 furnishing? materials to be used in the construction, alteration, or 
 repair of any building, bridge, railroad, or any other structure, 
 has a lien upon the same for work or labor done or materials fur- 
 nished by each respectively, whether done or furnished at the 
 instance of the owner of the building or other improvement, or 
 his agent ; and every contractor, sub-contractor, architect, builder, 
 or other person having charge of the construction, alteration, or 
 repair, either in whole or in part, of any building or other im- 
 provement, as aforesaid, shall be held to be the agent of the 
 owner for the purposes of this chapter. The liens are preferred 
 to any lien, mortgage, or other incumbrance which may have at- 
 tached subsequent to the time when the building, improvement, 
 or structure was commenced, work done, or materials were com- 
 menced to be furnished ; also to any lien, mortgage, or other 
 incumbrance, of which the lien-holder had no notice, and which 
 was unrecorded at the time the building, improvement, or struct- 
 ure was commenced, work done, or the materials were commenced 
 to be furnished. 
 
 Under a similar statute a lien for work or materials could not 
 be acquired on a portion of the road, but must be filed on the 
 entire road. One contractor or sub-contractor cannot file a lien 
 for the part of the road upon which he worked or for which he 
 furnished material, so that while one might acquire a lien upon 
 a bridge, another might have a lien upon a tunnel, and a third 
 upon a culvert. Neither does the statute contemplate that there 
 may be a separate lien upon each mile or section of the road. 2 
 
 585. Colorado. 3 — All mechanics, laborers, and others who 
 perform work or labor or furnish materials to the amount of 
 twenty-five dollars or more, for the construction or repairing of 
 
 1 Codes and Statutes 1876, vol. 2, §§ 2 Cox v. Western Pacific R. R. Co. 44 
 11,183, 11,186; Approved March 30, 1874. Cal. 18 ; S. C. 47 lb. 87. 
 
 » Gen. Laws 1877, pp. 588, 591. 
 568
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 586. 
 
 any railroad, tram-way, toll-road, or canal, have a lien upon such 
 railroad, tram-way, toll-road, or canal, for the amount and value 
 of the work or labor so performed, or material furnished, by filing 
 in the county clerk and recorder's office of the county in which 
 the property to be charged with such lien is situated, within forty 
 davs after such railroad, tram-way, toll-road, or canal shall have 
 been completed, a statement of such lien ; or if such lien is claimed 
 by a sub-contractor, journeyman, or an} r other person than a con- 
 tractor performing work or labor, or furnishing materials, then by 
 filing such statement within twenty days after the time when the 
 last work or labor was performed, or the last materials were fur- 
 nished by him, and by serving a copy of such statement upon the 
 owner or owners of such property, or the agents of such owner or 
 owners. Any lien so claimed extends to and includes all fran- 
 chises, charter privileges, and rights of way that may anywise 
 pertain to any such railroad, tram-way, toll-road, or canal. The 
 land occupied by any building or superstructure, railroad, tram- 
 way, toll-road, or canal, necessary for the convenient use and occu- 
 pation of the same, is subject to the liens provided for, if at the 
 time the work or labor was commenced, or the first materials were 
 furnished, such land was owned by, or was in the possession of, 
 under a bond fide claim of title, the person or persons for whom, 
 or at whose instance, such work or labor was performed, or mate- 
 rials were furnished ; but if such person hold less than a fee sim- 
 ple estate in such land, then only his or their interest therein i3 
 subject to such lien. The liens provided for are preferred to 
 every other lien or incumbrance which shall attach upon any 
 property made subject thereto subsequent to the time when the 
 labor or work was commenced, or the first of the materials were 
 furnished, and also to all mortgages and other incumbrances unre- 
 corded at the time such work or labor was commenced, or the first 
 of the materials were furnished ; but any valid incumbrance upon 
 any such land duly made and recorded before such work or labor 
 was commenced, or the first of such materials were furnished, re- 
 mains unimpaired. 
 
 586. In Connecticut 1 every railroad for the construction of 
 which, or of any of its appurtenances, any person shall have a 
 claim for materials furnished or Bervicea rendered, under any con- 
 
 l G. S. 1875, pp. 360, 361 ; Act I871/ch. 137. 
 
 569
 
 § 587.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 tract with or approved by the corporation owning or managing 
 such road, is subject with its real estate, right of way, material, 
 equipment, rolling stock, and franchise, to the payment of such 
 claim ; such claim takes precedence of any other incumbrance 
 originating after the commencement of such services or the fur- 
 nishing of such materials. A certificate of the lien must, within 
 sixty days after the performance of such services, or the furnishing 
 of such materials has ceased, be filed in the office of the secretary 
 of state in a book kept for the purpose. 
 
 The general lien law of the state extends only to services ren- 
 dered or materials furnished in constructing or repairing a build- 
 ing. 1 This statute, however, applies to buildings of a railroad 
 company. 2 It was contended in one case, in behalf of a railroad 
 company, that the statute could not apply to railroads or other 
 enterprises of a public character ; that railroad companies are pub- 
 lic corporations, created by positive statute for public use ; and 
 that the easement in the soil is taken by the public in the exer- 
 cise of the right of eminent domain ; and therefore the exercise 
 of a mechanic's lien is incompatible with the public rights in the 
 property, and inconsistent with the objects of the corporation. 
 But the court said that if it be granted that the easement in the 
 soil is in such case taken in the exercise of the right of eminent 
 domain, it by no means follows that the soil is so taken with an 
 immunity from all liens and incumbrances upon it, or with an im- 
 munity from liens that may afterwards be put upon it under the 
 general lien law. 3 The fact that the legislature subsequently en- 
 acted a special lien law in favor of contractors as against railroad 
 companies was regarded as giving countenance to the view that 
 the general lien law was intended to apply to those corporations. 
 
 587. Dakota Territory. 4 — Every mechanic, or other person 
 who shall do any labor upon, or furnish any materials, machinery, 
 or fixtures for any building, erection, or other improvements upon 
 land, including those engaged in the construction or repair of any 
 work of internal improvement, by virtue of any contract with the 
 
 1 G. S. 1875, p. 359, § 9; Statute of station in Danbury, in the case of Bene- 
 1855. diet v. Danbury & Norwalk R. R. Co. 24 
 
 2 Botsford v. New Haven, Middletown Conn. 320. 
 
 & Willimantic R. R. Co. 41 Conn. 454. 4 r q, i 877) pp . 62 2, 624, §§ 655, 656, 
 
 3 Without the question being raised, 664, 665, 666, of Code of Civil Procedure, 
 such a lien was enforced upon a passenger 
 
 570
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 588. 
 
 owner, his agent, trustee, contractor, or sub-contractor, has a lien 
 upon such building, erection, or improvement, and upon the land 
 belonging to such owner, on which the same is situated, to secure 
 the payment of such labor done, or materials, machinery, or fixt- 
 ures furnished. Every sub-contractor wishing to avail himself of 
 the benefits of this lien must give notice to the owner, his agent, 
 or trustee, before or at the time he furnishes any of the things 
 aforesaid or performs any labor, of his intention to perform the 
 same, and the probable value thereof. The liens for labor done 
 or things furnished are preferred to all other liens and incum- 
 brances which may be attached to or upon said building, erection, 
 or other improvement, and to the land on which the same is situ- 
 ated, or either of them, made subsequent to the commencement 
 of said building, erection, or other improvement. 
 
 The entire land upon which any such building, erection, or 
 other improvement is situated, including that portion of the same 
 not covered therewith, is subject to all liens so ci'eated, to the ex- 
 tent of all the right, title, and interest owned therein b}^ the owner 
 thereof, for whose immediate use or benefit such labor was done 
 or things furnished. The lien attaches to the buildings, erections, 
 or improvements, for which they were furnished or done, in pref- 
 erence to any prior lien or incumbrance, or mortgage upon the 
 land upon which the same is erected or put, and any person en- 
 forcing such lien may have such building, erection, or other im- 
 provement sold under execution, and the purchaser may remove 
 the same within a reasonable time thereafter. 
 
 588. Georgia. 1 — All contractors to build railroads have a 
 special lien upon the road for work done and materials furnished 
 therefor. The lien must be recorded, within three months after 
 the completion of the work, in the office of the clerk of the Su- 
 perior Court. Such lien is inferior to other general liens, when 
 actual notice of such liens have been communicated before the 
 work was done or materials furnished, but is superior to all other 
 liens. Persons who contract with a railroad in the capacity of 
 mechanics have a lien on the road for the work done, but QOl if 
 they made the contract in the capacity of contractors. 2 
 
 In all cases where the business of any corporation operating a 
 
 1 Code 1873, §§ 1979, 1980; Laws 1874, 2 Savannah, Griffin & North Ala. B. B, 
 p. 45. Co. v. Grant, 56 Ga, 68. 
 
 .071
 
 § 589.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 railroad, either wholly or partially in this state, shall, by an order 
 or decree of any court, be placed in the hands of a receiver for 
 the benefit of the creditors or stockholders of such corporation, 1 
 it shall be the duty of said receiver to apply the income of said 
 railroad to the payment of the incidental expenses necessary to the 
 carrying on said business, which shall include the wages of em- 
 ployees, wood, cross-ties, and other material furnished, and which 
 may be necessary for conducting said business, and keeping the 
 property in repair, and the damages which may arise from the 
 loss or injury to goods, wares, and merchandise received by said 
 road for transportation, and for injuries to persons and property 
 caused by the running of the cars on said road, and for which said 
 road is made liable, as common carriers, by the laws of this state ; 
 and a lien is accordingly created on the gross income of said road, 
 while in the hands of such receiver, in favor of such creditors or 
 claimants, superior to all other liens under the laws of this state. 
 If the receiver be removed, or a vacancy occur in the office, and 
 a successor be appointed, it is made his duty to pay the liens so 
 provided for, according to their date, out of any funds in his 
 hands as such receiver, whether such liability accrued before or 
 after his appointment. 
 
 589. Illinois. 2 — All persons who furnish to any railroad cor- 
 poration, under the laws of this state, any fuel, ties, material, 
 supplies, or any other article or thing necessary for the construc- 
 tion, maintenance, operation, or repair of such roads, by contract 
 with said corporation, or who do and perform any work or labor 
 for such construction, maintenance, operation, or repair by like 
 contract, are entitled to be paid for the same as part of the cur- 
 rent expenses of said road ; and in order to secure the same have 
 a lien upon all the property, real, personal, and mixed, of said 
 railroad corporation as against such railroad, and as against all 
 mortgages or other liens which shall accrue after the commence- 
 ment of the delivery of said articles, or the commencement of said 
 work or labor. Suit must be commenced within six months after 
 such contractor or laborer shall have completed his contract with 
 the railroad corporation, or after such labor shall have been per- 
 formed or material furnished. 
 
 Laws 1876, p. 122, §§ 1, 2. » R. S. 1877, p. 671 ; Act of April 3, 
 
 1872. 
 
 572
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 590. 
 
 A sub-contractor, material-man, or laborer, who furnishes to 
 any contractor with any such railroad corporation any fuel, ties, 
 materials, supplies, or any other article or thing, or who performs 
 any work or labor for such contractor in conformity with any 
 terms of any contract, express or implied, which such contractor 
 may have made with any such railroad corporation, has a lien upon 
 all the property, real, personal, and mixed, of said railroad cor- 
 poration. No such lien takes priority over any existing lien. The 
 person performing such labor, or furnishing such material, must 
 cause a notice, in writing, of his intention to claim a lien, to be 
 served on the president or secretary of such railroad corporation. 
 
 This act giving sub-contractors a lien upon railroads for labor 
 and materials furnished relates only to labor and materials fur- 
 nished after its passage. 1 Under the previous act 2 no one was 
 entitled to a lien unless his contract was directly with the railroad 
 company. 3 A sub-contractor is not, under the present law, en- 
 titled to a lien on a railroad, unless he complies with the statute 
 in regard to giving notice. 4 
 
 Under the railroad lien law of Illinois there is no lien in favor 
 of any one who may have done labor for or furnished materials or 
 supplies to sub-contractors. The statute having no apt words to 
 extend the liens given beyond sub-contractors, the court has no 
 right by judicial construction to extend the meaning of the act 
 beyond the intention plainly expressed. No lien exists against a 
 railroad in favor of remote contractors. 5 
 
 590. Indiana. 6 — The employees of any corporation doing 
 business in this state, whether organized under the laws of the 
 state or otherwise, are entitled to have and hold a first and prior 
 lien upon the corporate property of such corporation, and the earn- 
 ings thereof, for all work and labor done and performed by such 
 employees for such corporation, from the date of their employ- 
 ment by such corporation, which lien is prior to any and all liens 
 
 1 B. S. 1874, p. C7l, § 52. 141 ; S. C. 5 Reporter, 261 ; and Bee Roth- 
 
 '- February 22, 1861. gerber v. Dupuy, 64 HI. 452; Ahem v. 
 
 a ArbuckJew. 111. Midland Ry. Co. 81 Evans, 66 111. 125 ; Newhall v. K 
 
 111. 429. 70 III. 156. 
 
 * Cairo & St. Louis R. R. Co. i>. Cauble, ,; Acts Special S.'-si.m is;:, ,h. 9, p. 
 
 85 111. 5.05. 27. For former statute, see 1 R. S. 1876, 
 
 6 Cairo & St. Louis R. R. Co. v. Wat- p. 70'J. 
 son, 85 111. 531 ; 11 Chicago Leg. News, 
 
 573
 
 § 591.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 created or acquired subsequent to the date of the employment of 
 such employees by such corporation. Any employee wishing to 
 acquire such lien upon the corporate property of any corporation, 
 or the earnings thereof, whether his claim be due or not, must 
 file in the recorder's office of the county, where such corporation is 
 located or doing business, notice of his intention to hold a lien 
 upon such property and earnings aforesaid, for the amount of his 
 claim, setting forth the date of such employment, the name of the 
 corporation, and the amount of such claim ; and the lien so created 
 relates to the time when such employee was employed by such 
 corporation, or to any subsequent date during such employment, 
 at the election of such employee, and has priority over all liens 
 suffered or created thereafter, except other employees' liens, over 
 which there is no such priority. 
 
 Any employee having acquired such lien may enforce the same 
 by filing his complaint therefor in the Circuit or Superior Court 
 in any county where such lien was acquired, at any time within 
 six months from the date of acquiring such lien, or if a credit be 
 given, from the date of such credit, and the court rendering judg- 
 ment for such claim shall declare the same a lien upon such prop- 
 erty, and order the same sold to pay and satisfy such judgment 
 and cost. 
 
 591. Iowa. 1 — Every mechanic or other person who does any 
 labor upon, or furnishes any materials, machinery, or fixtures for 
 any building, erection, or other improvement upon land, including 
 those engaged in the construction or repair of any work of inter- 
 nal improvement, by virtue of any contract with the owner, his 
 agent, trustee, contractor, or sub-contractor, upon complying with 
 the provisions of the statute, has, for his labor done, or materials, 
 machinery, or fixtures furnished, a lien upon such building, erec- 
 tion, or improvement, and upon the land belonging to such owner 
 on which the same is situated, to secure the payment of such labor 
 done, or materials, machinery, or fixtures furnished. 
 
 And when such material has been furnished, or labor performed, 
 in the construction, repair, or equipment of any railroad, canal, 
 viaduct, or other similar improvement, the lien therefor extends 
 and attaches to the erection, excavations, embankments, bridges, 
 
 1 Laws 1876, ch. 100. The first para- statute. Code 1873, title 14, ch. 8, first 
 graphs are the same as in the previous enacted April 3, 1860. 
 
 574
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 591. 
 
 road-bed, and all land upon which the same may be situated, in- 
 cluding the rolling stock thereto appertaining and belonging ; all 
 of which, except the easement or right of way, constitutes the 
 building, erection, or improvement provided and mentioned in this 
 statute. 
 
 An account or statement of the lien must be filed with the 
 clerk of the District Court of the county, verified by affidavit. A 
 principal contractor must file such statement within ninety days 
 from the date on which the last material was furnished, or the last 
 labor was performed ; and when the lien is claimed on a railroad, 
 a sub-contractor has sixty days from the last day of the month in 
 which the labor was done, or material furnished, within which to 
 file his claim. 
 
 Such liens are preferred to all other liens and incumbrances 
 which maybe attached to or upon such building, erection, or other 
 improvements, or either of them, and to the land upon which they 
 are situated, made subsequent to the commencement of said build- 
 ing, erection, or other improvement. 1 These liens attach to the 
 buildings, erections, or improvements for which they were fur- 
 nished or done, in preference to any prior lien or incumbrance, or 
 mortgage upon the land upon which such erection, building, or im- 
 provement belongs, or is erected or put. If such material was fur- 
 nished, or labor performed, in the erection or construction of an 
 original and independent building, erection, or other improvement 
 commenced since the attaching or execution of such prior lien, in- 
 cumbrance, or mortgage, the court may, in its discretion, order and 
 direct such building, erection, or improvement to be separately 
 sold under execution, and the purchaser may remove it within 
 such reasonable time as the court may fix. But if, in the dis- 
 cretion of the court, such building or improvement should not be 
 separately sold, the court takes an account and ascertains the sep- 
 arate values of the land, and the erection, building, or other im- 
 provement, and distributes the proceeds of sale so as to secure to 
 the prior mortgage or other lien priority upon the land, and to bhe 
 mechanic's lien priority upon the building, erection, or other Lm- 
 
 1 Sco § 577. 'Die contract is regarded time for notice expires ninetydays from 
 
 as entire, ami where there is a continu- the date of the conclusion of the work. 
 
 oosopen account, the cause "f aetion is Jones v. Swan, 21 fowa, 181; Delaware 
 
 deemed to have accrued as to all tint items I lonstruction < !o. v. Davenport & Si. Paul 
 
 on the day of the hut ; ami therefore the Ry. Co. 4G Iowa, 40D. 
 
 575
 
 § 592.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 provement. If the material furnished, or labor performed, was 
 for additions to, repairs of, or betterments upon buildings, erec- 
 tions, or other improvements, the court takes an account of the 
 values before such material was furnished, or labor performed, and 
 the enhanced value caused by such additions, repairs, or better- 
 ments, and upon the sale of the premises distributes the proceeds 
 of sale so as to secure the prior mortgage or lien priority upon the 
 land and improvements as they existed prior to the attaching of 
 the mechanic's lien, and to the mechanic's lien priority upon the 
 enhanced value caused by such additions, repairs, or betterments. 
 In case the premises do not sell for more than sufficient to pay off 
 the prior mortgage or other lien, the proceeds are applied on the 
 prior mortgage or other lien. 
 
 It is also provided that a judgment against any railway corpo- 
 ration for any injury to any person or property shall be a lien 
 within the county where recovered on the property of such corpo- 
 ration, and such lien shall be prior and superior to the lien of any 
 mortgage or trust deed executed since the fourth day of July, 
 1862, the time when the original statute went into effect. 1 Under 
 this statute, the purchaser of railroad bonds secured by mortgage 
 is required to take notice that his lien, although prior in time, 
 must be postponed to judgments for injuries to persons or prop- 
 erty occurring at any time after the execution of the mortgage, 
 so long as the property is in the possession of the company. But 
 the right of action is not a lien, nor is an action pending a lien. 
 The lien does not attach until a judgment is rendered. There- 
 fore, if the mortgaged property be sold under a decree of fore- 
 closure before judgment is recovered, the company has then no 
 title to the property, and no lien can attach to it. There is 
 nothing in the statute charging a purchaser at the foreclosure sale 
 with notice of the action, or making the claim at the time of the 
 injury or at the time of commencing the action a lien upon the 
 company's property. The action is purely personal. Until judg- 
 ment is rendered, any one may purchase the company's property 
 unaffected by the action. 2 
 
 592. Kansas. 3 — Whenever any railroad company contracts 
 
 1 Code 1873, § 1309. 3 Laws 1872, ch. 136, § 1 ; 2 Dassler's 
 
 2 Burlinyton, Cedar Rapids & North- Stat. 1876, § 4610. 
 ern It. R. Co. 7 Cent. L. J. 65. 
 
 576
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 593. 
 
 with any person for the construction of its road or any part 
 thereof, such railroad company is required to take from the per- 
 son with whom such contract is made a good and sufficient bond, 
 conditioned that such person shall pay to laborers, mechanics, 
 and material-men, and persons who supply such contractor with 
 provisions or goods of any kind, all just debts incurred in car- 
 rying on such work, due to such persons, or to any person to 
 whom any part of such work is given, which bond shall be filed 
 by such railroad company in the office of the register of deeds in 
 each county where the work of such contractor shall be ; and if 
 any such railroad company shall fail to take such bond, such rail- 
 road company is liable to the persons before mentioned to the full- 
 extent of all such debts so contracted by such contractor. 
 
 Under this statute the company rather than the laborers and 
 mechanics is the proper obligee. The liability of a railroad com- 
 pany in such case is purely statutory, and a party seeking to en- 
 force the liability must show all the facts required by the statute. 
 If the bond contains all the conditions provided for, it is not viti- 
 ated by an additional stipulation to save the company harmless 
 from all trouble, damage, costs, suits, by reason of the debts. 1 A 
 railroad company failing to take the bond required is liable not 
 merely to the laborers personally, but to any persons to whom 
 they may transfer their claims. 2 
 
 This statute applies not merely when a railroad company is en- 
 gaged in the construction of its first and main track, but also 
 whenever it is enlarging its road by the addition of side tracks. 3 
 
 593. Kentucky. 4 — A lien is given in favor of any person who 
 performs labor or furnishes materials for the erection, altering, or 
 repairing of a house, building, or other structure, or the improve- 
 ment in any manner of real estate by contract with the owner. 
 When the labor is done for a contractor or sub-contrartor no lien 
 attaches, unless notice in writing be given to the owner that ;i 
 lien will be claimed. The lien is dissolved unless the claimant, 
 within sixty days after he ceases to labor or furnish materials, 
 files a statement in the office of the clerk of the comity court of 
 
 1 Atchison, Topeka & Santa IV R. K. b Missouri, K;i " •' ' v - Texas Ry. Co. v. 
 
 Co. 14 Ivans. 212. Br< tpra. 
 
 '- Missouri, Kansas & Texas By. Co. v. 4 Gen. Stats. 1878, ch. 70, pp. 620 684 
 Brown, ll Cans. 557. 
 
 a? 677
 
 § 593.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 the county. The lien is not effectual against a bond fide pur- 
 chaser for value without notice, actual or constructive. 1 
 
 When the property or effects of any railroad company 2 are as- 
 signed for the benefit of creditors, or come into the hands of any 
 receiver of a court, trustee, or assignee, for the benefit of creditors, 
 or anywise come to be distributed among creditors, whether by 
 operation of law or by the act of such company, owner, or oper- 
 ator, the employees of such company, owner, or operator in such 
 business, and the persons who have supplied materials or supplies 
 for the carrying on of such business, have a lien upon so much 
 of such property and effects as may have been embarked in such. 
 business, and all the accessories connected therewith, including 
 the interest of such company, owner, or operator in the real estate 
 used in carrying on such business. 
 
 This lien is superior to the lien of any mortgage or other in- 
 cumbrance, and exists for the whole amount due such employees 
 as such, or due for such materials and supplies. No president or 
 other chief officer, nor any director or stockholder of any such 
 company, is deemed an employee within the meaning of this act. 
 
 When the trustee or other person having the administration 
 or distribution of such property or effects continues the oper- 
 ation of the business, it is his duty, at the end of each calendar 
 month, after payment of current expenses, and after payment 
 of any debt due the United States or the State of Kentucky, 
 to distribute the remaining money in his hands among the 
 persons to whom this lien is given pro rata, except twenty per 
 cent, thereof, which he may, if necessary, reserve for contingent 
 expenses. 
 
 All persons whose property has been injured by the carelessness 
 of a railroad company or its employees have a like lien for the re- 
 covery of damages for such injury, and the statute of limitations 
 for such injuries is the same against a railroad company as that 
 provided against natural persons. 
 
 Whenever a railroad is sold or taken into possession by any 
 court of equity, or other court having jurisdiction, the wages due 
 to employees by said corporation, for work done within three 
 months next before such sale or seizure, and claims for compensa- 
 
 1 A mortgagee is entitled to the rights of - Laws 1876, ch. 902. 
 a purchaser under this act. Gere v. Crush- 
 ing, 5 Bush (Ky.), .304. 
 
 578
 
 STATUTES GIVING LIENS UPON RAILROADS. [§§ 594, 595. 
 
 tion for injuries to persons or property inflicted in operating said 
 railroad, within six months next before such sale or seizure, are 
 a first lien and must be first paid from the proceeds of sale, or of 
 net earnings of the railroad while in possession of the court. 1 
 
 594. In Maine 2 it is provided that every railroad company, 
 in making contracts for the building of its road, shall require 
 sufficient security from the contractors for the payment of all 
 labor thereafter performed in constructing the road by persons 
 in their employ ; and such company shall be liable to the labor- 
 ers employed for labor actually performed on the road, if they, 
 within twenty days after the completion of such labor, shall, in 
 writing, notify its treasurer that they have not been paid by the 
 contractors. 
 
 595. Maryland. — The general lien law applies to buildings 
 only. Coal cars were held not to be subjects of a mechanic's lien 
 under a statute which provided that every machine erected, con- 
 structed, or repaired should be subject to a lien in like manner 
 with buildings ; even admitting that coal cars could be called ma- 
 chines, the statute was construed to apply only to fixed or station- 
 ary machinery. 3 Such a statute is to be construed with reference 
 to the general purpose of lien laws in favor of mechanics. By 
 the common law mechanics who erected a house or stationary ma- 
 chinery lost all claim upon the property as soon as it became fixed 
 to the realty ; and the lien provided by statute was designed to 
 obviate the insecurity arising from the vesting of the title in the 
 owner of the realty without any voluntary delivery of the prop- 
 erty by the mechanics who had done the work and furnished the 
 materials for the additions to the realty. But the reason of the 
 law does not apply to movable machines. With reference to 
 these the law affords ample and complete security to the mechanic 
 by leaving in him the right of property, or in the case of repairs 
 done, giving him a lien thereon while they remain in his posses- 
 sion ; and he has the right to retain the possession and his right 
 of property or his lien, until his claim for construction or repair is 
 paid. 
 
 1 Lawa 1876, ch. 319. 8 New England Car Spring Co. v. Balti« 
 
 2 Act, 1S77, c!i. 186. more & Ohio R. R. < '"■ LI Md. 81. 
 
 579
 
 §§ 596, 597.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 596. In Massachusetts 1 any person to whom a debt is due 
 for labor performed or for materials furnished and actually used 
 in constructing any railroad by virtue of an agreement with the 
 owner of such railroad, or with any person having authority from 
 or rightfully acting for such owner in procuring or furnishing 
 such labor or materials, has a right of action against the owner 
 of such railroad to recover such debt with costs ; provided that 
 no one shall have an action for labor performed unless he shall, 
 within thirty days after ceasing to perform such labor, serve on 
 the owner of the railroad a written statement under oath of the 
 amount of the debt, and of the name of the person for whom and 
 by whose employment the labor was performed, by causing such 
 statement to be filed in the office of the clerk of the city or town 
 where the labor may have been performed ; and provided that no 
 one shall have a right of action for materials furnished unless be- 
 fore beginning to furnish the same he shall have served written 
 notice of his intention to claim such right in the same manner. 
 No contractor for the whole or any part of such railroad can have 
 such right of action, unless his contract is with the owner of the 
 railroad. Action must be commenced within sixty days after the 
 claimant has ceased to perform the labor or furnish the materials. 
 
 This statute applies to a person performing labor under an 
 agreement with a contractor, who acts under a contract with the 
 owner of the railroad. While sub-contractors have no right of 
 action under this statute, persons employed by them or furnish- 
 ing them materials are protected. 2 
 
 This statute does not afford any remedy to a person to whom 
 a debt is due for labor performed in constructing a railroad, by 
 virtue of an agreement with a contractor whose contract with the 
 owner of the railroad was made before the passage of the statute, 
 although the labor was performed after the statute took effect. 3 
 
 597. Michigan. 4 — It is lawful for all railroad companies, 
 when contracts are made by them with any contractors for work, 
 labor, or materials to be used in repairing or constructing rail- 
 roads, to provide in the contracts for the payment of laborers 
 and persons furnishing material to such contractors or to sub-con- 
 
 1 Acts of 1873, ch. 353. 8 Parker v. Mass. R. R. Co. 115 Mass. 
 
 2 Hart v. Boston, Revere Beach & Lynn 580. 
 
 R. R. Co. 121 Mass. 510. * Compiled Laws 1871, pp. 786, 787. 
 
 580
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 598. 
 
 tractors ; and if no such provision is made, it is lawful for the 
 railroad companies to withhold payment until such laborers and 
 persons furnishing material are paid ; and it is the duty of such 
 railroad companies, by agent or otherwise, at each pay-day, to 
 see that all laborers and persons furnishing material employed 
 by any such contractors or sub-contractors are paid before pay- 
 ment is made to such contractors, not to exceed, however, the 
 amount due to the contractors. The provisions of this act do not 
 apply to any iron or other materials and property used in ironing 
 and equipping the railroad. A bill of items of the material and 
 labor furnished to such contractor or sub-contractors shall be fur- 
 nished to the company through their agent, or otherwise, together 
 with the amount claimed prior to the usual pay-day of said com- 
 pany, when such claim shall be due, or in case the said contract- 
 ors are not then paid, then prior to the payment then due. On 
 compliance with the provisions of this act, the persons perform- 
 ing the labor, or furnishing the materials, have the right to col- 
 lect pay for the same from the railroad companies by action, as in 
 case of other claims against such railroad companies, if the said 
 claim or claims are undisputed and acknowledged to be due from 
 said contractor or sub-contractor. 
 
 All the stockholders of any such company are individually lia- 
 ble for all the labor performed, 1 but they are not liable to an 
 action therefor until an execution shall be returned unsatisfied, 
 in whole or in part, against the corporation, and the amount due 
 on such execution shall be primd facie evidence of the amount 
 recoverable with cost against any such stockholder ; and every 
 stockholder against whom any such recovery for labor, ties, wood, 
 and supplies shall have been had, has the right to recover the 
 same of the other stockholders of the corporation, in ratable pro- 
 portion to the amount of stock they shall respectively hold. 2 
 
 598. Minnesota. 3 — Whenever any railroad company con- 
 tracts with any person for the construction or repairing «»f its 
 road, or any part thereof, such railroad company shall take from 
 
 the person with whom such contract is made a g 1 and sufficient 
 
 bond with sureties, conditioned that such person si ia II pay all la- 
 
 i Const. 1850, art. xv. § 7. 8 Laws 1878, cb 29, ^ 1, -\ •'! ; 1 Btatl. 
 
 2 Compiled Laws 1871, p. 580; Laws at Large 1878, p. 486. 
 1873, p. 540. 
 
 681
 
 § 599.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 borers and mechanics all just debts due to such persons, or to any 
 person to whom any part of such work is given, incurred in carry- 
 ing on such work, which bond or a certified copy thereof shall be 
 filed by said railroad company, in the office of the register of 
 deeds in each county where the work of such contractor shall be. 
 All persons to whom such contractor shall be indebted for work 
 as aforesaid, and every railroad company which shall have paid 
 any debt, claim, or demand, as provided by this act, shall have an 
 action on said bond, to the full amount of debts awarded against 
 such contractors. And if any such railroad company shall fail to 
 take and file such bonds, or if any contractor or sub-contractor 
 shall be indebted for work or services as aforesaid, said railroad 
 company shall be liable to the persons mentioned to the full ex- 
 tent of all such debts so contracted. Such laborers or mechan- 
 ics or other persons shall give the notice and take the action pre- 
 scribed in this act. Whenever any person, being contractor or 
 sub-contractor, employed by or in pursuance of the terms of any 
 contract with any railroad company for the construction or re- 
 pairing of any portion of any railroad, shall be indebted to any 
 laborer or mechanic for services rendered, such railroad company 
 shall be liable to pay such laborer or mechanic the amount of such 
 debt, provided such laborer or mechanic shall have given notice 
 to such railroad company within thirty days after such debt shall 
 have accrued that he has such debt, and provided such debt shall 
 have accrued within sixty days prior to the giving of such notice. 
 Such notice shall be in writing, and shall specify the particular 
 nature and amount of such debt, claim, or demand, and shall be 
 delivered to the secretary or chief engineer in charge of the con- 
 struction or repairing of that portion of the road upon which such 
 labor was performed, either personally, or by leaving the same at 
 the office or usual place of business of such secretary or engineer. 
 No action shall be maintained against any railroad company under 
 the provisions of this act, unless the same is commenced within 
 sixty days after the service of notice aforesaid. 
 
 599. Missouri. 1 — All persons who shall do any work or labor 
 in constructing or improving the road-bed, rolling stock, station- 
 houses, depots, bridges, or culverts of any railroad company in- 
 corporated under the laws of this state, or owning or operating a 
 1 Laws 1873, pp. 58, 59; Myer's Supplement to Wagner's Stats. 1877, p. 76. 
 
 582
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 599. 
 
 railroad within this state, and all persons who shall furnish ties, 
 fuel, bridges, or materials to such railroad company shall have, 
 for the work done and labor performed, and for the materials fur- 
 nished, a lien upon the road-bed, station-houses, depots, bridges, 
 rolling stock, real estate, and improvements of such railroad, upon 
 complying with the provisions hereinafter mentioned ; provided 
 such work and labor is performed, and such materials are fur- 
 nished, under and in pursuance of a contract with such railroad 
 company, its agents, contractors, sub-contractors, lessees, trustees, 
 or construction company organized for the uses and purposes of 
 such railroad company, or having in charge the building, construc- 
 tion, or improvement of such railroad, or any part thereof. 
 
 This lien attaches to the buildings, erections, improvements, 
 road-bed, and property mentioned, from the date of the com- 
 mencement of such work and labor, or from the time such mate- 
 rials were furnished or delivered, and is prior to all mortgages or 
 incumbrances placed upon the property affected by this lien sub- 
 sequent to the passage of this act. 
 
 It is the duty of all persons claiming the benefit of such lien, 
 within ninety clays next after the completion of the work, or after 
 the materials were furnished, to file in the office of the circuit 
 clerk of any county through which said railroad is located a just 
 and true account of the amount due, after all just credits have 
 been given, which account shall state the amount claimed as due, 
 the general nature of the work, amount of labor performed, or of 
 materials furnished ; the dates when the work was done, and 
 when materials were furnished, and the place or places at which 
 said labor and work was performed, or said materials were fur- 
 nished ; the name or names of the parties with whom the contract 
 for said work or furnishing said materials was made, and also the 
 name of the railroad against which said lien is intended to apply : 
 and it is the duty of all persons claiming said lien, within said 
 ninety days, to serve a copy of the above account on the person 
 or corporation owning or operating, or having charge of said road, 
 or of the property to which said lien attaches. 
 
 All railroad companies and other corporations 3 an- required 
 
 to make payment to their employees and other operatives <>i" the 
 
 wages due for all labor and services performed bj them, within 
 
 three months next preceding a demand made therefor, nut ex- 
 
 1 Laws 1877, pp. 348, 349 ; Myer'fl Supplement to Wagner's Btats. I s ", p. 79. 
 
 588
 
 § 599.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 ceeding sixty dollars, in preference to any other claim, debts, or 
 demands whatsoever, not secured by specific liens on property, 
 and such priority of payment may be enforced by civil action; 
 and payments of wages are inquired to be made on or before the 
 fifteenth day of each month, for the full amount of all wages 
 earned previous to the first day of that month, with interest at six 
 per centum, if not paid, to be added to the amount of such wages 
 when paid or recovered by suit. All debts due employees or 
 operatives for wages of their labor have priority of payment from 
 the money and assets of the corporations in the hands of officers 
 or agents, or of any receiver or assignee, over every other claim 
 not specifically secured. Every corporation, officer, agent, re- 
 ceiver, assignee, or person holding money or assets, refusing to 
 recognize the priority of employees' claims, is liable to such em- 
 ployees for the amount of all loss and damages occasioned by his 
 unlawfully withholding the money. 
 
 Whenever any contractor for the construction of any part of a 
 railroad 1 which is in process of construction, or any conti'actor for 
 repairing any part of a railroad, shall be indebted to any sub-con- 
 tractor, laborer, or other person who shall perform any labor upon 
 or furnish any materials for such railroad, such sub-contractor or 
 laborer, or other person, may give notice of such indebtedness to 
 the company ; and said company shall thereupon become liable to 
 pay such sub-contractor or laborer, or other person, the amount 
 so due him for such labor or materials, and action may be main- 
 tained against said company therefor. Such notice shall be given 
 within twenty days after the performance of the labor or work, 
 or the delivery of the materials, for which the claim is made. 
 Such notice shall be in writing, and shall state the amount and 
 number of days' labor, and the amount, description, and quan- 
 tity of materials furnished, and the time when the said labor 
 was performed, and the time when the said materials were fur- 
 nished for which the claim is made, and the name of the con- 
 tractor from whom due, and shall be signed by such sub-contractor, 
 laborer, or other person, or his attorney, and shall be served on an 
 engineer, agent, or other person employed by said company, hav- 
 ing charge of the section of the road on which such labor was 
 performed, or such material furnished, personally, or by leaving 
 the same in the office or usual place of business of such engineer, 
 
 1 Myer's Supplement 1877, p. 72, § 10; Laws 1873, p. 61. 
 584
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 600. 
 
 agent, or person having charge, with some person over fifteen 
 years of age ; but no action shall be maintained against any com- 
 pany under these provisions, unless the same is commenced within 
 ninety days after notice is given to the company as above pro- 
 vided. 
 
 A former statute 1 giving laborers a claim for thirty days? labor 
 or less against a railroad company, upon giving notice to the com- 
 pany of their claim, applied to laborers employed by a sub-contrac- 
 tor. 2 Under such statute a notice that a contractor is in arrear, 
 and that the laborer claims a certain sum as due to him, is suffi- 
 cient. But the notice can be served only in the mode pointed out 
 by statute, by service upon an engineer or agent of the company 
 for the section of the road upon which the work was done. Evi- 
 dence that the notice was given to the company without showing 
 how it was given is insufficient. 3 
 
 600. Nevada. 4 — Every person performing labor upon or fur- 
 nishing material of the value of twenty-five dollars, to be used in 
 the construction, alteration, or repairs of any building, railroad, 
 tram-way, toll-road, canal, or any other structure, has a lien upon 
 the same for the work or labor done, or materials furnished by 
 each respectively, whether done or furnished at the instance of 
 the owners of the building or other improvement or his agent ; 
 and every contractor, sub-contractor, architect, builder, or other 
 persons having charge of the construction, alteration, or repairs, 
 either in whole or in part, of any building or other improvement 
 as aforesaid, shall be held to be the agent of the owner. The 
 liens so provided for are preferred to any lien, mortgage, or other 
 incumbrance which may have attached subsequent to the time 
 when the building, improvement, or structure was commenced, 
 work done, or materials were commenced to be furnished ; also, 
 to any lien, mortgage, or other incumbrance, of which the lien- 
 holder had no notice, and which was unrecorded at the lime of the 
 
 1 Wagner's Stats, of Mo. p. 302, § 10. have no eyes t<> Bee, cars to hear, nor bands 
 - Grannahan v. Hannibal & St. Jo. It. to receive, and can only directly act, or 
 
 B, Co. 30 Mo. 546; and Bee 1'rlcrs v. St. be acted upon, through and DJ means of 
 
 Iron Mt. R. B. Co. 24 Mo. 586 j their agenti and officers." Per Sher- 
 
 S. C. 23 Mo. 107. wood, J. 
 
 Cosgrove v. Tebo & Neosho B. R. Co. 4 Stat. 1875, ch. 64, §§ 1, 4. 
 54 Mo. 495. "For these artificial entities 
 
 585
 
 §§ 601, 602.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 building, improvement, or structure was commenced, work done, 
 or the materials were commenced to be furnished. 
 
 601. New Hampshire. 1 — Any person who shall, by himself 
 or others, perform labor or furnish materials to the amount of 
 fifteen dollars or more, in the grading, masonry, bridging, or 
 track-laying of any railroad, under a contract with an agent, con- 
 tractor, or sub-contractor of the proprietors thereof, by giving no- 
 tice in writing to said proprietors, or the person having charge 
 of said railroad, that he shall claim a lien for labor to be per- 
 formed or materials to be furnished, shall have a lien upon said 
 railroad, and the land upon which the same is constructed, which 
 shall continue for sixty days after such labor is performed or ma- 
 terials furnished, and may be enforced by attachment, as provided 
 by law in the case of a lien upon a house or other building or ap^- 
 purtenances. 
 
 602. New Jersey. 2 — As often as any contractor for the con- 
 struction of any part of a railroad which is in progress of construc- 
 tion shall be indebted to any laborer for thirty or any less num- 
 ber of days' labor performed in constructing said road, such laborer 
 may give notice of such indebtedness to said company, and the 
 company shall thereupon become liable to pay such laborer the 
 amount so due him for such labor, and an action may be main- 
 tained against said company therefor ; such notice shall be given 
 by such laborer to said company within twenty days after the 
 performance of the number of days' labor for which the claim is 
 made ; it must be in writing, and must state the amount and 
 number of days' labor, and the time when the same was per- 
 formed for which the claim is made, and the name of the con- 
 tractor from whom due, and must be signed by such laborer or 
 his attorney, and served on an engineer, agent, or superintendent 
 employed by such company having charge of the section of the 
 road on which such labor was performed, personally, or by leaving 
 the same at the office or usual place of business of such engineer, 
 agent, or superintendent, with some person of suitable age ; but 
 no action shall be maintained against any compan}' under these 
 provisions unless the same is commenced within thirty days after 
 
 1 Laws 1871, ch. 1, § 3. 2 R. S. 1877, p. 927, § 10 ; Acts 1877, p. 
 
 155, § 10. 
 586
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 603. 
 
 notice is given to the company by such laborer. The liability of 
 the companj 7 cannot exceed its liability to the contractor. Pay- 
 ments made to such laborers are a full discharge to the company 
 from the contractor for the amount so paid. 
 
 Whenever a receiver is appointed over any railroad company, 1 
 the receiver is required to apply all unincumbered personal ef- 
 fects, and all moneys which may be transferred to him at the 
 time of entering upon his duties as such receiver, toward the pay- 
 ment of wages at that time due the employees of such company ; 
 and the chancellor may from time to time make such orders as 
 he may deem proper to equitably carry out the provisions of this 
 section ; provided, that no such payments shall be made for more 
 than two months' wages. 
 
 In case of the insolvency of any corporation, 2 the laborers in 
 the employ thereof shall have a lien upon the assets thereof for 
 the amount of wages due to them respectively, which shall be 
 paid prior to any other debt or debts of the company ; and the 
 word " laborers " shall be construed to include all persons doing 
 labor or service of whatever character for or as workmen or em- 
 ployees in the regular employ of such corporations. 
 
 603. New York. 3 — The pi-ovisions of the laws relating to 
 mechanics' liens apply to bridges and trestle-work erected for rail- 
 roads and materials furnished therefor, and labor performed in 
 constructing said bridges, trestle-work, and other structures con- 
 nected therewith ; and the time within which said liens may be 
 filed extends to ninety days from the time when the last work 
 shall have been performed on said bridges, trestle-work, and struct- 
 ures connected therewith, or the time from which said materials 
 shall have been delivered. 
 
 Any person who performs any labor for a railroad corporation, 
 on filing with the county clerk of any county in which Buch rail- 
 road corporation is situated, or through which the road of such 
 corporation passes, the notice hereafter mentioned, lias a lien for 
 the value of such labor upon such railroad track, rolling stock, and 
 
 1 Laws 1874, ch. 27, § 2; 2 Rev. 1877, and sec 2 It. S. ls::>, \>. 565. Original 
 p. 943. Ads, Laws [854, <h. 403; Laws 1870, 
 
 2 1 Rev. 1877, p. 188, § 63 ; 2 Ik 128'J, eh. 529 ; the latter art extending tin- lien 
 §25. provided for in former act to railroad 
 
 3 3 Rev. Stat. 1875, p. 815, §§ 1, 3, 1, 7 ; I..
 
 § 603.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 appurtenances, and upon the land upon which such railroad track 
 and appurtenances are situated, to the extent of the right, title, 
 and interest of such railroad corporation in the property existing 
 at the time of filing the said notice. Within thirty days after 
 the performance and completion of such labor, such person shall 
 file a notice, in writing, with the county clerk of the county where 
 the property is located, specifying the amount of claim, and the 
 corporation against whom the claim is made. 
 
 Every lien created under the provisions of this act continues 
 until the expiration of one year, unless sooner discharged by the 
 court or some legal act of the claimant in the proceedings ; but 
 when a judgment is entered therein, and docketed with the 
 county clerk within said year, it shall be a lien upon the real 
 property of the railroad corporation against whom it is obtained, 
 to the extent that other judgments are now made a lien thereon. 
 
 Under these acts laborers employed by a sub-contractor cannot 
 establish a lien against the company unless they show that at the 
 time of filing their notices the company was indebted to the prin- 
 cipal contractor on its contract with him, and unless, moreover, 
 they show that the principal contractor was then indebted to the 
 sub-contractor. 1 
 
 It is further provided, that as often as any contractor for the 
 construction of any part of a railroad, 2 which is in progress of con- 
 struction, shall be indebted to any laborer for thirty or any less 
 number of days' labor performed in constructing said road, such 
 laborer may give notice of such indebtedness to said company ; 
 and said company shall thereupon become liable to pay such la- 
 borer the amount so due him for such labor, and an action may 
 be maintained against said company therefor. Such notice shall 
 be given by said laborer to said company within twenty days 
 after the performance of the number of days' labor for which the 
 claim is made. Such notice shall be in writing, and shall state 
 the month and particular days of the month upon which labor 
 was performed and remains unpaid for, the price per day, the 
 amount due, with the name of the contractor from whom due, the 
 section of the road on which such labor was performed, and shall 
 
 1 Sampson v. Buffalo, N. Y. & Philad. contractors. Kent v. New York Cent. R. 
 
 R. R. Co. 13 Hun (N. Y.), 280; 6 N. Y. R. Co. 12 N. Y. 628. 
 
 Weekly Dig. 74. Statute 1850, ch. 140, "- 2 R. S. 1875, p. 522. 
 § 12, applied to laborers employed by sub- 
 
 588
 
 STATUTES GIVING LIENS UPON RAILROADS. [§§ 604, 605. 
 
 be signed by such laborer or bis attorney, to which notice an affi- 
 davit shall be annexed, made by sucb laborer or bis attorney, to 
 tbe effect that of bis own knowledge tbe statements contained in 
 sucb notice are in all respects true. Sucb notice so verified sball 
 be served on an engineer, agent, or superintendent employed by 
 said company having charge of tbe section of tbe road on which 
 such labor was performed, personally, or by leaving tbe same at 
 tbe office or usual place of business of sucb engineer, agent, or 
 superintendent, with some person of suitable age. But no action 
 sball be maintained against any company, under tbe provisions of 
 tbis section, unless tbe same is commenced after ten and within 
 thirty days after notice is given to tbe company by such laborer 
 as above provided. 
 
 604. North Carolina. 1 — As often as any contractor for the 
 construction of any part of a railroad which is in progress of con- 
 struction sball be indebted to any laborer for thirty or any less 
 number of days' labor performed in constructing said road, such 
 laborer may give notice of such indebtedness to said company, 
 and said company sball thereupon become liable to pay sucb la- 
 borer the amount so due him for such labor, and an action may 
 be maintained against said company therefor. Sucb notice shall 
 be given by said laborer to said company within twenty .lays 
 after the performance of the number of days' labor for which 
 the claim is made. Such notice shall be in writing, and shall 
 state the amount and number of days' labor, and the time when 
 the same was performed for which the claim is made, and the 
 name of the contractor from whom due, and shall be signed by 
 such laborer or his attorney, and shall be served on an engineer, 
 agent, or superintendent, employed by said company, having 
 charge of the section of the road on which such Labor was per- 
 formed, personally, or by leaving tbe same at the office or usual 
 place of business of such engineer, agent, or superintendent, with 
 some person of suitable age. But no action shall be maintained 
 against any company under the provisions of this Bection unless 
 the same is commenced within thirty days after notice is given 
 to the company by such laborer as above provided. 
 
 605. Ohio. — Any person who performs labor or furnishes 
 1 Itcvisal 1873, cli. 99, §12; Acl 1871-2, ch. L88, § 12.
 
 § 606.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 machinery or materials for erecting, altering, repairing, or remov- 
 ing any house, mill, manufactory, or other building, appurtenance, 
 fixture, bridge, or other structure, by virtue of a contract with 
 the owner or his agent, has a lien upon the same and the owner's 
 interest in the land to secure the payment of the claim. To 
 obtain such lien the claimant must, within four months from the 
 time of performing such labor or furnishing such machinery or 
 materials, file an itemized account with the county recorder. 1 
 
 Railroad companies contracting for the construction of a rail- 
 road, 2 depot buildings, water tanks, or any part thereof, are liable 
 to each person performing labor or furnishing materials stipulated 
 for in the contract, expressly or impliedly made with the original 
 contractor, or with any sub-contractor, provided the claimant shall 
 serve a notice of his claim upon the company within thirty days 
 after he has ceased to labor or furnish materials for such road ; 
 but no lien upon the property is given by this statute for the pay- 
 ment of such claim. 
 
 606. Pennsylvania. 3 — The legislature of this state by resolu- 
 tion declared that it shall not be lawful for any company of the 
 state empowered to construct and maintain any railroad, canal, or 
 other public improvement, while any debts and liabilities incurred 
 by the company to contractors, laborers, and workmen employed 
 in the construction or repair of such improvement remain unpaid, 
 to execute any assignment, mortgage, or other transfer of the real 
 or personal estate of the said company, so as to defeat, postpone, 
 endanger, or delay such creditors without their written assent 
 shall first be had ; and any such assignment, mortgage, or transfer 
 shall be deemed fraudulent, null, and void, as against any such 
 contractors, laborers, and workmen. 
 
 The intention of the legislature by this resolution was to give 
 to an unpaid contractor a priority of claim to the company's prop- 
 erty over every right that could be acquired under a mortgage 
 made after the debt to the contractor was incurred ; and that the 
 property, into whosesoever hands it might come, should remain 
 
 1 Laws 1877, pp. 168-174. the issuing of a scire facias upon a judg- 
 
 2 Laws 1874, p. 51. ment for the services. The plaintiff may 
 
 3 January 21,1843. A further act re- proceed in equity notwithstanding this 
 lating to the enforcement of the lien pro- statute. Malone v. Shamokin Valley & 
 vided for in this resolution was passed Pottsville R. R. Co. 34 Leg. Int. 438. 
 April 4, 1862. The latter act provides for 
 
 590
 
 STATUTES GIVING LIENS UPON RAILROADS. [§ 606. 
 
 subject to a paramount claim of the contractor so long as the debt 
 due to him remained unpaid. The resolution substantially gave 
 the contractor a lien of indefinite duration. Though it did not 
 give a, jus in re or a jus ad rem, it constituted a charge upon the 
 property, a right to prevent any disposition of it, by which it 
 could be withdrawn from the creditor's reach, and therefore in a 
 legitimate sense an equitable lien. Such lien is not merged in 
 any judgment that may be obtained for the debt. Neither is the 
 lien divested by a foreclosure sale of the property under a mort- 
 gage so made, especially if the sale be made subject to any lawful 
 claims which may exist prior to the mortgage. Nor is such lien 
 divested by a statute authorizing the company to borrow money 
 and to pledge its income and property to secure the payment. A 
 repeal of the resolution cannot be inferred from the grant of such 
 a power. 1 
 
 Under these laws a sale under a mortgage executed subse- 
 quently to the making of a contract for the building of a railroad 
 is fraudulent and void as against the contractor: and if the prop- 
 erty has been conveyed in pursuance of such sale to a new com- 
 pany it is still liable to the claim of the contractor. 2 
 
 This statute 3 is held not to include civil engineers, although 
 the latter were required to render service to the company from 
 the commencement to the completion of the work. 4 Earlier de- 
 cisions had construed statutes relating to laborers' and servants' 
 wages as intended to secure to manual laborers the fruits of their 
 own work, and not as intended to embrace the earnings of con- 
 tractors. The intent of all such statutes is to protect a class of 
 persons who are wholly dependent upon the toil of their hands 
 for subsistence, and who cannot protect themselves. In one sense 
 the engineer is a laborer, but so is the lawyer and doctor, the 
 banker, and the corporation officer, yet they cannot properly be 
 included among the laboring classes. 
 
 i Fox v. Seal, 22 Wall. 4l'4 ; followed 8 Laws 1843, p. 367 ; Laws 1862, \<. 335. 
 
 by Tyrone & Clearfield R.R. Co. v. Jones, ' Pennsylvania R. R. Co. v. Leuffer, 84 
 
 I Weekly Notes of Cases, 571. Pa. St. 168 ; S. (7.24 Pittsburg L. J. 177 ; 5 
 
 - Malone v. Shamokin Valley & Potts- Cent. L. J. 74 ; 4 Weeklj Notes, :: ; and 
 
 ville K. R. Co. 34 Leg. Int. 438. In this Bee Wentworth's Appeal, 24 Pittsburg L. 
 
 case the action was brought by the con- J. 'J5. 
 tractor more than six years after the mak- 
 ing of the contract. 
 
 ..'.'1
 
 §§ 607, 608.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 607. In Rhode Island, 1 any building, canal, turnpike, rail- 
 road, or other improvement constructed, erected, or repaired by 
 contract, with or at the request of the owner, is subject to a lien 
 for the work done and the materials used before any other lien 
 which shall originate subsequent to the commencement of such 
 erection, construction, or reparation. If the contract be written, 
 legal process to enforce the lien must be commenced within four 
 months from the time that any payment on such contract shall 
 become due ; if not in writing, within six months from the time 
 of commencing the doing such work, or the delivery of such ma- 
 terials. A sub-contractor can have no lien unless within thirty 
 days after commencing the work he gives notice in writing to the 
 person against whose estate he claims a lien that he shall claim 
 the benefit of the lien. Lodging an account or demand in the 
 office of the clerk of the town, or in Providence in the office 
 of the recorder of deeds, is deemed the commencement of legal 
 process. 
 
 608. In Vermont 2 it is provided that every railroad shall re- 
 quire sufficient security from the contractors for the payment of 
 all labor performed in constructing its road by persons in their 
 employ ; and that such company shall be liable to the day la- 
 borers employed by the contractors for labor actually performed 
 on their road, but such liability shall not exist unless the person 
 having such claim shall, in writing, within forty days after per- 
 formance of such labor, notify the engineer in charge of the sec- 
 tion on which the labor was performed that he has not been paid 
 by the contractors. 
 
 This provision has been declared constitutional as applied to 
 corporations previously chartered. 3 Under this statute the lia- 
 bility of the corporation is not limited to laborers employed by 
 persons contracting directly with the corporation, but extends to 
 persons employed by sub-contractors. 4 The statute secures to the 
 laborer not only his personal services, but payment for the use of 
 
 1 G. S. 1872, ch. 166, §§ 1-7 ; Laws 1874, upon Kent v. N. Y. Central R. R. Co. 2 
 ch. 419. Kern. (N. Y.) 628; Peters v. St. Louis & 
 
 2 G. S. 1870, ch. 28, § 72; Act of Iron Mountain R. R. Co. 23 Mo. 107. 
 1849, No. 41, § 53. * Branin v. Conn. & Passumpsic Rivers 
 
 8 Branin v. Conn. & Passumpsic Rivers R. R. Co. supra ; Kent v. N. Y. Central R. 
 R. R. Co. 31 Vt. 214; citing and relying R. Co. supra. 
 592
 
 STATUTES GIVING LIENS UPON RAILROADS. [§§ 609, 610. 
 
 his horse and cart which he has used in the construction of the 
 road. 1 
 
 609. Virginia. 2 — All conductors, brakesmen, engine-drivers, 
 firemen, captains, stewards, pilots, clerks, depot or office agents, 
 storekeepers, mechanics, or laborers, and all persons furnishing 
 railroad iron, fuel, and all other supplies necessary for the opera- 
 tion of trains and engines, employed in the service of any railroad, 
 canal, or other transportation company, chartered under or by the 
 laws of this state, or doing business within its limits, have a prior 
 lien on the franchise, the gross earnings, and on all the real and 
 personal property of said company, which is used in operating the 
 same, for and to the extent of the wages or salaries contracted to 
 be paid them by said company ; and no mortgage, deed of trust, 
 sale, conveyance, or hypothecation hereafter executed of said prop- 
 erty shall defeat or take precedence over said lien. 
 
 Any person entitled to the benefit of the lien forfeits the same 
 unless within six months after his wages or salary shall have 
 fallen due he files a memorandum, stating the amount and justice 
 of his claim, under affidavit, according to his best knowledge and 
 belief, with the clerk of the county or corporation court ; and the 
 said clerk shall forthwith record the said memorandum in the 
 deed book, and index the same by the name of the person filing 
 the same, and also in the name of the corporation against which 
 the claim is. And it is provided also, that it shall in all cases 
 be sufficient for the claimant to file the memorandum with the 
 clerk of the court wherein deeds may be recorded in the county 
 or corporation wherein the chief office of the company against 
 which the claim may be is located. 
 
 610. Wisconsin. 3 — Whenever any railway company in this 
 state is placed by any court of this state in the hands of a re- 
 ceiver, whether upon foreclosure or creditors' bill, it is the duty 
 of such receiver to report immediately to the court ao appointing 
 him the amount due by said railroad company, or by the per n 
 or persons who were operating said road at the date o\ such re- 
 ceiver's appointment, to employees and Laborers upon said, road, 
 and it is made the duty of said court to order the said receiver bo 
 
 i Branin v. Conn. & Pusampsic Biven - Acta i 1 -". ch. 200, §§ 1, 2. 
 B. B. Co. supra. ' '<^ s 1878, ch. 316, 8 >• 
 
 38 598
 
 § 611.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 pay out of the first receipts and earnings of said railway, after 
 paying current operating expenses under his administration, the 
 wages of all employees and laborers which had accrued within 
 six months prior to the appointment of such receiver. 
 
 IV. Vendor'' s Lien. 
 
 611. Vendors of land to a railroad company have a lien 
 for the purchase money under the same circumstances they 
 would have such lien against other purchasers ; 1 and as in other 
 cases they may have the lien enforced by a sale of the land. 2 
 Under some circumstances a vendor may have an injunction re- 
 straining the company from continuing in the possession and use 
 of the land, and may have a receiver appointed to enforce the 
 lien. 3 But ordinarily an injunction will not be granted to re- 
 strain the company from using the land, or from running trains 
 or engines over it, until a sale, inasmuch as the land would thus 
 be rendered useless to both parties. 4 Even after an unsuccessful 
 attempt by the vendor to enforce his lien by sale, the court will 
 not restrain the company from continuing in possession of the 
 land, but will rather direct another attempt to sell. 5 
 
 A mortgage, so far as it covers after-acquired property, is an 
 equitable lien only, and the record of it prior to the acquisition of 
 the property may not be constructive notice of the existence of 
 the mortgage, or of the purpose for which it was made. But as 
 against an agent of a railroad company, who has been employed 
 in securing the necessary lands for its right of way, such record is 
 presumptive evidence of actual knowledge on his part that bond 
 fide bondholders had advanced, or would advance, their money 
 upon the faith of the mortgage, and upon the faith of the public 
 records as to the title and incumbrance. Therefore, when such 
 an agent of the Canandaigua and Niagara Falls Railroad Company 
 himself sold and conveyed land to the company, he was deemed 
 
 1 Winchester v. Mid-Hants Ry. Co. L. Walker v. Ware, Hadham & Buntingford 
 R. 5 Eq. 17 ; Florida v. Anderson, 91 U. Ry. Co. 12 Jur. N. S. pt. 1, 18. 
 
 S. 667 ; Anderson v. Jacksonville, Fensa- 3 Winchester v. Mid-Hants Ry. Co. 
 
 cola & Mobile R. R. Co. 2 Woods, 628. supra. 
 
 2 Munns v. Isle of Wight Ry. Co. L. R. * Munns v. Isle of Wight Ry. Co. su- 
 5 Ch. 414 ; L. R. 8 Eq. 653 ; St. Germans pra; Lycett v. Stafford & Uttoxeter Ry. 
 v. Crystal Palace Ry. Co. L. R. 11 Eq. Co. L. R. 13 Eq. 261 ; 41 L. J. 474. 
 568; 19 W. R. 584 ; Keane v. Athenry & b Williams v. Aylesbury & Buckingham 
 Ennis Junction Ry. Co. 19 W. R. 43, 318; Ry. Co. 21 W. R. 819. 
 
 594
 
 vendor's lien. [§ 611. 
 
 to have waived any claim to a vendor's lien for the price, as 
 against bondholders secured by a mortgage of the road and the 
 real estate then owned by the company, or which might afterwards 
 be acquired. 1 It was regarded as inconsistent with good faith on 
 his part that he should retain a secret lien. 
 
 Moreover, the legal title of the land in question, which was con- 
 veyed to the railroad company, vested immediately in the latter. 
 At the same instant the lien of the mortgage, which had before 
 that been given by the railroad company, and which, before that 
 time, remained but an equitable claim upon rights to be acquired, 
 became a vested legal right upon the premises in question. " As- 
 suming now," said Potter, J., delivering the judgment of the 
 Court of Appeals of New York, 2 " for the purpose of the argu- 
 ment, the position urged by the plaintiff that he did not intend to 
 waive his equitable lien for the purchase money, all that he can 
 then claim is, that his equitable lien attached at the same instant 
 of time with the mortgage lien. Here, then, are two liens accru- 
 ing at the same instant, the one a secret equitable one, the other 
 a legal, written, recorded, public one. The question would then 
 seem to be, which of these liens has the priority ? " This ques- 
 tion is answered by the decision, that the lien of the recorded mort- 
 gage became a legal mortgage as soon as the land was acquired, 
 and that this lien was superior to the equity of the vendor. 
 
 As against a mortgage which in terms covers all the property 
 a railway company may afterwards acquire for the use of its road, 
 a person who afterwards sells to it land for its road-bed cannot set 
 up a vendor's lien for purchase money. The mortgage becomes a 
 lien upon such land from the moment the company acquires the 
 title. 3 After such a mortgage has been foreclosed, and tin- road 
 has passed into the hands of innocent purchasers, there is an ad- 
 ditional reason why such a lien cannot be enforced. 4 
 
 A sale under a vendor's lien necessarily cuts oil' all incum- 
 brances made by the company, and gives the purchaser a title 
 freed from all claims on the part of the company itself, an. I from 
 all claims en the part of the public/' 
 
 ii-k v. Totter, 2 Abb. (N. V.) App. * Pi< rce v. Milwaukee ft St. Pan! B. B. 
 Dec. 138; and see Carpenter v. Black Co. supra. 
 Bawk Gold Mining Co. 65 N. V. 48. 6 Munnsw. We of Wighl Ry.Co.supra; 
 
 2 Fihk v. Potter, supra. Walker v. Ware, Hadham & Buntingford 
 
 a Pierce v. .Milwaukee & St. Paul K. K. By. Co. 8fi Beav.5S ; H W. B. L58. 
 
 Co. 24 Wis. 551. 
 
 595
 
 §§ 612, 613.] LIENS AFFECTING PRIORITY OF RAILROAD MORTGAGES. 
 
 V. Transportation Subscriptions. 
 
 612. In Missouri 1 provision is made that a railroad company 
 may receive subscriptions to the capital stock of the company to 
 aid in the construction and equipment of its road, to be known as 
 " transportation subscriptions," which are payable in services to 
 be rendered by the company in the transportation of passengers 
 and freight. These subscriptions are made an irrevocable and 
 indefeasible first lien and charge against such railroad, and the 
 road-bed, rolling stock, and depots, engine-houses, and machine 
 shops of such company, then in possession of or thereafter ac- 
 quired by such company, or its successors or assigns, until dis- 
 charged, except as to mortgages recorded in the county or coun- 
 ties through which the line of such road runs, or is proposed to be 
 run, before the date of the making of such subscription ; which 
 mortgages have preference only as to so much of such road and 
 the property of such company as is situated in counties in which 
 the same are at that time recorded, and such mortgages have no 
 preference upon any property acquired after the time of making 
 such subscription. 
 
 VI. Judgment Lien. 
 
 613. A mortgage of corporate property or of the corporate 
 undertaking has priority over a subsequent judgment creditor 
 of the company, and it does not vary the rule that the judgment 
 is obtained before the mortgagee has entered into possession him- 
 self, or through a receiver. 2 If such judgment creditor has ob- 
 tained the appointment of a receiver, the mortgagee may have a 
 receiver appointed who will supersede the receiver already in pos- 
 session. 3 The judgment creditor may also be restrained at the 
 suit of a prior mortgagee from levying upon any of the property 
 included in terms, or by inference in the mortgage. 4 
 
 A mortgage, of which a judgment creditor has actual notice at 
 the time of his recovery of judgment, though not recorded till 
 afterwards, has priority of the judgment lien. If such judgment 
 
 1 Laws 1877, March 29; Myer's Sup- i Legg v. Mathieson, supra; Gardner 
 plementto Stats, p. 81. v. London, Chatham & Dover By. Co. L. 
 
 * Legg v. Mathieson, 2 Giff. 71. R. 2 Ch. App. 201. 
 
 3 Ames v. Birkenhead Docks, 20 Beav. 
 332, 352. 
 
 596
 
 JUDGMENT LIEN. [§ 613. 
 
 be afterwards assigned, the assignee takes it subject to all the 
 equities affecting the original plaintiff in the judgment. 1 
 
 Under a mortgage comprising the real and personal property of 
 a railway company, a subsequent judgment creditor of the com- 
 pany may be enjoined from levying his execution upon any part of 
 the property, although the mortgage be not due. Whenever the 
 mortgagee's security is in danger of being impaired by the acts of 
 a junior creditor, he may file his bill in chancery to protect his 
 security, and restrain the threatened injury. 2 
 
 1 Butler v. Rahm, 46 Md. 541. 409 ; IS L. T. (N. S.) 73 ; Legg v. Math- 
 
 2 Wildy v. Mid-Hants Rv. Co. 16 W. R. ieson, 2 Giff. 71 ; 29 L. J. Ch. 385. 
 
 597
 
 CHAPTER XXL 
 
 SCHEMES FOR REORGANIZATION AFFECTING THE PRIORITY OF 
 
 MORTGAGES. 
 
 I. Rights under agreements for reorgan- I II. Rights of preferred stockholders as 
 iz;ition, 614-618. against mortgagees, 619-624. 
 
 I. Rights under Agreements for Reorganization. 
 
 614. Schemes for reorganizing corporations. — In general 
 the rights of secured creditors cannot be varied without their con- 
 sent. It often happens, however, that such creditors are in effect 
 compelled to admit unsecured creditors and the stockholders of 
 an insolvent company to come into a scheme for its reorganization 
 and share in its benefits in some degree. It is sometimes so far 
 within the power of the stockholders and unsecured creditors to 
 embarrass and delay proceedings for the foreclosure of the mort- 
 gage and sale of the property, that it is expedient for the mort- 
 gage creditors to arrange for a reorganization, and give up some- 
 thing of their own security, for the sake of avoiding litigation and 
 delay. 
 
 The entering into a scheme of reorganization is a voluntary 
 matter with creditors or stockholders of a corporation. It can- 
 not be forced upon any one except by virtue of a statute existing 
 prior to the charter of the corporation, so that such statute be- 
 comes a part of the contract under which its securities and stock 
 were issued. , 
 
 By force of statutory provisions for reorganization the rights 
 of secured creditors may be varied without their consent. Thus 
 the Railway Companies Act of England 1 provides, " where a com- 
 pany are unable to meet their engagements with their creditors, 
 
 1 30 & 31 Vict. 127, §§ 6-16, Act of re, L. R. 6 Eq. 610; lb. 615 ; Cambrian 
 
 1867. Instances of such schemes may be Ry. Co's. Scheme in re, L. R. 3 Ch. 278; 
 
 found in London Financial Asso. v. Wrex- Munns v. Isle of Wight Ry. Co. L. R. 8 
 
 ham, &c. Ry. Co. L. R. 18 Eq. 566 ; Bris- Eq. 653 ; Stevens v. Mid-Hants Ry. Co. 
 
 tol & North Somerset Ry. Co. in re, L. R. L. R. 8 Ch. 1064. 
 6 Eq. 448 ; Devon & Somerset Ry. Co. in 
 
 598
 
 RIGHTS UNDER AGREEMENTS FOR REORGANIZATION. [§ 615. 
 
 the directors may prepare a scheme of arrangement between the 
 company and their creditors, with or without provisions for set- 
 tling and defining any rights of shareholders of the company as 
 among themselves, and for raising, if necessary, additional share 
 and loan capital, or either of them, and may file the same in the 
 Court of Chancery for England or in Ireland, according to the 
 situation of the principal office of the company, with a declara- 
 tion in writing under the common seal of the company, to the 
 effect that the company are unable to meet their eno-ao-ements 
 with their creditors." The scheme must be assented to by three 
 fourths of the mortgagees and holders of bonds, debenture stock, 
 and preference stock respectively affected by it, and when so 
 assented to may be confirmed by the Court of Chancery. But in 
 such case it is to be observed that the statute becomes a part of 
 the contract under which subsequent securities are taken. The 
 authority of parliament in respect to existing corporations is how- 
 ever different from that possessed by legislatures in this country. 
 
 615. A substantial departure from the terms of a compro- 
 mise agreement, the object of which was to substitute third 
 mortgage bonds for prior liens and debts existing against a cor- 
 poration, will absolve the parties to an executory agreement from 
 its obligations, and leave them to stand on their original rights 
 under the prior mortgage. Thus where the agreement signed by 
 a bondholder recited that the amount of debts for which a third 
 mortgage was to be substituted was $955,000, and a mortgage 
 authorized and executed to carry out the agreement recited that 
 tin- debt secured by it was $1,200,000, the departure from flic 
 agreement was considered sufficient to justify a party to it in re- 
 fusing to comply with it. 1 The excess is so great as to require 
 explanation. A small increase of the amount arising from an 
 accidental omission of a debt which the agreement was intended 
 to provide for might not invalidate the agreement. Bui when 
 the excess is so material, and the only explanation of it is that the 
 mortgage was increased in order to raise funds to enable the com- 
 pany to so construct its road as to form ;i new connection with 
 another railroad, — an object foreign to the purpose of the com- 
 promise agreement, — the change oannol be justified. The fact 
 that the whole amount of $1,200,000 had not been issue, I under 
 1 Miller v. Rutland & Washington R. B. Co. « < » Vt. 399. 
 
 599
 
 §§,616, 617.] SCHEMES AFFECTING PRIORITY OF MORTGAGES. 
 
 the mortgage is immaterial so long as the corporation had the 
 right to issue bonds to that amount. 
 
 616. Failure of bondholder to surrender bonds in accord- 
 ance -with agreement. — A bondholder who has entered into an 
 agreement for the reorganization of a railroad company and the 
 purchase of the property at a foreclosure sale is not entitled to the 
 benefits of his agreement, if he fails to perform a stipulation on 
 his part to surrender his bonds when requested prior to the sale 
 to trustees appointed to act for the parties to the agreement ; es- 
 pecially when the only means provided for the purchase of the 
 road was the bonds held by the signers of the contract. Such 
 bondholder cannot after the sale come in and participate in the 
 benefits of a reorganization, but can claim only the amount of 
 purchase money yielded by the sale. 1 
 
 617. A party to an agreement for the reorganization of a 
 company cannot set up a secret agreement with himself, 
 to the disadvantage of the other parties to it. The Wilming- 
 ton and Manchester Railroad Company having issued bonds se- 
 cured by first, second, and third mortgages, desiring to provide 
 additional means for rebuilding and equipping its road, issued a 
 new mortgage for a sum sufficient to retire the three existing 
 mortgages, and provide for the sum desired ; and most of the 
 bondholders under the old mortgages came into the arrangement, 
 and exchanged their old bonds for the new. The new mort- 
 gage secured bonds of three classes : first, preference bonds for 
 which the first mortgage bonds were to be exchanged ; second, 
 preference bonds to be used in rebuilding and equipping the road ; 
 and third, preference bonds to be used in retiring the second and 
 third mortgage bonds. Default having been made under the 
 new mortgage, the property was sold under a decree of foreclos- 
 ure, and the proceeds were directed to be applied, first, to the pay- 
 ment of several creditors under the old mortgages, who had not 
 exchanged their bonds ; and the balance to the payment of the 
 first preference bonds pro rata, the proceeds being insufficient to 
 satisfy this class in full. A holder of third preference bonds then 
 intervened by petition, alleging that he had exchanged bonds 
 secured by the second and third mortgages for the new bonds, 
 
 1 Carpenter v. Catlin, 44 Barb. (N. Y.) 75. 
 600
 
 PREFERRED STOCKHOLDERS AS AGAINST MORTGAGEES. [§§ 618, 619. 
 
 under a separate agreement, that if all the old bondholders did 
 not come into the arrangement his old bonds should be returned 
 to him, and he should be restored to all his rights under thorn ; 
 and he, therefore, prayed that his old bonds be returned, and that 
 he be paid the amount out of the proceeds of sale as a creditor who 
 had not parted with his prior lien under the old mortgages. But 
 it appearing that the other purchasers of the new bonds had no 
 notice of this private agreement, he had no equity as against them 
 to the relief asked for. Seeking relief in equity, he can obtain it 
 only on equitable principles. The arrangement between the com- 
 pany and the several creditors, for the exchange of their securi- 
 ties, is regarded in equity as a single contract, for the reason that 
 both the relations of all these creditors with the company, and 
 their relations with each other, entered into its consideration. 
 The equities among the creditors must be satisfied ; and against 
 these he cannot set up a secret agreement with the company, giv- 
 ing him an advantage over the other bondholders. 1 
 
 618. Under a scheme to relieve an insolvent railroad com- 
 pany by allowing all its creditors to share on equal terms in 
 a mortgage of all its property, a creditor who held its promissory 
 note, with other notes of the corporation, as collateral security 
 for this note, was allowed to prove only the amount of the orig- 
 inal note against the corporation, because the purpose of the ar- 
 rangement was to give all the actual creditors, without regard to 
 the nature of their claims or the form of the contract under 
 which they arose, an equal participation in the security afforded 
 by the mortgage. 2 This is very different from the case where 
 the collateral security was a part of a limited amount secured 
 by mortgage, and the company being in liquidation, the creditor 
 had a legal right to avail himself of the benefit of his collateral 
 security by proving the whole of it against the property. 
 
 II. Rights of Preferred Stockholders as against Mortgagees. 
 
 619. Questions of priority have sometimes arisen between 
 preferred stockholders and subsequent mortgagees. — What. 
 
 1 Jesupu. Wilmin-toii & Manchester B. doubted whether a debtor*! own bond or 
 
 E. Co.2 S. <:. 4G9. mortgage, deposited by waj of a collateral, 
 
 a Third Nat. Bank >•. Eastern R. R.Co. could be held i<> !"■ n pledge which could 
 
 122 Mass. 240. In Morris Canal & Bank- be -old in the market and applied us inch. 
 
 ing Co. v. Fisher, 'J N. J. Bq. '''17, it WU 601
 
 § 620.] SCHEMES AFFECTING PRIORITY OF MORTGAGES. 
 
 mortgage interest may be paid by a railroad company, before the 
 payment of interest on its preferred stock must depend on the 
 construction to be given the conditions attached to such stock. 
 Whatever rights attached to it when it was issued continue to ad- 
 here to it. If, at the time of its issue, only interest on mortgages 
 then existing was to be paid before interest on preferred stock, 
 subsequent mortgage indebtedness will not affect that stock, nor 
 the legal right of its holders, to payment of interest before pay- 
 ment of interest on mortgages given for such subsequent indebted- 
 ness. But preferred stockholders would have no preference over 
 subsequent mortgagees in case the stock was issued on such terms 
 that it should be held that interest on all mortgages of the cor- 
 poration, whether for indebtedness prior or subsequent to the issue 
 of the preferred stock, was first to be paid from the earnings. 1 
 
 620. Ordinarily preferred shareholders are entitled to have 
 deficiencies of their dividends made up out of the earnings le- 
 gally applicable to the payment of dividends, whenever such earn- 
 ings are received, in preference to any payment to the holders of 
 the common stock. This right is inferred from the contract, and 
 need not be provided for in express terms. 2 The preferred share- 
 holders are entitled to have the full amount of their dividends 
 paid before any payment is made in respect of dividends upon 
 the ordinary stock. Such dividends, in relation to the common 
 stock, are substantially interest chargeable exclusively on profits ; 
 yet there is nothing in such a use of the word dividend which is 
 at all at variance with the ordinary usage. 3 Such dividends are 
 not payable absolutely or unconditionally, as interest is, but only 
 out of profits made by the company. If there are no dividends 
 there are no profits. If there were no profits last year, but there 
 are profits this year, the arrears of dividends at the stipulated 
 rate, payable for last year, together with the dividends for this 
 year, are both to be paid if the profits are sufficient for this pur- 
 pose. The preference is limited to the profits of the company 
 whenever earned. 4 Preferred stockholders do not lose their rights 
 
 1 Thompson v. Erie R. Co. 42 How. (N. De G. & J. 606, per Lord Cranworth, Lord 
 Y.) Pr. 68, per James, J. Chancellor; S. C. 4 Kay & J. 1. 
 
 2 Cony U.Londonderry & Enniskillen 4 Taftu. Hartford, Providence &Fishkill 
 Ry. Co. 29 Beav. 263 ; S. C. 7 Jur. N. S. R. R. Co. 8 R. I. 310 ; Crawford v. North 
 508 ; 30 L. J. Ch. 290. Eastern Ry. Co. 3 Jurist N. S. 1093 ; S. C. 
 
 3 Henry v. Great Northern Ry. Co. I 3 Kay & J. 723 ; London India Rubber Co. 
 
 602
 
 PREFERRED STOCKHOLDERS AS AGAINST MORTGAGEES. [§§ 621, 622. 
 
 to have arrears of dividends made up to them through laches in 
 asserting their rights. 1 
 
 The use of the word "guaranteed," in connection with pre- 
 ferred stock, does not change the legal effect of the rights of the 
 holder of such stock. 2 
 
 621. In ascertaining the profits of a railroad company for 
 the purpose of making dividends on preferred shares, the Mas- 
 ter of the Rolls, Romilly, laid down the following rules : 3 " I am 
 of opinion that all the debts of the company are first payable, 
 other than those which, for want of a better expression, may be 
 called funded debts ; for instance, if the defendants have raised 
 money by mortgage, under the powers contained in their act, for 
 the purpose of completing their line, this does not constitute such 
 a debt as can be paid off out of the profits before the profits are 
 divided. But, on the other hand, any debts which have been in- 
 curred, and which are due from the directors of the company, 
 either for steam-engines, for rails, for completing stations, or the 
 like, which ought to have been, and would have been paid at the 
 time, had the defendants possessed the necessary funds for that 
 purpose, those are so many deductions from the profits, which, 
 in my opinion, are not ascertained till the whole of them are 
 paid." 
 
 622. St. John v. Erie Railway Company. 4 — Such a question 
 arose in relation to the preferred stock issued by the Erie Railway 
 Company between the years 1861 and 1869, in pursuance of a con- 
 tract of reorganization entered into in 1859 between the share- 
 holders and creditors of a prior corporation, known as the New 
 York and Erie Railroad Company. That company had failed to 
 pay some of the interest due upon bonds issued by it and secured 
 by mortgages, and certain of its unsecured debts. Foreclosure 
 proceedings had been commenced, and a receiver of the property, 
 
 in re, 37L. J. Ch. 235 ; Matthews v. Great supra ; Smith v Cork & Bandon B 
 
 Northern By. Co. 5 Jur. N. S. 284; Stevens supra. 
 
 p. South Devon Ry. Co. 13Beav.48; S.C. - Tail o. Hartford, Providence 
 
 9 Hare, 313 ; Smith v. Cork & Bandon kill li. B. Co 'r 1 "- 
 
 ■ \r. B.3 Bq. 356; affirmed [r. B. :; <«wy v. Londonderrj S Bnui 
 
 r> Eq. 65. I;i this case the prior cases are By. Co. 29 Beav. 263, 272. 
 reviewed at Length. " 10 Blatchf. 871 ; on appeal, 82 Wall 
 
 1 Matthews v. Great Northern By. Co. 186. 
 
 608
 
 § G22.] SCHEMES AFFECTING PRIORITY OF MORTGAGES. 
 
 covered by at least two of the five mortgages of the road, had been 
 appointed. The shareholders, and bondholders under all of the 
 mortgages, and the unsecured creditors, then entered into a con- 
 tract whereby the mortgaged property was to be purchased for 
 the account of the parties to the contract at the foreclosure sale. 
 The holders of the mortgages were to be mortgagees under the 
 new company, and the holders of unsecured bonds of the old com- 
 pany were to exchange their bonds for preferred stock equal in 
 amount. The contract provided that the " preferred stock should 
 be entitled to preferred dividends out of the net earnings, if 
 earned in the current year, but not otherwise, not to exceed seven 
 per cent, in any one year, payable semi-annually, after payment 
 of mortgage interest and delayed coupons in full." The new cor- 
 poration was formed under legislative authority, and preferred 
 stock to the amount of $8,500,000 and upwards was issued. Div- 
 idends were regularly paid on this stock until the year 1868. In 
 1865, after the preferred stock was created, the company issued 
 one million pounds of sterling bonds, unsecured by mortgage, bear- 
 ing interest at six per cent, per annum in gold coin. They were 
 issued for money borrowed to equip and repair the road, and the 
 money was expended for these purposes. During the year 1868 
 the company paid the interest in full on these bonds ; but on the 
 31st of December, 1868, after deducting the operating expenses, 
 the interest paid on the mortgages existing January 1, 1862, and 
 the rent of roads leased prior to that date, the net earnings were 
 sufficient to pay only a partial dividend on the preferred stock ; 
 and of course if no interest had been paid by the company on 
 the sterling bonds, and no rent for roads leased after January 1, 
 1862, such dividend on the preferred stock would have been in- 
 creased. A holder of preferred stock brought a bill in the Cir- 
 cuit Court of the United States praying that the court would as- 
 certain and adjudge the meaning of the words " net earnings," 
 and would enjoin the company from applying any portion of the 
 net earnings, after payment of the interest on the mortgage bonds, 
 to any other purpose than the payment of a dividend on the pre- 
 ferred stock. It was claimed in his behalf, that as the unsecured 
 bondholders stood, when the contract was made, next in order as 
 creditors to the holders of the mortgage bonds, they became en- 
 titled to occupy the same relative position as holders of preferred 
 stock, and to receive their dividends on such stock out of the earn- 
 604
 
 PREFERRED STOCKHOLDERS AS AGAINST MORTGAGEES. [§ 620. 
 
 ings, before the payment of interest on obligations incurred after 
 the issuing of such stock ; that the words, " after payment of mort- 
 gage interest and delayed coupons in full," did not mean merely 
 " before any dividend is paid on the common capital stock," but 
 meant "next after payment of mortgage interest and delayed 
 coupons in full ; " that this construction is sensible, because of the 
 prior position of the preferred stockholders, as holders of unse- 
 cured bonds entitled to be paid interest next after the payment of 
 mortgage interest; that they did not waive, but preserved, their 
 position as entitled to such interest, and only modified their right 
 in regard to the repayment of the principal of their debts ; that 
 the preferred stock is only a new form of security for the debts in 
 exchange for which it was issued, holding the same place, ami en- 
 titled to be paid the same interest, as such debts were entitled to 
 when the exchange was made subject to the proviso as to the 
 earning of the interest in the current year ; that the holders of 
 the preferred stock are not subject to the contingencies of new 
 loans and new leases, and extended enterprises ; that while the 
 contract contains no limitation on the power of the company to 
 issue interest-bearing securities, it contains a limitation on their 
 power of disposing of their net earnings ; that the shares of pre- 
 ferred stock are, in fact, perpetual bonds, with no right to the re- 
 payment of the principal, but with a specified preferential right 
 in regard to interest; that the fact that it is called "stock," and 
 that it is declared to be entitled to " dividends," and that its hold- 
 ers have an equal right to vote with the holders of common stock, 
 cannot destroy the rights which appertain to it by the terms of 
 the contract. But it was held that the preferred stockholders 
 were not entitled to a dividend before the payment of interest on 
 such bonds. 1 
 
 623. The terms preferred stock and preferred dividends, 
 taken by themselves and in connection with other words, are < fo- 
 mented upon at length by Judge Blatchford in giving the opinion 
 of the Circuit Court in the foregoing case: "I d<> no! think that 
 a fair and reasonable construction of the contract, with which 
 the language of the statutes and of the certificates of Btock is in 
 harmony, sustains the views urged on the pari ol the plaintiff. 
 The words are not, 'next after payment of mortgage interest. 1 
 
 i St. John v. Eric By. < '<>. l" Blatchf. 271. 
 
 605
 
 § 623.] SCHEMES AFFECTING PRIORITY OF MORTGAGES. 
 
 They are, ' after payment of mortgage interest.' The contract, in 
 its fifth article, provides that the holders of the unsecured bonds 
 agree to exchange them for preferred stock,' 'to be entitled to 
 preferred dividends, out of the net earnings.' The only way men- 
 tioned in the contract, in which the stock was to be ' preferred 
 stock,' was, that it was to be entitled to ' preferred dividends.' 
 What was that word ' preferred ' to mean ? ' Preferred ' over 
 what ? Were the dividends to be ' preferred ' over and to be 
 paid before the mortgage interest on the five mortgages, so as to 
 become, in fact, by the agreement of the holders of the mortgage 
 bonds, who were parties to the contract, a virtual mortgage on the 
 net earnings to the extent of such dividends, prior to the lien of 
 the five mortgages ? But for some expression of intention in the 
 contract, on that subject, the mere word ' preferred ' might be 
 construed so to mean. It otherwise might mean, not merely ' pre- 
 ferred,' as respected the holders of common stock, but ' preferred,' 
 as respected the securities held by all other parties to the con- 
 tract. Therefore something must be inserted to exclude such an 
 inference, and to secure to the holders of mortgage bonds a pri- 
 ority as to the payment of their delayed coupons, and of their 
 future interest. Such priority was accordingly secured by adding 
 the words, ' after payment of mortgage interest and delayed cou- 
 pons in full.' There is nothing to show that the words have any 
 other effect, or were intended to have any other effect. An in 
 tention that they should have such an effect, which is a reason- 
 able effect, is inferable from the fact that they clearly have such 
 an effect, and it is unreasonable to infer any other intention, when 
 that intention is a sufficient reason for inserting them. Without 
 them there is nothing to give the mortgage interest a priority 
 over the ' preferred dividends.' In this view it is impossible to 
 see in them anything except the expression of a priority in favor 
 of the mortgage interest over the ' preferred dividends,' and im- 
 possible to see in them any expression of a priority in favor of the 
 
 ' preferred dividends ' over anything The former holders 
 
 of the unsecured bonds of the old company, by taking the pre- 
 ferred stock in exchange for their bonds, abandoned their position 
 as creditors, and became merely stockholders in the new company, 
 as against their existing and all future creditors of the new com- 
 pany. They acquired the same right to vote as the holders of 
 common stock. In the absence of any expressed intention to the 
 606
 
 PREFERRED STOCKHOLDERS AS AGAINST MORTGAGEES. [§ 624. 
 
 contrary, it would be very unreasonable to suppose that the gen- 
 eral power of the defendants to take leases of roads and to pay 
 the rents of them, and to borrow money and issue bonds there- 
 for and pay the interest on such bonds, would have been subordi- 
 nated by the legislature or by themselves to the rights of any class 
 of their stockholders, and equally unreasonable to suppose that 
 the claims of creditors would have been postponed to those of 
 
 stockholders Moreover, the views urged on the part of the 
 
 plaintiff, if sound, must be carried to their legitimate conclusions. 
 The money has been borrowed on the sterling bonds. Their 
 holders are creditors. If the company should become bankrupt, 
 are the claims of those creditors to be repaid their principal to 
 be postponed to the claims of the preferred stockholders, in re- 
 spect to the capital of their shares ? The stock is, in the contract, 
 declared to be ' preferred stock,' as well as to be entitled to ' pre- 
 ferred dividends.' The statute and the certificates call it ' pre- 
 ferred capital stock.' If ' preferred stock,' why should it not have 
 preference over the principal of subsequently created debts, if 
 dividends on it are to precede the payment of interest on such 
 debts? Yet, such a claim would probably never be advanced, 
 and certainly would not be admitted. The statement in the con- 
 tract, the statute, and the certificates, that the ' preferred divi- 
 dends ' are to be paid out of the ' net earnings ' sheds no light, one 
 way or the other, for a solution of the question. The mortgage 
 interest and the delayed coupons are also to be paid out of the 
 net earnings. Net earnings are properly the gross receipts, less 
 the expenses of operating the road to earn such receipts. Inter- 
 est on debts is paid out of what thus remains, that is, out of the 
 net earnings. Many other liabilities are paid out of the net earn- 
 ings. When all liabilities are paid, either out of the gross re- 
 ceipts, or out of the net earnings, the remainder is the profil of 
 the shareholders, to go towards dividends, which in that way are 
 paid out of the net earnings." 
 
 624. Preferred dividends payable out of net earnings are 
 not in the nature of interest constituting a debt, bul are pay- 
 able only out of profits in the manner specified bj the contract. 
 The decree of the Circuit Court, in the case lasl under consider- 
 ation, waa upon appeal affirmed by the Supreme Court oi the 
 
 CUT
 
 § 624.] SCHEMES AFFECTING PRIORITY OF MORTGAGES. 
 
 United States. 1 Mr. Justice Swayne, delivering the opinion of 
 the court, considered the effect of the agreement for reorganization 
 as regards the preferred stockholders. " The original takers of 
 the preferred stock were creditors. They abandoned that position 
 and became stockholders. They thereupon ceased to be the 
 former, and can only be regarded as the latter. They surrendered 
 their debts and received in return stock of the same amount, 
 which gave them a chance for annual dividends of seven per cent., 
 and a voice by voting in the choice of those by whom the affairs 
 of the company were to be administered. What they were to re- 
 ceive was not interest, but dividends ; and they were to receive 
 them in priority to the holders of the common stock. The latter 
 could receive nothing until the former were satisfied. The max- 
 imum payment on the preferred stock was specified. It might be 
 less, or nothing. It could not be more. The amount subject to 
 the limit prescribed depended wholly upon the residue of the net 
 earnings applicable in that way. The language employed is apt 
 to express the relation of stockholders. None to express the re- 
 lation of creditors is found in the instrument; and there is noth- 
 ing from which the intent to continue that relation any longer can 
 be inferred. If the mortgages were foreclosed and there were a 
 surplus left insufficient to satisfy the general creditors, it is quite 
 clear that the holders of the preferred stock could have no right 
 to share in the fund." The claim made in behalf of the preferred 
 stockholders, that the net earnings are predicated of things as 
 they were when the preferred stock was issued, the learned judge 
 declared to be without support, express or implied. The com- 
 pany had a right to take new leases, and make new mortgages. 
 It had the right so to conduct its operations, in good faith, as it 
 might see fit ; and it was from them and all of them that the 
 materials for the computations of earnings were to be derived. 
 In conclusion, it was the judgment of the court that the rents for 
 the year, accruing under leases taken by the company after the 
 issuing of the preferred stock, and the interest upon the sterling 
 bonds for that year, were properly paid ; and that there were no 
 net earnings earned in that year which could be properly applied 
 in payment of preferred dividends. 
 
 1 St. John v. Erie Ry. Co. 22 Wall, ford, Providence & Fishkill R. R. Co. 8 
 136. See, on point that such dividends R. I. 310, 335. 
 are not a debt due absolutely, Tafty. Hart- 
 
 608
 
 CHAPTER XXII. 
 
 FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 I. Sale of entire property, 625-628. 
 
 II. Conduct of sale, 629-631. 
 
 III. "What franchises pass by the sale, 632- 
 635. 
 
 IV. Distribution of proceeds of sale, 636- 
 641. 
 
 V. Setting aside of sale, 642-652. 
 
 I. Sale of entire Property. 
 
 625. Under a deed of trust which contemplates but one 
 sale, the entire property may be sold upon a default in the pay- 
 ment of interest. It is moreover a well settled rule that the 
 whole property may be sold upon a default in the payment of in- 
 terest before the principal is due, when the property cannot be 
 sold in parts without injury to the whole. 1 As a general rule it is 
 evident that a continuous line of railroad cannot be cut up and 
 sold piecemeal without destroying its value. The unity and con- 
 tinuity of a line of railroad are among the important elements of 
 its value. Therefore, although a mortgage contains no provision 
 making the whole debt due upon a default in the payment of in- 
 terest, and no provision authorizing a sale of the whole property 
 covered by the mortgage, a court of equity will upon such default 
 order a foreclosure and sale of so much of the property ;is will 
 satisfy the instalments then due ; 2 and generally if tin- property 
 cannot be divided without injury, a sale of the whole would be 
 decreed. 
 
 When under a deed of trust of a railroad and all its property 
 the trustees without the aid of a court, by following lit*- terms <>f 
 the deed, might sell the entire line of road upon a default in the 
 payment of interest before the maturity of the principal, the 
 power of the trustees is not any the less when the court has been 
 
 1 Wilmer v. Atlanta & Richmond Air * Goodman v. Cincinnati & Cbii 
 
 Line By. Co. 2 Woods, 447. See 2 Jones EL Co. 3 Dta. (Ohio) 176 ; Weil Branch 
 
 on Mortgages, §§ 1616-1619. Bank v. Chester, n Pa. St. 2s_>. 
 
 30 609
 
 § 626.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 asked by the bondholders to construe the deed of trust and to 
 order the trustees to execute it. If the trustees in such case sell 
 the whole road as an entire and indivisible property, under the 
 direction of the court, they do so by virtue of the power vested in 
 them by the deed. The court does not foreclose the mortgage as 
 in an equitable foreclosure. It does not confer upon the trustees 
 any power which they did not already possess, by virtue of the 
 deed of trust, or impose upon them any new duties, but simply 
 tells them what their powers are under the deed, and requires 
 them to exercise these powers for the benefit of the cestuis que 
 trust. 1 
 
 626. In a few states special provision has been made by 
 statute in regard to the sale of the entire property. Thus, in 
 Indiana 2 it is provided that in case of the sale of any railroad and 
 its property, under or by the authority of any competent court, 
 part of which railroad may be situate within the state and part 
 in an adjoining state, and embraced in the mortgage or deed of 
 trust, the whole may be sold at one time and place, as an en- 
 tirety, at such point on the line of said railroad, either within or 
 without the state, and upon such notice as the court or courts 
 ordering such sale may direct. 
 
 In Kansas 3 it is provided that in actions to enforce a mortgage 
 or deed of trust, executed by any railroad company upon its rail- 
 road or other property, or any portion thereof, if the property 
 mortgaged shall be situated in more than one county in this state, 
 the District Court of any one of such counties shall have jurisdic- 
 tion to render judgment against such company for the amount 
 found due in the same manner as is provided by law, concerning 
 other debts secured by mortgage on real property, and to decree 
 and enter an order for the sale of said mortgaged property, and to 
 provide for the terms and method of payment of the purchase 
 price of the property ordered to be sold ; which order shall be di- 
 rected to the sheriff of any or either of the counties in which said 
 mortgaged property is situated. And the sheriff to whom such 
 order may be directed shall have power to sell the whole of said 
 
 1 Wilmer v. Atlanta & Richmond Air March 3, 1865. See statute in New Jer- 
 Line Ry. Co. 2 Woods, 447, 456. set, R. S. 1877, p. 922, § 77. 
 
 2 1 R. S. 1876, p. 728, ch. 218, § 1, Act s Laws 1876, ch. 108, § 1 ; Dasslcr's 
 
 Stats. 1876, §4625. 
 
 610
 
 SALE OF ENTIRE PROPERTY. [§ 626. 
 
 property pursuant to the order of the court, and make return of 
 his proceedings in the same manner as may be provided by law in 
 ordinary cases of foreclosure of mortgages upon real estate ; and 
 upon the coming into court of the return of the sale by the sheriff, 
 if the same shall be found to have been made in compliance with 
 the order of the court, the court shall thereupon confirm the sale, 
 vesting in the purchasers title to the property sold, and order the 
 execution of a deed by the sheriff, as in the case of the sale of real 
 estate upon execution or other final process. 
 
 In Kentucky 1 it is provided that sales of the property and fran- 
 chises of railroad and turnpike corporations, when adjudged by a 
 court, shall be after such notice and advertisement, and at such 
 place as, in the discretion of the court, shall seem proper ; and if 
 such sales are made on the foreclosure of one or more mortgages 
 or deeds of trust, the court may order such sale to be made for 
 the whole amount of the outstanding bonds and interest secured 
 by such deed or deeds of trust or mortgage ; or if said property 
 and franchises will produce so much, then for the amount of in- 
 terest due under said deed or deeds of trust or mortgage, or either 
 of them, subject to the payment by the purchaser of the out- 
 standing bonds, and interest secured thereby, as they become due ; 
 and in the latter event may, by proper orders, secure the assump- 
 tion thereof by the purchaser. But where a sale shall be ordered 
 to be made subject as aforesaid, the court shall direct the officer 
 making such sale, in the event that such property and franchises 
 so offered do not sell for enough to pay the amount aforesaid, then 
 to sell such property and franchises free from incumbrances. 
 Sales made under these provisions shall be on such credits as the 
 court may deem proper. But if the sale be made subject to the 
 payment of the principal as aforesaid, the average credit shall not 
 be less than two years, nor more than four years : and where the 
 sale is not made subject as aforesaid, the average credit shall not 
 be less than three years, nor more than six years. 
 
 In New York the Supreme Court may direcl :i sale of the 
 whole of the property, rights, and franchises covered l>\ a mort- 
 gage or deed of trust, at any one time and place to be named in 
 the judgment or order, either in the case ol the Qon-paymenl <>f 
 interest only, or of both the principal and interest due and un- 
 paid and secured by such mortgage or deed ol trust. 9 
 
 1 Laws 187G, cb. 447, § 1. ■ Lawi I 876, I b. I W, p. i 
 
 • ill
 
 §§ 627, 628.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 627. When specific property subject to a separate incum- 
 brance can be sold separately without injury to other property, 
 as for instance when a section of a railroad subject to a separate 
 raorto-ao-e can be sold by itself, without sacrificing the whole line 
 of road, it should be thus sold in order that the incumbrancer* 
 may have a chance of protecting his securities without involving 
 himself in onerous engagements. Cases sometimes occur where a 
 sale of the entire property covered by different mortgages must 
 be made absolutely, and the different claims adjusted upon the 
 fund subsequently ; thus, when a sale of a portion of a railroad, 
 which is subject to a separate mortgage, would be injurious to 
 the entire property, which is subject to other mortgages under 
 which a sale of the entire road is asked for, it may be that the 
 only just course that can be pursued is to sell the whole and ad- 
 just the rights of the mortgagees afterwards. 1 
 
 628. Upon the foreclosure of a mortgage of a railroad and 
 its franchises for a failure to pay an instalment of interest, 
 when the mortgage contains no provision that the principal shall 
 become due upon such a default, if the property can be divided 
 without injury, only so much of it should be sold as will satisfy 
 the amount due ; but if it is not susceptible of division, as would 
 usually be the case, it must be sold as an entirety. When, how- 
 ever, it seems probable that the property is worth much more 
 than the amount of the debt and interest, the court may very 
 properly, upon the request of the company, order the property to 
 be leased for the shortest term that will produce the amount due, 
 and the accruing interest. The court should, in such case, require 
 the lessee to give a covenant with approved security, to keep the 
 property in good repair, and to return it at the end of the term 
 in as good condition as it may be when received. 2 
 
 After a sale of an entire road has been made upon a default in 
 the payment of interest due upon a mortgage of it before the 
 principal debt is due, the proceeds are applied in the first place to 
 the payment of the interest for the satisfaction of which the sale 
 was made, and the remainder is brought into court, to be disposed 
 of under its direction. 3 
 
 1 Campbell v. Texas & New Orleans R. 2 Bardstown & Louisville R. R. Co. v. 
 R. Co. 2 Woods, 263. Metcalfe, 4 Mete. (Ky.) 199. 
 
 8 Wilmer v. Atlanta & Richmond Air 
 612 Line Ry. Co. 2 Woods, 447.
 
 CONDUCT OF SALE. [§ 629. 
 
 II. Conduct of Sale. 
 
 629. The marshal or other officer, who makes a sale under 
 a decree of foreclosure, is not only invested with a reasonable 
 discretion as to the manner of conducting the sale, but is not 
 at liberty to overlook or disregard such discretion. Acting under 
 the decree, he has duties to perform to the complainant, to the 
 vendor and purchaser, and to the court, and is bound to exercise 
 his best judgment in the performance of all these duties. The 
 usual practice is for the officer in selling the property to act under 
 the advice of the solicitor of the complainant. " Granting that 
 solicitors may properly advise the officer, still it must be borne in 
 mind that the authority and discretion in making the sale are to 
 a certain extent primarily vested in the officer designated in the 
 decree. Unreasonable directions of the solicitor are not obliga- 
 tory and should not be followed ; as if the solicitor should direct 
 the property to be struck off at a great sacrifice when but a single 
 bidder attended the sale. Under such circumstances the officer 
 might well refuse to do as he was directed, and he might be justi- 
 fied in postponing the sale to a future day to prevent the sacrifice 
 of the property. Every such officer has a right to exercise a reason- 
 able discretion to adjourn such a sale, and all that can be required 
 of him is, that he should have proper qualifications, use due dili- 
 gence in ascertaining the circumstances, and act in good faith, and 
 with an honest intention to perform his duty." : In a case of a 
 sale of a railroad under a decree of foreclosure which directed the 
 marshal to sell at public auction, unless the mortgagors, previously 
 to such sale, should pay to the complainants the sum of 8254,175, 
 being the amount of the decree, four different adjournments, ex- 
 tending over a term of seven months, were made for the purpose 
 of enabling the mortgagors to make an arrangement to pay the 
 debt : and although a bid of nearly the whole amount of the debt 
 was made on the second day fixed for the sale, and the whole 
 amount of the debt was bid on the third day fixed for the sale, 
 and the adjournments were made by direction of the complainant's 
 solicitor, the company having redeemed before the Eourth day to 
 which the sale was adjourned, it was held thai tin- adjournments 
 were made for sufficient cause, and the Bale was properly di oon- 
 
 « Blossom v. RailroadCo. :i Wall. 196, 208, per Clifford, .1. Bee 9 Jonei on Mort 
 gkges, §§ 1633-1635. 
 
 618
 
 § 630.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 tinned. The highest bidder has in such case no right to insist 
 upon being allowed to pay the amount of his bid, and have a con- 
 firmation of the sale to himself. 1 
 
 630. A mortgage trustee will be left to exercise his discre- 
 tion as to the time of making sale under a decree of foreclos- 
 ure, and as to making a sale at all pending an appeal from the 
 decree, which the appeal does not supersede. The trustee is the 
 representative of all the bondholders, and it is for him to deter- 
 mine whether the best interests of all concerned would be pro- 
 moted by a sale, and individual bondholders have no right to in- 
 sist upon an execution of the decree. 
 
 The Central Railroad Company of Iowa having made default 
 in payment of interest, some of the bondholders requested the 
 trustee to foreclose the mortgage. He did not, however, institute 
 proceedings to foreclose, and thereupon these bondholders brought 
 suit for this purpose in the Circuit Court of the United States for 
 the District of Iowa, and made the trustee a party to it. A de- 
 murrer, on the ground that the trustee only could bring such suit, 
 was overruled. The trustee then asked and obtained permission 
 to file a bill to foreclose, and upon filing such bill the action was 
 consolidated with that commenced by the bondholders. A decree 
 of sale was entered at the October Term, 1875, upon the assump- 
 tion that the parties to be affected assented to the decree. This 
 assumption was not, however, well founded, for certain other bond- 
 holders, having been allowed to intervene, took an appeal to the 
 Supreme Court of the United States. They perfected the appeal ; 
 but failing to give bond as required, the supersedeas was dis- 
 charged. A committee of bondholders asked the trustee to order 
 the special master to proceed with a sale of the road, and the 
 trustee failing to do this, the committee directed the master to 
 sell. This he refused to do. The trustee thereupon petitioned 
 the court for advice in respect to the sale, and the committee of 
 bondholders moved for an order directing the trustee and master 
 to execute the decree. Dillon and Love, JJ., upon a hearing in 
 March, 1877, declined to order a sale, the latter saying : 2 " The 
 appellants are seeking to get the decree reversed. It must be 
 borne in mind that they have never yet had the judgment of any 
 
 1 Blossom v. R. It. Co. supra. R. R. Co. of Iowa, 11 West. Jurist, 428 ; 
 
 2 Farmers' Loan & Trust Co. v. Central 5 Cent. L. J. 56 ; 4 Dill. 533. 
 
 614
 
 CONDUCT OF SALE. [§ 630. 
 
 court upon their rights and equities under the mortgage. If the 
 court had passed its independent judgment upon their rights and 
 equities, and had made a decree disposing of them accordingly, 
 and if they had failed to supersede the decree, I do not see that 
 they would have an}' reason to complain, even though they could 
 not, in the event of a reversal, be placed as to their rights under 
 the mortgage in statu quo. But in the absence of any real adju- 
 dication by the court, and by virtue of a consent decree, to which 
 they were not parties, to have the property in which they are in- 
 terested disposed of, so that in the event of a reversal they cannot 
 be awarded the very relief to which they would be entitled by the 
 terms of the mortgage, would seem to me not at all in accordance 
 with the principles of equity. Again, it is impossible for us to 
 know what the decision of the Supreme Court will be, and what 
 complications may consequently arise from the execution of the 
 decree in the mean time. Will the Supreme Court dispose of the 
 case with reference to the fact that the decree below has been ex- 
 ecuted, and the trust property placed beyond judicial control, or 
 will it determine the controversy with reference to the state of the 
 case and property at the time when the decree was entered below ? 
 I confess I do not see the way clear in the future, if the status quo 
 of the trust property be changed, as required by the terms of the 
 decree. On the contrary, it appears to me that no complications 
 can possibly arise if the decree be not executed. Nor can I see 
 clearly that any special injury will result to the parties in interest 
 by reason of the delay. If the majority feel aggrieved by the re- 
 fusal of the court to grant their present motion, I suppose they 
 have their remedy: they can apply for a mandamus, and thus Bub- 
 mit their case to the judgment of the Supreme Court, and it it be 
 a matter of right in them, and not of discretion in the Circuit 
 Court, they can thus obtain redress." 
 
 In accordance with this suggestion, the parties wenl before the 
 Supreme Court on an application for a mandamus to compel the 
 Circuit Court to execute th.- decree by a sale of the road, but the 
 application was refused, on the ground that the trust,- is the rep- 
 resentative of all the bondholders, and that they have no Legal 
 right to insist upon an execution <»f tin- decree, and should not, in 
 their individual capacity, be allowed to interfere with Ins discre- 
 tion, except upon strong and clear rea ons. It" they are dissatis- 
 fied with the trustee, their remedy i^ to apply to have him re- 
 
 615
 
 § 631.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 moved, under a provision in that behalf contained in the trust 
 deed, and get a trustee to carry out their wishes if they can. 
 
 Afterwards, at the May term of the Circuit Court, application 
 to compel the trustee to sell the road under the decree was re- 
 newed, when Judge Dillon, with the concurrence of Judge Love, 
 again refused it, saying, after reciting the action of the Supreme 
 Court in this case, that while the decision of that court is conclu- 
 sive against the legal right of these parties to have this decree ex- 
 ecuted, at the same time there is no restraint in the decree, or 
 in what has been decided in either court against its execution ; 
 that the appeal did not supersede it, and that the trustee is at per- 
 fect liberty, whenever he sees fit, to execute the decree ; that as 
 far as the court is concerned, considering the trouble this road had 
 given it, by reason of the controversies and factions among the 
 bondholders, it would be glad if the trustee could see his way clear 
 to execute the decree, and get the road out of court, and into the 
 hands of parties who could control it satisfactorily ; that it should 
 be understood that the trustee incurs no personal liability by ex- 
 ecuting the decree, and that the only question for the trustee to 
 determine is whether the best interests of all the cestuis que trust, 
 or bondholders, would be best promoted by now executing the 
 decree, or by allowing it to stand until the determination of the 
 appeal. 
 
 631. In Kansas 1 the time and manner of making sales of 
 railroads, in all cases of foreclosure of mortgages or deeds of 
 trusts, are provided for by statute. No sale shall take place at the 
 instance of the trustee named in said mortgages or deeds of trust, 
 by virtue of any judgment, decree, or interlocutory order entered 
 therein, until after the expiration of three years from the entry or 
 docketing thereof, unless a majority of all the holders in amount 
 of bonds issued in pursuance of the terms of the mortgage or 
 deed of trust, by virtue of which the foreclosure proceedings are 
 had, and the judgment obtained, shall petition the trustee named 
 in such mortgage or deed of trust to proceed to such sale, and 
 said trustee shall file the said petition with the clerk of the court 
 in which such judgment, decree, or order has been entered or 
 
 i Laws of 1876, ch. Ill; Dassler's when the mortgaged property is situate in 
 Stats. 1876, §§ 4627, 4631. See Laws of more than one county. 
 1877, ch. 108, for act regulating procedure 
 
 616
 
 WHAT FRANCHISES PASS BY THE SALE. [§ 632. 
 
 docketed, when the complainant in such suit may proceed to sell 
 the property and franchises covered by said mortgages or deeds of 
 trust, in accordance with the terms thereof, or as directed by the 
 court. 
 
 In case any person other than the owner of said bonds shall sign 
 such petition, representing himself as the agent, trustee, or proxy 
 of said owner, his authority for signing the same must be in 
 writing or printed, and executed by the owner of said bonds, and 
 be duly acknowledged before some notary public, and be attested 
 by the signature and official seal of such notary. If at the time 
 of the entry of such judgment, decree, or order, no receiver shall 
 have been appointed by the court in which the suit is pending, it 
 is the duty of the court to appoint a receiver to take charge of, 
 manage, control, and operate the property of said railway com- 
 pany, who shall be subject to the order of the court, and possess 
 and exercise all the powers and duties of receivers generally, to- 
 gether with such special powers and duties as the said court shall 
 delegate to him. If at the time of the entry of such judgment, 
 decree, or order, a receiver shall have been heretofore appointed, 
 the court may Continue him as such receiver, with all the powers 
 and duties as hereinbefore indicated. 
 
 Any sale made contrary to the provisions of this act is abso- 
 lutely void, and shall convey no title or interest whatever to any 
 purchaser. 
 
 III. What Franchises pass by the Sale. 
 
 632. The franchise to be a corporation. — The sale of the 
 property and franchises of a railroad corporation, under a decree 
 to satisfy a mortgage, does not pass to the purchaser debts due 
 the corporation, nor does it destroy its corporate existence. For 
 the purpose of collecting and paying debts the corporation still 
 exists. 1 
 
 The sale b} T one railroad company to another of a portion or 
 division of an existing line of road with its franchises is con- 
 strued to mean only the franchise of operating thai pari of the 
 
 road, and not tin- franchise of being a corporati and of suing 
 
 and being sued as such. Both companies, after Buch sale, retain 
 precisely the same corporate existence they had before, the one 
 
 i Smith r. Gower, a Mete. (Ky.) 171. Bee §§ 15, 10. 
 
 617
 
 §§ 633, 634.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 parting with and the other acquiring a specific piece of property 
 with the franchise necessary to its use. 1 
 
 Under a statute which provides that a corporation shall be dis- 
 solved b}' a mortgage sale of its franchises and property, an ille- 
 gal and fraudulent sale does not work a dissolution. 2 
 
 633. A mortgage by a railroad company does not pass 
 any interest in land which it has occupied for its uses, but for 
 which it has failed to pay the damages assessed. — Its interest 
 in such land is a mere easement, and not an estate in the land 
 subject to lien or execution. The land-owner's title to damages 
 is paramount to a mortgage given by the railroad company be- 
 fore the damages have been assessed and paid. Although he al- 
 lows the company to construct a road over his land, and to use it 
 without payment of damages, and thus waives the trespass, he 
 does not necessarily waive his claim for damages ; and a prose- 
 cution of his claim to judgment is conclusive against such waiver. 
 A sale of the road under a mortgage before the damages are paid 
 does not divest the land-owner of his right to recover compensa- 
 tion for the occupancy of his land from the purchaser. 3 
 
 But when a railroad compan}^ being unable to agree with the 
 owners of lands for a right of way, gives a bond with sureties and 
 takes possession, a sale under a mortgage subsequently made gives 
 the purchaser a clear title, and the land-owner is thrown back 
 upon the bond for his damages. 4 
 
 Of course, a right of way acquired by a railroad company by 
 grant from the land-owner passes by a mortgage and by a fore- 
 closure sale under the mortgage, and vests in the purchaser. 5 
 
 634. Interest on purchase money. — When a purchaser at a 
 judicial sale for the foreclosure of a mortgage is immediately put 
 into possession of the propert}', he is chargeable with interest on 
 the amount of the purchase money to the time of its payment. 6 
 
 1 Wright v. Milwaukee & St. Paul Ry. * Fries v. Southern Pa. R. R. & Mining 
 Co. 25 Wis. 46. Co. 85 Pa. St. 73 ; distinguished from 
 
 2 White Mountains R. R. v. White Western Pa. R. R. Co. v. Johnston, 59 Pa. 
 Mountains R. R. 50 N. H. 50. St. 290. 
 
 8 Western Pennsylvania R. R. Co. v. 5 Juuction R. R. Co. v. Ruggles, 7 Ohio 
 
 Johnston, 59 Pa. St. 290 ; Pfeifer v. She- St. 1. 
 
 boygan & Fond du Lac R. R. Co. 18 Wis. 6 Haven v. Grand Junction R. R. & 
 
 164. Depot Co. 109 Mass. 88. 
 618
 
 DISTRIBUTION OF THE PROCEEDS OF SALE. [§§ 685, 636. 
 
 635. A purchaser at a foreclosure sale under a decree in 
 chancery subjects himself to the jurisdiction of the court, 
 and can be compelled to perform his agreement specifically. He 
 undoubtedly has the corresponding right to appear and claim at 
 the hands of the court such relief as the rules of equity proceed- 
 ings entitle him to. If the court refuses to order the -sale either 
 to be set aside or completed, he may carry the matter by appeal 
 to the appellate tribunal. The act complained of is not a mere 
 ministerial duty, necessarily growing out of the decree which is 
 being carried into effect, but the purchaser has in the course of 
 the subsequent proceedings in the case acquired rights which the 
 court is bound to protect, and has become a quasi party to the 
 proceedings. 1 
 
 A deci-ee confirming a foreclosure sale, if it is final, may be ap- 
 pealed from. 2 Upon such an appeal from the Circuit Court of 
 the United States to the Supreme Court, the refusal of the former 
 court to accept a supersedeas bond, when offered during the term 
 at which the decree was rendered, does not take from a judge of 
 that court, or a justice of the Supreme Court, the power to ap- 
 prove one thereafter. 3 
 
 IV. Distribution of the Proceeds of Sale. 
 
 636. In the distribution of the proceeds of a foreclosure 
 sale, liens at law have precedence of equities. Thus, land was 
 sold to a railroad company under an agreement that the vendor 
 should receive as part of the consideration bonds of the company 
 secured by a second mortgage to be issued. He delivered the 
 deecl, but before the mortgage was issued the company confessed 
 certain judgments. The vendor then refused to receive the bonds 
 because of the judgments, and the bonds were thereupon other- 
 wise appropriated by the company. Upon a distribution of the 
 proceeds of a foreclosure sale, it was held that the vendor, having 
 rejected the bonds, had no further claim upon them, and the com- 
 pany could dispose of them as it, pleased ; and that the mortgage 
 having been given to secure the bonds and the vendor not own- 
 ing them, he had no lien, equitable or legal, through the mortgage 
 
 i Blossom v. Milwaukee, &c. I:. R. ( '<>. Butterfield v. Usher, 91 U. S. 246; Blos- 
 
 l \V;ill. 655. See 2 Jones on Mortgages, sum v. Milwaukee, &c. R R Co. i Wall. 
 
 §§ 1642-1651. 055. 
 
 2 Saj^e v. Railroad Co. 90 U. S. 712; 8 Sa^e r. Railroad Co. supra. 
 
 619
 
 §§ 637, 638.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 for the purchase money for which the bonds were to be delivered 
 to him. 1 
 
 637. Every bond is entitled to its pro rata share. — In the 
 distribution of the proceeds of a foreclosure sale under a mortgage 
 securing a series of bonds, the holders of the bonds share pro rata 
 in the distribution ; and if the holder of a bond is entitled to its 
 proceeds, the holder of other bonds cannot set up mere informali- 
 ties in the manner of its acquisition. The question of ownership, 
 whether at law or in equity, is immaterial. The time and man- 
 ner of the transfer of the bonds are not material ; the only real 
 question is whether each holder is entitled to the bonds he claims. 
 Each bond carries with it a fractional interest in the proceeds of 
 the mortgaged property, determined by the proportion the amount 
 of the bond bears to the whole amount secured. 2 
 
 638. In distributing the proceeds of a foreclosure sale the 
 payment of coupons which matured before a general default 
 may be preferred by the court when there is nothing in the mort- 
 gage requiring a pro rata distribution. Thus, upon the sale of 
 the New York and Oswego Midland Railroad Company, Judge 
 Blatchford ordered that unpaid coupons or interest belonging to 
 a class in which a part of the coupons or of the interest has been' 
 paid should be paid before coupons or interest falling due at a 
 later date, and before the principal of any of the bonds ; and that 
 coupons detached, and in the hands of others than the holders of 
 the bonds from which they were detached, should be paid before 
 such bonds. 3 On July first, 1873, the company made default 
 in the entire amount of interest then falling due, amounting to 
 $280,000, and never made any payment afterwards. The unpaid 
 interest previously due amounted to about $30,500, which had 
 matured at different times for several years previous. Against 
 this pi'eference it was contended that there was no principle, legal 
 or equitable, upon which it could be made ; that it was not shown 
 that payment of the interest was ever demanded and refused ; 
 that no right to be paid the interest accrued until demand and 
 refusal, and until then there was no default ; that the company 
 
 1 Rice's Appeal, 79 Pa. St. 168. R. R. Co. 13 Blatchf. 412 ; and see Vir- 
 
 2 Hodge's Appeal, 84 Pa. St. 359. ginia v. Chesapeake & Ohio Canal Co. 32 
 
 3 Slevens v. N. Y. & Oswego Midland Md. 501. 
 
 6>20
 
 DISTRIBUTION OF THE PROCEEDS OF SALE. [§ G38. 
 
 was justified in paying subsequently maturing interest, even 
 though prior maturing interest remained unpaid, so long as the 
 payment of such prior maturing interest had not been demanded ; 
 that he is prior in right who is prior in the time of presenting his 
 demands, when presentment is required ; and that those who, 
 prior to July first, 1873, received their interest, received no prefer- 
 ence as against those who did not receive their interest, because 
 the latter did not demand it and the former did. The general 
 principle was invoked, that, where general debts are secured by 
 one and the same mortgage, and become due, and the mortgage 
 is then foreclosed, they will be paid pro rata from the fund, if it 
 is insufficient to pay the whole of them ; and that the only excep- 
 tion to this rule is where the mortgage, by its terms, creates a 
 preference in favor of some of the debts, or where the original 
 creditor, as to any which he has assigned, has designed to confer a 
 right of prior satisfaction on the assignee. 
 
 In support of the preference it was contended that as to the in- 
 terest which matured prior to July first, 1873, inasmuch as some 
 of the parties entitled to it had received it, and some had not, the 
 former will have received a preference, unless the latter are now 
 to be put on an equal footing. To this it was replied that there 
 really was no preference ; that, so long as the debtor was solvent, 
 every party entitled to interest was paid as he presented his ma- 
 tured claim ; that, if he did not present it, he took the risk of the 
 debtor's becoming insolvent ; and that he had no special property 
 in, or lien on, the funds of the debtor, which could require the 
 debtor to set apart funds sufficient to pay undemanded matured 
 interest which fell due at an earlier date, before paying demanded 
 matured interest falling due at a later date. Judge Blatchford, 
 delivering the opinion of the court, said : " I do not think any dis- 
 tinction can be made between interest which matured before July 
 first, 1873, and interest which matured on that day, growing out 
 of the fact that payment of the latter was demanded and refused, 
 or a demand was waived, and that the former was not demanded. 
 I do not see how any diligence of those of a given class who 
 were paid their interest, in asking to have it paid, can be imputed 
 as laches to others of the same class who did not ask to be paid 
 their interest, so as to work a virtual preference in favor of the 
 former. To give to the hitter their interest in full, before pay- 
 ing the principal of the bonds, is only to put all those in a given 
 
 621
 
 § 638.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 class entitled to interest on an equal footing ; and to put them on 
 such equal footing requires, also, that interest maturing at an 
 earlier date shall be paid before interest maturing at a later date. 
 Here are special equities, it seems to me, which would be vio- 
 lated, if such an inequality were left to exist as the exclusion 
 from the full payment of interest of some of a given class. There 
 is nothing in the terms of the mortgage, in this case, which re- 
 quires such exclusion. On the contrary, the mortgage provides 
 that, after default, the mortgagees shall sell so much of the mort- 
 gaged property ' as shall be necessary to pay and discharge the 
 principal and interest, according to the tenor thereof,' of all the 
 bonds issued, and shall, out of the moneys arising from such sale, 
 pay the principal and interest which shall then remain due and 
 unpaid on the issued bonds. The words, 'according to the tenor 
 thereof,' may very well be held to embrace the payment of in- 
 terest, according to the times of the semi-annual recurrences of 
 interest, and in such order. Certainly, there is nothing in these 
 words, or elsewhere in the mortgage, that forbids a course which 
 is absolutely necessary, unless a result is to be effected which will 
 not be a payment of interest according to the tenor of the bonds, 
 but will leave some part of a given instalment of interest paid in 
 full, and the rest of it not paid in full. In the case of Dunham 
 v. Cincinnati, Peru, $c. Ry. Company, 1 the mortgage provided, 
 that in case of default and a sale, all bonds, and the interest ac- 
 crued thereon, should be equally due and payable, and entitled to 
 a pro rata dividend of the proceeds of sale. Hence it was held 
 that there could be no preference of past due coupons over the 
 principal of the bonds. No case was cited on the argument which 
 decides the above question adversely to the view I take. Most of 
 the cases cited were not cases of coupons or interest on numer- 
 ous bonds secured by mortgage, and none of them were cases 
 where some interest in a given class had been paid and the rest 
 not paid, and the fund was insufficient to pay all the principal 
 and interest due. The case of Sewall v. Brainerd 2 was not such 
 a case, nor was the case of Miller v. Rutland $ Washington Rail- 
 road Company ; 3 and, in the latter case, no preference was 
 claimed." 
 
 The coupons which fell due July first, 1873, were not paid by 
 the railroad company, but they were detached from the bonds 
 
 1 1 Wall. 254. 2 38 yt. 364. » 40 Vt. 399. 
 
 622
 
 DISTRIBUTION OF THE PROCEEDS OF SALE. [§§ 639, 640. 
 
 and cashed by other parties. They were regarded by the court 
 as having a special equity. " It was through the advance of money 
 to cash those coupons in the hands of the holders of the bonds to 
 which they belonged, that such holders obtained the money for 
 those coupons. On such advance, those coupons passed into the 
 hands of those who now hold them. But for such advance, the 
 coupons, in the hands of the original holders of them, would not 
 have been worth their face value, as they were made to be by 
 such advance. The original holders of such coupons must be re- 
 garded as still holding the bonds to which such coupons belonged, 
 or, if not, those who hold such bonds and subsequently maturing 
 coupons belonging thereto must be held to be subject to the same 
 equities with such original holders. No special reasons are shown, 
 in the evidence, why, as against any of such holders, the present 
 holders of coupons of July first, 1873, are estopped from claim- 
 ing priority. Those who had their coupons of July first, 1873, 
 cashed by means of such advance, retained the money, and, to 
 permit them now to exclude the holders of such coupons from 
 being paid in full, and put on an equality with the registered 
 interest of July first, 1873, which was paid in full, would be to 
 permit them to work an inequality which would be unjust." 1 
 
 639. One who holds bonds as collateral security should 
 receive only the amount of his loan and interest, and not the 
 full amount of the bonds or of the dividend upon them. 2 This 
 principle was applied to a case where a person authorized to raise 
 money on the negotiable bonds of a corporation borrowed money 
 on his own note, and pledged bonds to the lender, and applied 
 the money to the use of the corporation. In a distribution of the 
 proceeds of a foreclosure sale, the lender was not allowed to re- 
 ceive the full amount of the bonds and account to the person who 
 negotiated them, but was only entitled to his loan and interest. 3 
 
 640. Upon the foreclosure of a railroad mortgage no part 
 of the proceeds of the foreclosure sale can be distributed 
 among the stockholders of the corporation, in accordance with 
 any previous arrangement between them and the mortgagees, as 
 against the general creditors not secured by the mortgage. Sub- 
 
 i See §§ 328-331. 3 life's Appeal, 7:i Pa. St. 1G8. 
 
 2 See § 435. 
 
 628
 
 § 640.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 ject to the lien of the mortgages the property of the road is in 
 the corporation ; and if anything remains upon a foreclosure of 
 a mortgage after discharging the mortgage liens it belongs to 
 the corporation as a trust fund for the benefit of its general cred- 
 itors, and does not belong primarily to its stockholders. The 
 stockholders are not entitled to receive anything from a distribu- 
 tion of the proceeds of a foreclosure sale. The corporation is 
 entitled to the surplus after the payment of its debts, and the 
 stockholders are entitled to a share of the surplus only after the 
 payment of all the debts of the corporation. 
 
 These principles are illustrated by a case decided by the Su- 
 preme Court of the United States upon appeal from the Circuit 
 Court for Iowa. 1 ' The Mississippi and Missouri Railroad Com- 
 pany having incumbered its property by five several mortgages 
 securing bonds to the aggregate of $7,000,000, a sum greatly 
 exceeding the value of the property, became insolvent, and the 
 Chicago and Rock Island Railroad Company made overtures for 
 the purchase of the road, offering to give for it $5,500,000, a sum 
 more than its value, upon the condition of getting title at once. 
 The only way of accomplishing this seemed to be by a foreclosure 
 of one of the mortgages ; and as it was supposed that it was in 
 the power of the stockholders to delay the foreclosure an arrange- 
 ment was made between the stockholders and the mortgagees 
 whereby the different classes of bondholders were to receive speci- 
 fied amounts, ranging from thirty to one hundred per cent, of the 
 amount of their bonds, and the stockholders were to receive six- 
 teen per cent, of the par value of their stock, amounting to 
 $552,400, but no provision was made for the payment of the 
 general creditors of the company. Pursuant to this agreement 
 the property was sold under foreclosure, and the purchaser con- 
 veyed it to the Chicago, Rock Island, and Pacific Railroad Com- 
 pany, a new corporation formed under the laws of Iowa to super- 
 sede the two companies before named. Before the sum arranged 
 for division among the stockholders was distributed, certain judg- 
 ment creditors of the first named company appeared as claim- 
 ants of this fund. The court held that this arrangement was 
 fraudulent as against general creditors of the company, who were 
 entitled to the undistributed fund ; and it was regarded as imma- 
 terial that the property was mortgaged for more than it was 
 
 1 Railroad Co. v. Howard, 7 Wall. 392. 
 624
 
 SETTING ASIDE OF SALE. [§§ 641, 642. 
 
 worth, and that if it had been sold under an ordinary foreclosure, 
 without any arrangement between the mortgagees and stock- 
 holders, the whole proceeds of the sale would have belonged to 
 the mortgagees. 
 
 641. Any surplus of proceeds of a foreclosure sale remain- 
 ing after satisfying the mortgage for the payment of which the 
 sale was made belongs to the holders of subsequent liens upon the 
 property, and in absence of such to the corporation owning the 
 equity of redemption. 1 In the hands of the corporation such 
 surplus is subject to its unsecured debts. The corporation takes 
 it as a trust for its general creditors, and its stockholders have no 
 claim upon it until all its debts are satisfied. In this respect the 
 rule is the same although the sale be made in pursuance of an 
 arrangement between the mortgage bondholders and the stock- 
 holders, whereby the bondholders were to receive eighty-four per 
 cent, of the proceeds in full satisfaction of their bonds, and the re- 
 mainder was to be distributed among the stockholders. The lien 
 of the mortgage being discharged by the payment of such per- 
 centage as a compromise, whatever remains of the mortgaged 
 property belongs to the corporation, and is subject like its other 
 assets to the payment of its debts. To a creditor's bill to prevent 
 the distribution of such fund among the stockholders of the cor- 
 poration before its debts are paid, and to subject the fund to the 
 payment of its debts, the stockholders are not necessary parties. 
 The corporation holds the fund in trust for the benefit of its 
 creditors in the first instance, and for the benefit of its stockhold- 
 ers secondarily. 2 
 
 V. Setting aside of Sale. 
 
 642. Proceedings to set aside as fraudulent a decree of 
 foreclosure, and a sale under it, must be commenced within 
 a reasonable time after such sale. What length of delay will 
 defeat a recovery must depend upon the particular circumstances 
 of each case. The Supreme Court of the United States in one 
 cast; held that a suit commenced five years after a sale under a 
 railroad mortgage did not show a sufficient degree of diligence to 
 justify the overthrow of the decree of foreclosure. 3 If ignorance 
 
 1 Sec 2 Jones on Mortgages, §§ 1C84- > Harwood '■• Railroad Co. 17 Wall 
 1098. 78. See 2 Jones on Mortgages, § 1074. 
 
 2 Railroad Co. v. Eoward, 7 Wall. 392. 
 
 40 625
 
 § 643.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 of the frauds be alleged as an excuse for the delay, the bill should 
 show specifically when the knowledge of the frauds was first ob- 
 tained, or should give a satisfactory reason why such knowledge 
 was not sooner obtained. 1 
 
 When a suit is brought to set aside as fraudulent a foreclosure 
 sale after a long delay, such for instance as five years, the cause of 
 the delay should be specifically set out. An allegation in general 
 terms of ignorance of the fraudulent acts and arrangements relied 
 upon is insufficient. It must appear by allegation and proof that 
 the complainant has not slept too long upon his knowledge of the 
 fraud. 2 
 
 Mortgagors may obtain relief from a fraudulent sale, if they 
 apply for it within a reasonable time after discovering the fraud. 
 Thus, where a mortgage trustee received a bribe from the pur- 
 chasers at the sale to induce him to act in their interest, and the 
 mortgagors remained ignorant of the bribery for eight years, a bill 
 brought within two years after this discovery was deemed to be 
 within a reasonable time. 3 
 
 643. The right of a corporation to avoid a sale of its prop- 
 erty, by reason of the fiduciary relations of the purchaser, 4 
 must be exercised within a reasonable time after the facts relating 
 to it are known, or can by due diligence be ascertained. What 
 this time is has never been held to be any determined number of 
 days or years as applied to every case, like the statute of limita- 
 tions, but must be decided in each case upon all the elements of it 
 which affect that question. These are generally the presence or 
 absence of the parties at the place of the transaction, their knowl- 
 edge or ignorance of the sale, and of the facts which render it 
 voidable, the permanent or fluctuating character of the subject- 
 matter of the transaction as affecting its value, and the actual rise 
 or fall of the property in value during the period within which 
 this option might have been exercised. 6 Thus, a very much longer 
 time might be allowed to assert this right in regard to real estate 
 whose value is fixed, on which no outlay is made for improvement, 
 
 1 Harwoody. Railroad Co. 17 Wall. 78. 4 See 2 Jones on Mortgages, §§ 1636, 
 
 2 Hanvood v. Railroad Co. supra. 1876-1888. 
 
 3 White Mountains R. R. v. White 5 Twin-Lick Oil Co. v. Marbury, 91 U. 
 Mountains R. R. 50 N. H. 50 ; and see S. 587, per Miller, J. 
 
 Sullivan v. Portland & Kennebec R. R. Co. 
 94 U. S. 806. 
 
 626
 
 SETTING ASIDE OF SALE. [§ 644. 
 
 and in the value of which there can be but little change, than 
 Avould be allowed in respect to property which is subject to rapid, 
 frequent, and violent fluctuations, such as mining property, or 
 property adapted to the production of mineral oil from wells. 
 Therefore, where a director of a corporation who was secured by 
 a trust deed of such property purchased the property at a fore- 
 closure sale under this deed, and the sale was fairly made, and 
 all the facts on which their right to avoid the contract depended 
 were immediately known to all the stockholders, who refused to 
 join in the purchase, or to pay assessments then made on their 
 stock, the corporation was not allowed nearly four years after- 
 wards, when the purchaser, taking all the risk, had made his in- 
 vestment profitable, to hold the purchaser as trustee of the prop- 
 erty, and liable to account for the profits during the time he had 
 been in possession of it. 1 
 
 644. A director of a corporation having in good faith made 
 a loan to it and taken security in the form of a deed of trust 
 of real estate may properly purchase the property at a sale 
 under the power. He is not in such case both seller and buyer. 
 When a trustee is interposed who makes the sale, and who has the 
 usual powers necessary to see that the sale is fairly conducted, he 
 is in this respect the trustee of the mortgagor, and must be sup- 
 posed to have been selected by him for the exercise of this power. 
 The cestui que trust is at liberty to bid, subject to the rules of 
 fairness, which are the more rigid in proportion as the relation he 
 bears to the mortgagor is the more confidential ; for, if he could 
 not bid, he would be deprived of the only means which his con- 
 tract gave him of making his claim out of the security. 2 
 
 It is not illegal for a director of a company to buy its securi- 
 ties directly of the company at a discount, provided he pays the 
 same price at which they are issued to other persons ; and there- 
 fore he is not liable to the company for the difference between 
 the price paid and par. Such u purchase does not fall within the 
 principle of equity which prohibits an agent, or director, or any 
 person in a fiduciary character, and having power and iulluence 
 in a company, from making a profit by his dealings with it. 3 
 
 i Twin-Lick Oil Co. v. Murhury, 01 U. 8 Compare Gcntfrnle dc Bellegarde in 
 S. 587. re, L. E. 4 Ch. I). 470. 
 
 2 Twin-Lick Oil Co. p. Marbuiy, snjira. 
 
 627
 
 § 645.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 645. A sale by a bondholder in fraud of other bondholders 
 •will be set aside. — One holder of a few bonds out of a large 
 amount issued by a corporation, and secured by a mortgage of its 
 property, has no right to use the mortgage as an instrument by 
 which he may become the owner of the mortgaged property at a 
 grossly inadequate price, leaving the other bonds unpaid. It is 
 his duty, if he makes use of the mortgage security at all, to make 
 it productive of the most that can be obtained for all who are in- 
 terested in it. Community of interest between the bondholders 
 having a common interest in the same security involves mutual 
 obligations. If one of them seeks to appropriate the security ex- 
 clusively to himself, or to make a profit out of it at the expense 
 of those whose rights in it are the same as his own, he is guilty 
 of fraud. 
 
 These principles are illustrated in a case which came before 
 the Supreme Court of the United States from Louisiana. 1 The 
 Vicksburg, Shreveport, and Texas Railroad Company, in 1857, 
 issued bonds to the amount of $5761,000, and secured them by a 
 mortgage upon its railroad and franchises and personal property, 
 together with more than four hundred thousand acres of land. 
 On the 23d of December, 1865, the holder of four of the mort- 
 gage bonds, upon which coupons to the amount of $720 were due 
 and unpaid, obtained from a judge of a court of the State of 
 Louisiana, at chambers, an ex parte order of sale. His petition 
 did not disclose the name of any other bondholder ; and no notice 
 to the other bondholders, the most of whom resided in other 
 states, was asked for or given. The sale was fixed for the ear- 
 liest possible day, the 3d of February, and the sheriff advertised 
 the sale in one newspaper published in the town of Monroe, and 
 by posting a copy of the advertisement on the church door, and 
 another at the door of his office. By a law of the state the prop- 
 
 1 Jackson v. Ludeling, 21 Wall. 616. It parte. The mortgage being regarded as 
 
 does not appear that the mortgage in this in the nature of a confession of judgment, 
 
 case was made to trustees for the bond- the judge grants an execution as a matter 
 
 holders. The mortgage, as well as the of course upon the production of the bonds 
 
 proceedings upon it, or upon the bonds, secured, and authentic evidence of the 
 
 show peculiarities of the law of Louisiana mortgage. This process is known under 
 
 different from the common and statute law their Civil Code as executory process. 
 
 of any other state in these respects. Under See, in this connection, New Orleans 11. R. 
 
 the practice in Louisiana, the proceedings Co. u. Morgan, 10 Wall. 256. 
 upon a mortgage may be altogether ex 
 
 628
 
 SETTING ASIDE OF SALE. [§ 645. 
 
 erty seized was required to be appraised, and could not be sold for 
 less than two thirds of its appraised value. It consisted of a rail- 
 road about one hundred and ninety miles in length, with numer- 
 ous stations, buildings, warehouses, depots, and depot grounds, 
 cars, locomotive engines, wagons, machinery, utensils, bills re- 
 ceivable to the amount of more than $40,000, unpaid stock sub- 
 scriptions exceeding $320,000, and a large land grant of several 
 hundred thousand acres, together with the franchise of the com- 
 pany. They met for the appraisal of all this property only on 
 the day of sale. They were appointed by the plaintiff in the suit, 
 and by the acting president of the road, upon whom service had 
 been made, both of whom became purchasers at the sale. They 
 appraised the entire property at $75,000, and the sale proceeded. 
 The sheriff exacted an illegal and onerous condition, that the pur- 
 chaser should pay cash to meet the interest coupons then due, 
 and should give security for the credit portion of the bid which 
 covered the immature interest and bonds. The property was 
 struck off for $550,000, but the bidder failing to pay at once 
 the interest coupons then due and presented, the sheriff imme- 
 diately set up the property again in bulk, and sold for $50,000 
 property upon which had been expended nearly $2,000,000, to- 
 gether with a large stock subscription, a lai'ge grant of lands, and 
 considerable movable property. It appeared that the bondholder 
 who instituted the proceedings, and several persons who became 
 the purchasers at the sale, had entered into an agreement and 
 combination to divest the company of its property and obtain it 
 themselves at a sacrifice. Several of them were directors and 
 other officers of the road. After the sale they entered into pos- 
 session of the property and organized a new corporation. The 
 other bondholders, who resided principally in other states, then 
 brought a bill in equity to set aside the sale. The Supreme Court 
 of the United States, in setting aside the sale, declared that the 
 property was sacrificed by means of an unlawful and widespread 
 combination, and that the directors who were parties to it were 
 guilty of an inexcusable violation of confidence. The fraud and 
 trust were entirely outside the record. The sale was conducted 
 under the forms of law. The irregularity of the proceeding was 
 in the fraudulenl combination to deprive the greal body of the 
 bondholders of their property in the road for the benefit <>f per- 
 sons in whom, from their official connection with the road, or from 
 
 629
 
 §§ 646, 647.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 their community of interest, these bondholders had the right to 
 rely for faithfulness to trusts and to common obligations. 
 
 646. A mortgage trustee in possession cannot without ex- 
 press authority become a purchaser. — Inasmuch as a trustee 
 having the possession and management of a railroad corporation 
 for the protection of bondholders is a trustee not only for them, 
 but for the corporation which made the mortgage, he cannot prop- 
 erly purchase the mortgaged property at a foreclosure sale even 
 under a subsequent mortgage ; and if he does so purchase the 
 property, the corporation may redeem it upon paying the amount 
 of his bid with interest thereon ; and the trustee will be required 
 to account for the earnings of the property while it was in his 
 possession. In such case the corporation is entitled to have the 
 account stated, and a reasonable time allowed for redemption after 
 the balance has been ascertained. 1 
 
 647. The fact that the purchasers at a foreclosure sale of 
 the property of a railroad company are bondholders and cred- 
 itors of the company who have entered into an agreement to 
 make the purchase and to reorganize the company does not of 
 itself affect the validity of the sale, or subject the property in their 
 hands to any trusts in favor of other creditors. Such creditors of 
 the corporation are bond fide purchasers, unless there be some- 
 thing else to destroy their character as such. The doctrine recog- 
 nized in Railroad Co. v. Howard? that equity regards the prop- 
 erty of a corporation as held in trust for the payment of the debts 
 of the corporation, and that it may be pursued by the creditors 
 into whosesoever possession it may be transferred, unless it has 
 passed into the hands of a bond fide purchaser, has no application 
 to a case where the purchasers occupy no relation of trust toward 
 the corporation or its other creditors, and are in no respect incom- 
 petent to purchase and hold the property in their own right, and 
 to agree among themselves as to the disposition to be made of it. 
 Such purchasers occupy the position of bond fide purchasers when 
 there is no fraud in their agreement to make the purchase and 
 reorganization, and the stockholders of the old company derive 
 
 1 Racine & Miss. R. R. Co. v. Farmers' 2 7 Wall. 392. 
 Loan & Trust Co. 49 111. 331 ; Ashhurst's 
 Appeal 60 Pa. St. 290. 
 630
 
 SETTING ASIDE OF SALE. [§ 648. 
 
 no benefit from it, and the foreclosure and the sale under it are 
 regular and fair. 1 
 
 Neither is a creditor to whom the old company was under obli- 
 gation to deliver additional bonds, but to whom they never were 
 delivered, for this reason entitled to share in the benefits of such 
 purchase by an association of bondholders. Although as between 
 the old company and the creditor equity would consider that 
 done which ought to have been done, this rule does not affect the 
 rights of bondholders who made their agreement and purchase in 
 reference to what the company had actually done, and especially 
 where the creditor seeking to establish this equity against the 
 bondholders was himself as an actual holder of some of the bonds 
 a party to the contract. 2 Bondholders who have become parties 
 to a scheme for the purchase of the mortgaged road and the forma- 
 tion of a new company, and have in pursuance thereof surrendered 
 their bonds in exchange for stock and bonds of such new associa- 
 tion, are not in a position to take exception to the foreclosure 
 sale. 3 
 
 648. Purchasers of a railroad at a foreclosure sale, who 
 have conspired with the directors of the road in effecting a 
 fraudulent sale, will be held as trustees for the benefit of the 
 parties in interest to the full value of the property purchased. 
 The Milwaukee and Superior Railroad Company made its promis- 
 sory notes, indorsed by four of its directors, for the price of iron 
 furnished for the road, and secured them by a pledge of its bonds 
 for 842,000. Similar bonds to the amount of $280,000, which 
 had never been issued, were sealed up and deposited with a firm, 
 not to be issued until this debt for iron had been paid, and 
 twenty-seven miles of the road built. The company having built 
 about five miles of road became insolvent. Suit was thereupon 
 brought upon the notes against the directors who had indorsed 
 them. These directors then procured at their own expense a suit 
 to be commenced to foreclose the mortgage. They also arranged 
 with certain persons to purchase this claim, under an arrangement 
 whereby the purchaser should acquire the entire property of the 
 road. \n furtherance of this plan the *2S(),000 of bonds were 
 delivered, by resolution of the board of directors, of whom four 
 
 i Vosc v. Cowdrey, 49 N. Y. 336 ; and 2 Vosc v. Cowdrey, tupra. 
 see Ashhurst's Appeal 60 Pa. St. 290. 3 Crawsliay v. Sontter, 6 WaH 739. 
 
 681
 
 §§ 649, 650.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 constituted a quorum, to the holders of the notes, as additional 
 security. These creditors had not asked for further security, and 
 refused, at first, to receive the bonds, and in fact did not receive 
 them till they had sold their claim. These bonds, then in the 
 hands of the proposed purchasers of the road, were sold on short 
 notice at public auction, and bought by themselves at a small 
 price ; and after the decree of foreclosure they presented these 
 bonds before the master, who allowed them as a lien on the road. 
 They then purchased the entire railroad and its property for 
 $20,000, and afterwards stripped it of its iron and all other mova- 
 ble property, which they sold and realized large sums of money 
 for. Other creditors obtained judgment against the company, 
 and brought a bill, alleging the sale to be fraudulent, and seeking 
 to reach the franchises and property. The Supreme Court of the 
 United States held the purchasers to be trustees of these creditors 
 for the value of the property less the sum actually paid for a lien 
 upon it, and chargeable with interest on the difference from the 
 day of sale. The scheme to acquire the property of this corpo- 
 ration was characterized as fraudulent in its inception, and fraud- 
 ulent at every step in the progress of its execution. 1 
 
 649. A foreclosure sale will be set aside as fraudulent 
 where it appears that the notice of sale misstated the sum 
 due under the mortgage, as for instance by setting forth that the 
 amount of the bonds secured was $2,000,000, with $70,000 inter- 
 est, when in fact less than $200,000 was outstanding in the hands 
 of bond fide holders for value, and the remainder had either not 
 been issued at all or had been through fraud - transferred to the 
 directors at merely nominal prices. Such a notice is calculated 
 to destroy all competition among bidders, and indeed to exclude 
 from the purchase every one except those engaged in the perpe- 
 tration of the fraud ; and where the purchase at such sale is made 
 in behalf of the bondholders, who organize themselves into a com- 
 pany, they will be perpetually enjoined from setting up any right 
 or title under it ; but the mortgage will remain as security for the 
 bonds in the hands of bond fide holders for value. 2 
 
 650. A sale before default passes only the mortgage title. — 
 
 1 Drury v. Cross, 7 Wall. 299. See 2 Jones on Mortgages, §§ 1668-1681, 
 
 2 James v. Railroad Co. 6 Wall. 752. 1906-1922. 
 
 632
 
 SETTING ASIDE OF SALE. [§ 651. 
 
 Under a mortgage or deed of trust in the usual form giving a 
 power of sale upon a default in payment of the debtor's interest 
 secured, a sale before such default is not effectual in cutting off 
 the right of redemption. It can confer nothing beyond the legal 
 title in trust for the benefit of the grantor. A purchaser is put 
 upon inquiry to ascertain whether there has been a default, and 
 whether the default still exists at the time of the sale. 1 
 
 651. The trustee who obtained the decree of sale should be 
 made a party to a suit in equity brought by stockholders of a 
 railroad company to set aside as fraudulent proceedings regular 
 on their face prosecuted by the trustee to foreclose it, after such 
 proceedings have been completed. He must be given an oppor- 
 tunity to sustain his decree or to rebut the alleged fraud, and his 
 absence is a fatal defect. "The judgments of courts of record 
 would be scarcely worth obtaining if they could be thus thrown 
 lightly aside." 2 
 
 It may be necessary to make others besides the plaintiff in the 
 original suit parties to the bill to set aside the sale. Thus the 
 majority of the bondholders and stockholders of the Mississippi 
 and Missouri Railroad Company having agreed to sell the road 
 for a stipulated price, and to divide the proceeds among all the 
 stockholders and creditors according to a plan agreed upon, and 
 other stockholders and bondholders having refused to agree to the 
 arrangement, in order to get around their opposition, a sale was 
 effected through the action of the majority, by an amicable fore- 
 closure of one of the five mortgages upon the road, the trustees in 
 one of the mortgages being complainants, and those in the other 
 mortgages, with the corporation, being defendants. The dissatis- 
 fied stockholders and bondholders then filed a bill against the 
 purchaser and the corporation whose road had been sold, not 
 making, however, any of the trustees or any of the consenting 
 stockholders parties, charging collusion in the sale, and praying 
 that it might be set aside. This bill was held by the Supreme 
 Court of the United States fatally defective for want of proper 
 parties. 8 The proceeds of the sale had been distributed between 
 the different sets of bondholders according to the agreement pre- 
 
 i Chicago, Bock Island & Pacific R. B. » Bibon v. Railroad Companies, L6 
 Co. v. Kennedy, to 111. 350. Wall. 146 
 
 2 Hurwood v. Railroad Co. 17 Wall. 78. 
 
 633
 
 § 652.] FORECLOSURE SALES UNDER CORPORATE MORTGAGES. 
 
 viously made between them. Their rights would therefore be 
 affected by the suit to set aside the sale. The presence of the 
 trustees of all these mortgages was therefore indispensable. To 
 a bill to set aside a foreclosure sale under decree of court, the 
 plaintiff in the foreclosure suit is a necessary party. 1 
 
 652. The legislature has no power to confirm, a fraudulent 
 sale of the mortgaged property of a corporation. Restrictive 
 statutes passed to cure defects in conveyances are purely remedial 
 in their nature, their purpose being to correct mistakes, in order 
 that the intention of the parties may be carried out ; and they ac- 
 complish only what, upon principles of natural justice, a Court of 
 Equity might decree. But such legislation cannot cure fraud in 
 a sale. 2 
 
 i Ilanvoodr. Railroad Co. 17 Wall. 78. 2 White Mountains R. R. v. White 
 
 Mountains R. R. 50 N. H. 50, 57. 
 
 634
 
 CHAPTER XXIII. 
 
 EIGHTS OF PURCHASERS AT FORECLOSURE SALES UNDER RAIL- 
 ROAD MORTGAGES. 
 
 I. Purchasers are not liable for the debts I II. Organization of purchasers into a new 
 of the old company, 653-660. corporation, 661-684. 
 
 I. Purchasers are not liable for the Debts of the Old Company. 
 
 653. There is no privity between a new corporation 
 formed in accordance with statute authority by the purchasers 
 of a railroad upon foreclosure, and the old corporation whose 
 property was foreclosed ; and the new company is not liable for 
 the debts of the old. Neither does the fact that the stockholders 
 of the original company, by an arrangement subsequent to the 
 purchase, were allowed to become stockholders of the new com- 
 pany without payment of any money, impose upon the new com- 
 pany the debts of the old. 1 There might be a preliminary agree- 
 ment, or such an arrangement with the stockholders of the old 
 company, or such admissions of liability as would charge the new 
 company with a' trust of the assets for the creditors of the old 
 company. Such was the case of Railroad Company v. Howard? 
 where not only was there a preliminary agreement to sell the 
 property to a particular company, and to make the proceeding to 
 foreclose the mortgage ancillary to the agreement, but after the 
 property vested in the purchaser, the latter admitted the posses- 
 sion of sixteen per cent, of the fund in hand to belong to the 
 stockholders of the old company ; and the question being whether 
 the stockholders or the creditors of that company should be en- 
 titled to this fund, it was, of course, held that the equity of the 
 creditors was superior to that of the stockholders. 
 
 Corporate existence, and the right to exercise tin' power of 
 eminent domain, can only be derived from Legislative enactment ; 
 
 1 Stewart's Appeal, 72 Pa. St. 291. 2 7 Well. 392. 
 
 685
 
 § 654.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 and before a company can demand a judgment condemning lands 
 to its use, it must show that both have been conferred upon it by 
 a valid law, and that it has substantially complied with the con- 
 ditions which the law has annexed to the exercise of the power. 
 The purchasers of a railroad upon a foreclosure sale, in the ab- 
 sence of a statute conferring upon them corporate powers, are not 
 invested with any corporate capacity whatever. The foreclosure 
 sale does not itself pass the franchise to be a corporation. 1 
 
 654. Purchasers of a railroad under a mortgage or execu- 
 tion sale are not regarded as continuing the old corporation. 2 
 The effect of legislation empowering the mortgage trustees and 
 the bondholders, together with their associates, to purchase at a 
 foreclosure sale the franchise and property of the old company, 
 and investing them with all the corporate powers and privileges 
 of the old company, but not giving the stockholders under the 
 old any rights in the new company, is to create a new and dis- 
 tinct corporation, capable of owning and using that which is con- 
 veyed under the sale, and not to reorganize the old company. 
 Such new company takes what it purchases, subject to no liens 
 or claims save such as may be paramount to the mortgage under 
 which the sale is made. 3 
 
 The corporation, as a legal entity, does not vest in the pur- 
 chasers upon a sale under a mortgage, or by an assignee in bank- 
 ruptcy, nor do they become corporators or stockholders in the 
 corporation, 4 but by virtue of a statute the purchasers may im- 
 mediately become a body corporate, with all the rights and privi- 
 leges of the old corporation. The statutory directions in regard 
 to the organization of the new corporation may not be conditions 
 of its being ; and irregularities in the organization are not neces- 
 sarily fatal to the being of the corporation under such a statute. 
 
 1 Atkinson v. Marietta & Cincinnati II. Ry. Co. 17 Wis. 497 ; Smith v. Chicago 
 R. Co. 15 Ohio St. 21 ; and see Menden- & North Western Ry. Co. 18 Wis. 17; 
 hall v. West Chester & Phila. R. R. Co. Commonwealth v. Central Passenger Ry. 
 36 Pa. St. 145, note; State v. Rives, 5 Co. 52 Pa. St. 506. 
 
 Ired. (N. C.) L. 297; State v. Bank of Mel. 3 Morgan County v. Thomas, 76 111. 
 
 6 G. & J. (Md.) 205; Commonwealth 120. 
 
 v. Tenth Mass. Turnpike Co. 5 Cush. * Metz v. Buffalo, Cony & Pittsburg 
 
 (Mass.) 509; Bruffett v. Great Western R. R. Co. 58 N. Y. 61 ; and see Wells- 
 
 R. R. Co. 25 111. 353. borough & Tioga Plank Road Co. v. Grif- 
 
 2 Vilas v. Milwaukee & Prairie du Chien fin, 57 Pa. St. 417. 
 
 636
 
 NOT LIABLE FOR DEBTS OF OLD COMPANY. [§ 655. 
 
 The organization is bat the creation of an agency by which the 
 corporation can act, and presupposes the existence of the corpo- 
 ration. 1 
 
 A subscriber to the stock of a road reorganized after a foreclos- 
 ure sale of an uncompleted railroad cannot avail himself of con- 
 ditions in the charter of the original road for the building of the 
 road between certain terminal points, in order to obtain a release 
 from his subscription. The new company is under no obligation 
 to complete the whole road, but may take and use the road in the 
 condition in which it was sold. 2 
 
 655. A new corporation formed by purchasers is not li- 
 able for the debts of the old corporation, to whose property 
 and franchises it has succeeded by purchase and legislative au- 
 thority, unless such debts have been expressly assumed, or the 
 new corporation is the same corporate body as the old, having 
 only a new name. Thus, the St. Paul and Pacific Railroad Com- 
 pany was sued upon coupons made by the Minnesota and Pacific 
 Railroad Company, under the allegation that the latter com- 
 pany not having completed its road as required by statute, the 
 name of the corporation was changed to that of the former com- 
 pany, which was really the old corporation under a new name. 
 Judge Dillon, after an examination of the legislative and con- 
 stitutional history of those corporations, was of opinion that it 
 was not the legislative intention to continue the old corporation, 
 but to create a new corporation, and to give it the property and 
 franchises of the old corporation, so far as they were held by the 
 state. 3 
 
 A new company organized by the purchasers of a railroad upon 
 foreclosure sale is not liable for the debts of the old company, 
 though by statute the new company is clothed with the same 
 powers as the old company. 4 The fact that the sale took place in 
 pursuance of an agreement between the old company, which made 
 
 1 Commonwealth v. Central Passenger North Hudson County R. R. Co. v. Boor- 
 
 Py. 52 Pa. St. 50G. acm, 2s N. J. Eq. 150. 
 
 '-' Chartiers Ry. Co. v. Hodgens, 85 Pa. 4 Gil man v. Sheboygan & Fond da Lac 
 
 St. .Vil. P. P. Co. :(7 Wis. ;si7, 319 ; Vilas v. Mil- 
 
 ■ Hopkins v. St. Paul & Pacific It. P. wankee & Prairie do Chien Ry. Co. 17 
 
 Co. 2 Dill. 396 ; and see Secombe p. Mil- Wis. 197; Wright v. Milwaukee & St. 
 
 wankee & St. Paul Ry. Co. lb. 469; Paul Ry. Co. 25 Wis. 46. 
 
 637
 
 § 655.] EIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 the mortgage, its bondholders and the mortgage trustees, that a 
 foreclosure sale should take place, and that the stockholders of 
 the old company, and its unsecured creditors, should become 
 stockholders in the new company, does not show that the new 
 company formed by the purchasers is merely a reorganization of 
 the old company, and does not enable a creditor of the old com- 
 pany to assert his claim against the new except in pursuance of 
 some agreement. 1 
 
 There is no doubt that an agreement for reorganization might 
 be made which would modify the effect which a foreclosure sale 
 would otherwise have. But the natural effect of a foreclosure sale 
 is not neutralized by facts which show merely an agreement for 
 the formation of a new company, in which those interested in the 
 old might become interested in a certain way. 2 
 
 The effect of a sale of the property and franchises of a railroad 
 company is not different from that of a sale under an ordinary 
 mortgage. The purchaser does not thereby become liable to pay 
 any of the debts of the mortgagor, though, if a prior lien exists 
 upon the property, it may of course be enforced. It does not 
 matter that the debt is a judgment for damages for land taken 
 by the railroad company for its roadway, and that the purchasers 
 at the foreclosure sale bought with notice of such outstanding 
 judgment. The fact that the purchaser is operating the road 
 across the lands of the plaintiff does not alter the case, so far as 
 this question of liabilit}' upon the judgment is concerned. The 
 plaintiff may have a remedy in another form of action, to compel 
 the company to make compensation for his property, or stop 
 running its cars over it. A Court of Equity would doubtless 
 afford such remedy in a case where it appeared the new company 
 elected to adopt the original taking, and continued to occupy 
 and use the land for the purposes of its road ; for the right of the 
 original owner to compensation for his property is paramount, 
 and it is idle to say that an unsatisfied judgment against an 
 insolvent corporation afforded him any compensation. But the 
 ground of liability of the new company is not upon the judgment 
 against the old corporation, but is founded upon the principle that 
 
 1 Smith v. Chicago & North Western 2 Smith v. Chicago & North Western 
 Ry. Co. 18 Wis. 17 ; Sullivan v. Portland Ry. Co. supra. 
 & Kennehec R. R. Co. 94 U S. 806. 
 638
 
 NOT LIABLE FOR DEBTS OF OLD COMPANY. [§§ 656, 657. 
 
 it has seen fit to adopt and ratify the original taking, and there- 
 fore is bound to make compensation. 1 
 
 656. Damages resulting from the negligence of those oper- 
 ating a road intermediate the time the property of a railroad 
 company is sold, and the confirmation of the sale by the court, 
 are not chargeable to the purchasers, unless they have taken actual 
 possession of the property. Before the confirmation of the sale 
 and conveyance of the property, the purchasers have no right to 
 intermeddle with the road or any of the property purchased. If 
 they do not in fact assume the control of the employees and ser- 
 vants of the road, they are not responsible for their negligence. 2 
 But after the sale has been completed, the purchaser is responsi- 
 ble for injuries resulting from the operation of the road, and the 
 former company is no longer liable, for its power over the prop- 
 erty has ceased, and with its power has also ceased its liability 
 for the proper management of the road. If the purchaser does 
 not become a corporation, but operates the road as an individ- 
 ual in his own name or as the former company, he cannot be sued 
 in the name of that company, but the suit should be in his own 
 name. 3 
 
 657. Condition precedent imposed by statute that new- 
 corporation shall assume debt of old. — When the purchasers of 
 a railroad are incorporated under a special act which provides as a 
 condition precedent to its operation that the new company shall 
 pay all claims against the old corporation for work done and ma- 
 terials furnished, the new company, when it has accepted the act 
 and succeeded to the franchises of the old company, is liable for 
 all such claims. The acceptance of the act amounts to an assump- 
 tion of payment of all claims provided for in the condition. It is 
 not necessary that the act should provide a specific remedy in 
 favor of the creditors, whose claims the company is made Liable 
 for, because whenever a statute imposes a duty or liability, the 
 common law affords the remedy, either by an action of debt when 
 tin; demand is for a sum certain, as in the case of a judgment, or 
 
 1 Oilman >\ Sheboygan & Fond du Lac 2 Metz v. Bull'alo, Corry & Pittsburg 
 It. It. Co. :s7 Wis. ;U7. The case of R. B*. Co. 58 N. Y. 61. 
 
 Fleifur v. Sheboygan & Fond du Lac It. 3 WelUborOUgh & Tioga Flank Head 
 
 II. Co. 18 Wis. 1.05, is distinguished, but Co. v. Griffin, 47 Fa. St. 417. 
 
 so far as it conflicts is overruled. 
 
 639
 
 §§ 658, 659.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 otherwise by an action of assumpsit. 1 If the claim be in the form 
 of a judgment against the old company, it is not necessary in an 
 action upon it to aver that the judgment was well founded ; for 
 the presumption is that the judgment is correct. 
 
 A statute making a consolidated corporation liable for all debts 
 of each company entering into the arrangement is not retrospec- 
 tive in its operation, but is designed to apply only to companies 
 consolidated after its passage. 2 
 
 658. To prove a new promise by the purchasers of a rail- 
 road and its franchises to pay a debt owing the original com- 
 pany, there must be shown some action on the part of the direc- 
 tors from which a promise can be clearly inferred. An agreement 
 to issue stock to the creditors of the former corporation in case a 
 reorganization should be effected does not give rise to any claim 
 on their part to payment in money ; and a certificate by the sec- 
 retary of the company that a certain amount was due a creditor 
 of the old company would be insufficient to bind the new com- 
 pany, unless he had been empowered to adjust the claim. 3 
 
 659. Debts incurred by a corporation cannot be released 
 by legislative enactment, whether they be debts incurred by 
 contract, forfeiture, or penalty. A repeal of the charter of the 
 corporation and a transfer of its power to a different body can- 
 not have this effect. The creditors of the corporation have still 
 an undoubted right to enforce their claims. To release a cor- 
 poration from its liabilities by legislative enactment would be to 
 impair the obligation of contracts existing between it and its 
 creditors ; and this is a prohibited power. Moreover the charter 
 of a company is a contract with which the legislature cannot in- 
 terfere without consent. A sale of its property does not disorgan- 
 ize it. It still continues a corporation so far as its creditors are 
 concerned. Neither can the legislature transfer the indebtedness 
 of one corporation to another without the action of these bodies ; 
 and even then the corporation that incurred the indebtedness is 
 not released without the consent of its creditors. 4 
 
 i St. Louis, Alton & Terre Haute E. R. 3 Am. Cent. Ry. Co. v. Miles, 52 111. 
 
 Co. v. Miller, 43 111. 199. 174. 
 
 2 Hatcher v. Toledo, Wabash & "West- i Bruffett v. Great Western R. R. Co. 
 
 ern R. R. Co. 62 111. 477. 25 111. 353 ; Hatcher v. Toledo, Wabash 
 
 640 
 
 & Western R. R. Co. 62 111. 477.
 
 NOT LIABLE FOR DEBTS OF OLD COMPANY. [§ 660. 
 
 660. A purchaser at a foreclosure sale of the franchises, 
 property, and irnrnunities of a railroad conipany acquires a 
 right of exemption from taxation which appertained to the cor- 
 poration by its charter. The charter of a corporation, when ac- 
 cepted, becomes a contract which cannot afterwards be impaired 
 by legislative action unless the power to change the charter is 
 reserved. The immunity from taxation is an important element 
 of the value of the corporate property and of the security. A 
 sale of the franchises and property of the corporation without the 
 exemption would practically repeal the exemption, and restore to 
 the state the right of taxation, which it did not have so long as 
 the old company continued to be the owner of the property. If 
 this exemption from taxation be regarded as a right appurtenant 
 to the corporation to which it is granted, then the right will pass 
 to a purchaser under a description of its franchises and property. 1 
 Yet the Supreme Court of the United States has held that immu- 
 nity from taxation is not itself a franchise of a railroad corpo- 
 ration which passes as such, without other description, to a pur- 
 chaser of its property. 2 The exemption in this case was of the 
 capital stock, works, workshops, warehouses, vehicles of transpor- 
 tation, and other appurtenances of the company. It is certainly 
 clear, as stated in that case, that a purchaser of an engine or 
 car from the company would not hold such property exempt from 
 taxation. The case is to be distinguished from one where the 
 entire road, franchises, and property of a railroad are exempted 
 from taxation, and all its rights, property, and appurtenances are 
 sold as a whole. The purchaser in such case acquires the right 
 to use the property as the old company had the right to use it. 
 Especially must this be the case when the sale is made under a 
 statute expressly conferring on the purchaser the rights, privi- 
 leges, and immunities of the corporation sold. Thus, the Knox- 
 ville and Ohio Railroad Company, whose charter contained an 
 exemption from taxation, borrowed money from the State of Ten- 
 nessee under its Internal Improvement Act, and a default having 
 occurred, a statute was enacted vesting the Chancery Court at 
 Nashville with jurisdiction of a suit to foreclose and enforce lie 
 state's lien, and to declare the amount of the. company's indebted- 
 
 1 St. Paul & Pacific R. It. ('<>. ». kee & St. Paul Ry. Co. v. Pfaender, 23 
 Parcher, u Minn. 297 ; Chicago, Milwau- Minn. 217. 
 
 - Morgan v. Louisiana, 93 (J. S 217. 
 
 41 .ill
 
 § 661.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 ness, and define the rights, duties, and liabilities of a purchaser of 
 the state's interest in the road. This court decreed a sale of the 
 property and franchises of the company, and that the sale should 
 vest the purchaser with all the rights, privileges, and immunities 
 appertaining to the franchises of the charter. The sale was 
 made on the faith of the decree, and the Supreme Court of the 
 state 1 held that the validity of the adjudication could not be ques- 
 tioned ; that the exemption from taxation was a right for which 
 a consideration had been given, and the exemption attached to the 
 property; and moreover that even if a new grant of immunity 
 to the purchaser be regarded as necessary, the act of the legisla- 
 ture and the decree would probably be equivalent to such a grant. 2 
 Where, however, a railroad chartered by the State of Missouri 
 having a like exemption was foreclosed and sold to satisfy a statu- 
 tory mortgage to the state, and was purchased by the state, the ex- 
 emption was of course merged, because the exemption from the 
 right of the state to tax the property would mean nothing when 
 the state itself became the owner of the property. Therefore 
 when the state came to sell the road again, it could sell it with or 
 without the right of redemption without injustice to any one. 
 Before the resale, the new Constitution of the state had forbidden 
 the grant of any exemption from taxation ; and it was held that 
 the legislature could not authorize a sale with the exemption. 3 
 
 II. Organization of Purchasers into a New Corporation. 
 
 661. Whether individual purchasers can manage the prop- 
 erty as individuals. — When a corporation is expressly author- 
 ized to mortgage its franchise and corporate property upon a fore- 
 closure of such mortgage, the franchise and property of the first 
 corporation would pass into the possession and management of 
 the mortgagee or of the purchaser subject to the like legislative 
 control as the first; but whether an individual acquiring such 
 property through a foreclosure could hold and manage it as an in- 
 dividual, or whether it would be necessary to form a corporation 
 with the powers and duties of the original corporation, would de- 
 pend upon the terms of the statute authorizing such mortgage, or 
 
 1 Knoxville & Ohio R. R. Co. v. Hicks, Northampton Co. 42 Conn. 103 ; At- 
 Sept. Term, 1877, 15 Am. Railw. R. 197; lantic & Gulf R. R. Co. v. Allen, 15 Fla. 
 1 Tenn. Leg. Reporter, 338. 637. 
 
 2 See, also, Nichols v. New Haven & 8 Trask v. Maguire, 18 Wall. 391. 
 
 642
 
 ORGANIZATION INTO NEW CORPORATION. [§ 6G2. 
 
 upon the general laws and policy of the state in relation to this 
 matter. 1 Aside, however, from statutes authorizing or requiring 
 the purchasers to organize themselves into a corporation for the 
 purpose of enjoying the property, it would seem in general that 
 public policy would require an organization into a corporation. 
 The laws granting the privilege of operating railroads, and regu- 
 lating the management of them, are framed solely with reference 
 to corporate bodies. Moreover, it is the universal custom to man- 
 age all such enterprises through the instrumentality of a corporate 
 organization ; and such an organization is so advantageous to the 
 owners that there is no wish or attempt to manage them in any 
 other manner. Where there are no general statutes authorizing 
 purchasers to form a corporation for the purpose of using the 
 property, they always obtain a special act of incorporation. At 
 the present time, however, there are statutes in many of the states 
 framed for the special purpose of enabling purchasers of railroads 
 at foreclosure and execution sales to become a corporation im- 
 mediately upon obtaining possession of the property, without any 
 uncertain interval before such organization can be obtained under 
 special acts. A statement of the more important provisions of 
 these statutes is given in the following sections of this chapter. 
 
 662. Alabama.' 2 — Mortgagees or others who may be or be- 
 come purchasers of any railroad in this state under any judicial 
 or other sale may reorganize the property so purchased in the 
 manner provided for the incorporation of railroad companies ; and 
 within sixty days after its organization, such body corporate must 
 file a certificate thereof, by its proper officers, in the office of the 
 secretary of state. Purchasers are defined to be the persons who 
 part with the actual consideration, or for whose benefit the pur- 
 chase is made. In each and every case in which any railroad may 
 be sold, by the state or by any commission, officer, or agent of the 
 state, or under any proceedings, judicial or otherwise, authorized 
 bylaw, the purchasers at any such sale may constitute them- 
 selves into a body politic and corporate, and shall have and pos- 
 sess all the powers and franchises which belonged to the company 
 or corporation originally owning the railroad so purchased, in- 
 cluding the power to purchase and hold real estate, and the fran- 
 
 i See Richardson v. Sibley, ll Allen - Code of 1876, §§ L844, 18-15, 18JC; 
 (Mass.), «'<■"), G8. and sec § 2053.
 
 § 663.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 chise to be and exist as a corporation under such name as the 
 purchasers may select and adopt. The boards of directors of such 
 new corporations have power to issue bonds, and to lease, sell, or 
 mortgage all or any part of the franchises or property of such 
 corporations, including the franchise to be or exist as a corpora- 
 tion, to any natural person, or to any other railroad corporation 
 chartered by this state or any other state of this Union. 
 
 The word " purchasers," as herein above used in every instance 
 where the same occurs, is declared to mean and comprehend, not 
 merely the trustees making the purchase, but the persons for 
 whom, in whose behalf, for whose benefit or advantage, or in trust 
 for whom such railroad is so purchased, being the persons who 
 part with the actual consideration of such purchase ; and in every 
 case a majority in interest of such purchasers may organize such 
 corporation for the benefit of themselves and of all other persons 
 having like interest in such purchase desiring to unite therein. 
 
 663. Arkansas. 1 — The purchasers of any railroad created by 
 or existing under the laws of this state, whether such sale be 
 under the decree or order of any court of competent jurisdiction, 
 or under the provisions of any mortgage or deed of trust duly ex- 
 ecuted, shall, upon the confirmation of such sale or the execution 
 of the deed or deeds purporting to convey the property as sold, 
 become a new body politic or corporate in fact and in law, by the 
 name of the aforesaid corporation, or such other name as they 
 may thereafter adopt, and shall be deemed the stockholders of 
 the capital stock of such body politic and corporate, and shall be- 
 come entitled to and vested with all the corporate rights, liberties, 
 privileges, immunities, powers, and franchises of and concerning 
 the said railroad so sold, not in conflict with the provisions of the 
 Constitution of this state, as fully as the same were held, exer- 
 cised, and enjoyed by such corporation before such sale ; and it 
 shall and may be lawful for the said new body politic and corpo- 
 rate at any time within one year after such sale and conveyance, 
 to organize themselves as a corporation, under such name as they 
 may vote to adopt, by electing a board of directors of not less 
 than five nor more than thirteen persons, and by the election and 
 appointment of a president, and such other officers as may be 
 authorized or required by law ; and such board of directors are 
 
 l Acts of 1874, p. 57. 
 
 644
 
 ORGANIZATION INTO NEW CORPORATION. [§§ 664, 665. 
 
 authorized to fix the capital stock of such new corporation at an 
 amount not exceeding the estimated cost of such railroad and 
 equipments when completed, together with such lands as said 
 corporation may acquire, and to issue certificates of the capital 
 stock of such corporation and to distribute the same ; also, when- 
 ever deemed expedient, to issue bonds, and to secure the payment 
 thereof by mortgage or deed of trust of the property, lands, in- 
 come, and franchises of said company. It shall be the duty of 
 such new corporation, within six months after its said organiza- 
 tion, to make a certificate thereof under the common seal, attested 
 by the signature of its president, specifying the date of such or- 
 ganization, and the name of its president and directors, and cause 
 such certificate to be filed in the office of the secretary of state 
 at Little Rock, and there to remain of record. 
 
 664. Florida. 1 — In case of a sale of any railroad or canal, or 
 any part thereof, constructed or in course of construction by any 
 railroad or canal company, by virtue of any trust deed, or any 
 foreclosure of any mortgage thereon, the parties acquiring title, 
 their associates, successors, or assigns shall have or acquire thereby, 
 and shall exercise and enjoy thereafter, the same rights, privileges, 
 grants, franchises, immunities, and advantages in or by said trust 
 deed enumerated and conveyed which belonged to and were en- 
 joyed by the company making such deed or mortgage or contract- 
 ing such debt, so far as the same relate or appertain to that 
 portion of said road or canal, or the line thereof mentioned or de- 
 scribed and conveyed by said mortgage or trust deed and no far- 
 ther, as fully and absolutely in all respects as the corporators, 
 office holders, shareholders, and agents of such company might or 
 could have done had not such sale or purchase taken place. Such 
 purchasers, their associates, successors, or assigns, may proceed to 
 organize anew by filing articles of association and electing direc- 
 tors, and may distribute and dispose of stock, and may conduct 
 their business generally; and such purchasers and their associates 
 shall thereupon be a corporation, with all the powers, privileges, 
 and franchises conferred by, and be, subject to, the provisions of 
 this act. 
 
 665. Georgia. 2 — In case of the sale of any railroad situated 
 > Laws of 1874, pp. 46, 47. - Laws 1876, pp. 11*, 119. 
 
 645
 
 § 6GQ.~\ EIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 wholly or partly within this state, by virtue of an}' mortgage or 
 deed of trust, whether under foreclosure or other judicial proceed- 
 ing, or pursuant to any power contained in such mortgage or deed 
 of trust, the purchasers thereof or their assigns may, together 
 with their associates (if any), form a corporation for the purpose 
 of owning, possessing, maintaining, and operating such railroad, 
 or such portion thereof as may be situated within this state, by 
 filing in the office of the secretary of state a certificate, specify- 
 ing the name and style of such corporation, the number of direc- 
 tors of the same, the names of its first directors, and the period of 
 their services not exceeding one year, the amount of the capital 
 stock of such corporation, and the number of shares into which it 
 is to be divided ; and the persons signing such certificate and 
 their successors shall be a body corporate and politic by the name 
 specified in such certificate, with power to sue and be sued, con- 
 tract and be contracted with, and to own, possess, maintain, and 
 operate the railroad referred to in such certificate, and to transact 
 all business connected with the same. 
 
 Such corporation shall possess all the powers, rights, immuni- 
 ties, privileges, and franchises in respect to such railroad, or the 
 part thereof included in such certificate, and in respect to the real 
 and personal property appertaining to the same, which were pos- 
 sessed or enjoyed by the corporation which owned or held such 
 railroad previous to such sale, under or by virtue of its charter 
 and any amendments thereto. 
 
 666. Indiana. 1 — In case of the sale of any railroad and its 
 property situated wholly in this state, or partly within this state 
 and partly in an adjoining state, by virtue of any mortgage or 
 mortgages, deed or deeds of trust, either by foreclosure or other 
 judicial proceedings, or pursuant to any power contained in such 
 mortgage or mortgages, deed or deeds of trust, or by the joint ex- 
 ercises of said powers and authorities, the purchaser or purchasers 
 thereof, their survivor or survivors, or he or his, or they or their 
 associates or assigns, may form a corporation by filing in the office 
 of the secretary of state a certificate specifying the name and style 
 of the corporation, the number of directors, the names of the first 
 
 1 Davis's Stat. 1870, p. 395, ch. 264, §§ Act March 5, 1861, 2 G. & H. Stat. p. 291 ; 
 2, 3, being Act March 3, 1865; same in 2 R. S. 1876, p. 6S0. 
 1 R. S. 1876, ch. 218, §§ 2, 3, p. 728. See 
 
 646
 
 ORGANIZATION INTO NEW CORPORATION. [§ 667. 
 
 directors, and the period of their service, not exceeding one year, 
 the amount of original capital, and the number of shares into 
 which said capital is to be divided ; and the persons signing said 
 certificate and their successors shall be a body corporate and pol- 
 itic, by the name in said certificate specified, with power to sue 
 and be sued, contract and be contracted with, and to maintain and 
 operate the railroad in said certificate named, and transact all 
 business connected with the same; and a copy of such certificate, 
 attested by the signature of the secretary of state or his deputy, 
 shall, in all courts and places, be evidence of the due organization 
 and existence of the said corporation, and of the matters in said 
 certificate stated. Such corporation shall possess all the powers, 
 rights, privileges, immunities*, and franchises, in respect to said 
 railroad, or the part thereof purchased as aforesaid, and of all the 
 real and personal property appertaining to the same, which were 
 possessed and enjoyed by the corporation that owned or held the 
 said railroad previous to such sale by virtue of its charter and 
 amendments thereto, and other laws of this state, or of any state 
 in which any part of said railroad is situate, not inconsistent with 
 the laws of this state, and shall have power, at any time after the 
 formation of the corporation as aforesaid, to assume any debts and 
 liabilities of the former corporation, and to make such adjustment 
 and settlements with any stockholder or stockholders, creditor or 
 creditors of such former corporation, as may be deemed expedient, 
 and, for such purpose, to use such portions of the bonds and stock 
 of such corporation as may be deemed advisable, and in such 
 manner as such corporation may deem proper. 
 
 The above provisions are declared to apply to and embrace any 
 and all sales or purchases of railroads, their franchises, rights, and 
 privileges, under judicial decrees or judgments of any of the courts" 
 of this state, or of the United States, at any time, whether said 
 sale under such decrees or judgments may have occurred before or 
 after! lie passage of said act. 1 
 
 667. Kansas. 2 — In case of the sale of any railroad or any 
 part thereof, constructed or in process of construction, made in 
 pursuance of the judgment of any court of competent jurisdiction, 
 foreclosing any mortgage or deed of trust, any railroad corpora- 
 
 i Act Due. 20, 1805; l R. 8. 1876, p. '■' Law of 1876, ch. 110; Dassler's Stat. 
 782. 1870, § 4626. 
 
 (117
 
 § 668.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 tion, the person or persons acquiring title under such sale, and 
 their associates, successors, and assigns, have and acquire thereby, 
 and may thereafter exercise and enjoy, all the rights, privileges, 
 grants, franchises, immunities, and advantages in and by such 
 mortgage or deed of trust conveyed, which belonged to and were 
 enjoyed by the company making such mortgage or deed of trust, 
 so far as the same relate and appertain to that portion of the rail- 
 road or line thereof mentioned and described in and conveyed by 
 said mortgage or deed of trust, and no further, as fully and abso- 
 lutely in all respects as the corporators, shareholders, officers, and 
 agents of such company might have exercised and enjoyed had no 
 such sale or purchase been made ; and such purchaser or purchas- 
 ers, their associates, successors, or assigns, may proceed to organ- 
 ize anew and elect directors, distribute and dispose of stock, take 
 the same or another name, and may conduct their business gener- 
 ally under and in the manner provided in the charter under such 
 original company, or in the laws relating thereto, with such vari- 
 ations in manner and form of organization as their altered circum- 
 stances may seem to require. But no greater or enlarged powers 
 shall be exercised by the new organization than are conferred by 
 the charter of such original company. Such new company is re- 
 quired to file in the office of the secretary of state a certificate, 
 setting forth the facts required by the general statutes for the or- 
 ganization of corporations. The new company is subject to all 
 the same obligations to the state or the public as the original cor- 
 poration w r as. Such reorganization in nowise affects any liability 
 against the old corporation existing at the time of the organiza- 
 tion of the new company. 
 
 668. Kentucky. 1 — Whenever a railroad is sold under and in 
 pursuance of a decree or judgment of a court of equity, or other 
 court having jurisdiction, the purchasers thereof, or their assigns, 
 together with such persons as may be associated with them, shall 
 be authorized to become a body politic and corporate for the pur- 
 pose of operating and completing said railroad, and shall be en- 
 titled to exercise all the franchises, powers, rights, and privileges, 
 and shall be subject to all limitations, restrictions, and liabilities 
 contained in the charter granted by the general assembly of the 
 1 Laws 1876, ch. 319. 
 
 648
 
 ORGANIZATION INTO NEW CORPORATION. [§ 669. 
 
 commonwealth under which said railroad was constructed and op- 
 erated as they existed at the time of such sale. 
 
 The mode by which said purchasers, or their assigns and asso- 
 ciates, as above mentioned, shall become incorporated, shall be as 
 prescribed in chapter fifty-six of the General Statutes. The ar- 
 ticles of incorporation of any such company may provide for the 
 issue, at one or several times, of any amount of negotiable bonds, 
 with or without coupons, bearing a rate of interest, payable semi- 
 annually, not exceeding eight per cent, per annum, and of paid- 
 up capital stock ; said bonds and stock not to exceed, in the 
 aggregate, the original cost of the construction of the railroad and 
 equipment purchased, and such sum as may be necessary in order 
 to complete the same ; and may provide for priorities in the pay- 
 ment of the interest or principal of said bonds, or of dividends 
 on different classes of its stock, and may regulate what right the 
 different classes of stockholders and bondholders may have to 
 vote in corporate meetings and elections, and may exempt the 
 latter from responsibility in consequence of the exercise of such 
 right. The corporation thus created may secure the payment of 
 any bonds issued by it, under the authority conferred by this act, 
 by mortgage or deeds of trust, upon all or any part of its prop- 
 erty, rights, and franchises acquired or to be acquired. 
 
 669. Maine. 1 — The foreclosure of a railroad mortai^e enures 
 to the benefit of all the holders of bonds, coupons, and other 
 claims secured thereby; and they, their successors and assigns, are 
 constituted a corporation, as of the date of the foreclosure, for 
 all the purposes, with all the rights and powers, duties, and obli- 
 gations of the original corporation by its charter; and the trus- 
 tees shall convey to such new corporation by deeds all the right, 
 title, and interest which they had by the mortgage and the fore- 
 closure thereof, and thereupon they shall be discharged. It' they 
 neglect or refuse so to convey, the court, on application in equity, 
 may compel them so to do. 
 
 The new corporation may call its fust meeting in the manner 
 provided for calling the first meeting of the original corporation, 
 and use therefor the old name; but at that meeting may adopt a 
 new one, by which it shall always after be known; and it may 
 take and hold the possession, and have the use of the mortgaged 
 
 1 Rev. Stat. 1871. <h 51, §§ 55, 
 
 649
 
 § 671.] EIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 property though a bill in equity to redeem is pending, and may 
 become a party defendant to such bill. The new corporation may 
 vote to redeem a prior mortgage, and may make assessments on 
 the stockholders therefor. 
 
 When the franchise of a railroad and its road, 1 wholly or partly 
 constructed, are sold by a decree of the court, by a power of 
 sale in a mortgage thereof, or on execution, the purchasers have 
 all the rights, powers, and obligations of the corporation under its 
 charter, and may form a new corporation in the manner herein- 
 before provided. If the original corporation or those claiming 
 under it have a right to redeem, they may do so in the manner 
 provided for the redemption of mortgaged real estate ; but shall 
 pay, in addition to the amount of the sale and interest, the rea- 
 sonable expenditures made by the new corporation in completing, 
 repairing, and equipping said road, and in the purchase of neces- 
 sary property therefor, after deducting the net earnings thereof. 
 
 The trustees of bondholders, or other parties under contract 
 with them, operating a railroad, and all the corporations formed 
 in the modes hereinbefore provided, shall have the same rights, 
 powers, and obligations as the old corporation had by its charter 
 and the general laws ; and shall also be subject to be amended, 
 altered, or repealed by the legislature and subject to all the gen- 
 eral laws concerning railroads, notwithstanding anything to the 
 contrary in the original charter. 
 
 The original corporation shall exist, after the foreclosure of the 
 mortgage, for the sole purpose of closing up its unsettled busi- 
 ness, and the right of action against it or its stockholders shall 
 not thereby be impaired ; but in suits founded on any of the 
 bonds or coupons secured by the mortgage, the proportional act- 
 ual value of the property taken under the mortgage shall be de- 
 ducted. 
 
 671. Michigan. 2 — In case of the foreclosure and sale of any 
 railroad, or part of any railroad, under any trust deed or mort- 
 gage given to secure the payment of bonds sold to aid in its con- 
 struction and equipment, or for other cause authorized by law, it 
 shall be competent and lawful for the parties who may become 
 the purchasers, and others whom they may associate with them- 
 
 1 Rev. Stat. 1871, 'ch. 51, §§ 67, 68, 69. 2 Laws 1873, p. 498. 
 See Laws 1878, ch. 53. 
 
 650
 
 ORGANIZATION INTO NEW CORPORATION. [§ G72. 
 
 selves, to organize a corporation for the management of the same, 
 and issue stock in the same in shares of one hundred dollars each, 
 to represent the property in said railroad ; and such corporation, 
 when organized, shall have the same rights, powers, and privi- 
 leges, as are or may be secured to the original company, whose 
 property may have been sold under and by virtue of such mort- 
 gage or trust deed. Such organization may be formed by virtue 
 of a declaration or certificate of the purchasers at the sale under 
 said mortgage or trust deed, which shall set forth the description 
 of the property sold, and the date of the deed under which it was 
 sold, or of the decree of the proper court, if it shall have been 
 sold by virtue of a decree of any court ; and with such descrip- 
 tion of the parties to the deed or suit as may identify the one or 
 the other, or both ; the time of the sale and the name of the offi- 
 cer who sold the same ; and also the purchasers, and the amount 
 paid, and the stockholders to whom stock is to be issued,- and the 
 amount of the capital stock and the name of the new corporation, 
 and such other statements as may be found requisite to make 
 definite the corporation whose property may have been sold, and 
 the property sold, as well as the extents and rights and property 
 of the new company ; which said certificate or declaration shall be 
 signed by all of the said purchasers, and shall be addressed to the 
 secretary of state ; and being filed and recorded in his oflice, the 
 said corporation shall become complete, with all the powers and 
 rights secured to railroad companies under this act, to all the pro- 
 visions of which, and amendments thereto, it shall be subject; and 
 a certified copy of said certificate or declaration shall be primd 
 facie evidence of the due organization of said company. 
 
 672. Minnesota. 1 — Upon the sale of the franchises and prop- 
 erty of any railroad corporation organized in this state under any 
 mortgage or deed of trust, the purchaser at such sale shall become 
 invested with all the rights, benefits, privileges, property, immu- 
 nities, franchises, and interests, so foreclosed and embraced, <>r in- 
 cluded in the said mortgage or trust deed, and in Baid sale, which 
 were held at the time of the execution of such mortgage or deed 
 of trust, or afterwards acquired by the company making such 
 mortgage or deed of trust, and whether the said mortgage or deed 
 of trust and sale shall have Included the corporate franchises of 
 
 1 Laws 1876, ch. .'30. 
 
 651
 
 § 672.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 such company or not, the said persons, for whose benefit such 
 purchase shall have been made as aforesaid, may organize as here- 
 inafter provided, and from the time of such organization shall be 
 to all intents and purposes a corporation, with all and singular 
 the corporate powers, rights, franchises, privileges, and immuni- 
 ties which w r ere held at the time of the execution of such mort- 
 gage or deed of trust, or afterwards acquired by the company 
 making such mortgage or deed of trust, so far as applicable to 
 the road and property so purchased ; and in the management 
 and operation of the road or lines, as well as in the use and en- 
 joyment of the property, franchises, and interests thus acquired, 
 and in the conduct of all business growing out of such purchase, 
 shall be entitled to all and singular the same rights, powers, priv- 
 ileges, immunities, and advantages theretofore granted to or be- 
 stowed upon the corporation making such mortgage or deed of 
 trust, which were applicable to the road, property, and franchises 
 so purchased while held and controlled by the last mentioned cor- 
 poration, and may have, use, and exercise the same in their corpo- 
 rate capacity, under and through the organization herein provided 
 for, in like manner and in all respects as the corporation making 
 such mortgage or deed of trust might or could have done, had no 
 foreclosure or sale taken place. The person or persons so pur- 
 chasing shall, by themselves or their authorized attorneys or 
 proxies, meet within thirty days after the delivery of the con- 
 veyance under such sale, or certificate of sale delivered, at some 
 place within this state, of which, and the time of such meeting, 
 notice shall be published, by the persons named as purchasers in 
 such deed or certificate of sale, by publication in some of the daily 
 newspapers of St. Paul, for a* least ten days prior to the time of 
 such meeting, at which time and place the said persons so pur- 
 chasing shall adopt a corporate name for the proposed new organ- 
 ization, and may proceed without further notice and elect a board 
 of not exceeding nine directors, and such board may thereupon 
 elect a president, secretary, treasurer, and such other officers as 
 the corporation making such mortgage or trust deed may there- 
 tofore or prior to such foreclosure have been authorized to elect, 
 and adopt a corporate seal. From the time of such election of 
 officers and the adoption of a corporate seal, the organization 
 shall be deemed complete, and the company thus organized shall 
 become and be a body corporate under the name so adopted as 
 652
 
 ORGANIZATION INTO NEW CORPORATION. [§ 673. 
 
 aforesaid by the purchasers at the mortgage sale, and clothed as 
 such, with the rights, powers, privileges, franchises, immunities, 
 and advantages herein above in such case provided. It shall be 
 the duty of such new organization, within thirty daj^s after such 
 organization shall be perfected, to make and certify under its cor- 
 porate seal, attested by its president and secretary, a statement 
 showing the date of such organization, the corporate name by it 
 adopted, the amount of its capital stock, issued and unissued, com- 
 mon and preferred, the name of its president, secretary, treasurer, 
 and other general officers, the number and names of its directors 
 so chosen at said meeting, and cause the same, together with the 
 conveyance or certificate of sale made to the purchasers upon the 
 foreclosure, to be recorded in the office of the secretary of state of 
 this state ; and such record, or a certified copy of such record of 
 said proceedings, shall be legal evidence of the existence of such 
 corporation or organization ; provided, however, that such court 
 shall provide in such foreclosure decree, or otherwise, that such 
 purchaser or purchasers shall fully pay all sums due and owing 
 by such defaulting and foreclosed railroad company to any ser- 
 vant or employee of such company ; and shall provide that such 
 purchaser and such new coi-poration so by them to be formed 
 under the provisions of this act shall complete all legal and sub- 
 sisting contracts for sale of the lands of such company, and upon 
 due performance on the part of any purchaser of such lands shall 
 convey the real estate so purchased in pursuance of the contract 
 or contracts so subsisting. 
 
 673. Mississippi. 1 — When any railroad company chartered 
 in this state, and whose road lies in whole or in part in this state, 
 which has mortgaged its franchises, road-bed, superstructure, and 
 other property, shall afterward be sold for foreclosure of such 
 mortgage by order or decree of any court of this state or of the 
 United States, having jurisdiction thereof, the purchasers at said 
 sale shall have the same right to operate Baid railroad in this 
 state as the incorporated company which had executed said mort- 
 gage, and said purchasers thereof shall be entitled to and be in- 
 vested with all the rights, privileges, and immunities appertaining 
 
 to the property or franchises, <>r both, so sold in as full and i i- 
 
 plete a manner as the com]. any was or is by virtue of it- charter 
 1 Laws 1877, p. 7s, ch. 16. 
 
 653
 
 § 674.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 of incorporation and amendments thereto, or by virtue of any- 
 other law or laws of this state. 
 
 The purchasers of said railroad, its property, franchises, &c, 
 aforesaid, may fix the amount of capital stock representing the 
 property bought, divide the same into shares of one hundred dol- 
 lars each, and the holders of such stock may meet together, adopt 
 a name for the company, and organize by the election of a board 
 of directors of such number as they may see fit, not less than 
 three, one of whom shall reside in this state (each share of said 
 stock being entitled to one vote) ; and said board of directors may 
 elect a president and such other officers as they may deem expe- 
 dient for the proper management of said property, fix their du- 
 ties, terms of office and compensation, and adopt by-laws not in- 
 consistent with the laws of this state. 
 
 A statement signed by the board of directors, showing the 
 name of the corporation, amount of capital stock, the shares into 
 which the same is divided, number and residence of the board of 
 directors, where the road is situated, the name by which it was 
 chartered and heretofore known, shall be filed with the secretary 
 of state, who certifies the fact of such filing, and the company 
 is thereupon a body corporate, with all the privileges and fran- 
 chises of the former company. It is made a condition precedent 
 to the right of the purchasers to avail themselves of the privi- 
 leges of this act, that they shall secure any indebtedness of the 
 former corporation to the state. 
 
 The provisions of the foregoing statute are extended, 1 and 
 made applicable to purchasers of the franchise, road-bed, and 
 other property of any railroad company chartered in this state, 
 and whose road lies in whole or in part in the state, at any execu- 
 tion sale thereof under judgments recovered in this state. 
 
 674. New Jersey. 2 — Whenever any railroad in this state, of 
 any corporation created by or under any law or laws of this 
 state, shall be sold or conveyed under or by virtue of any decree 
 or decrees of the Court of Chancery of this state, or of the 
 Circuit Court of the United States in and for the District of 
 
 1 Laws 1878, ch. 112. closure sale of railroads belonging to cora- 
 
 2 Laws 1875, eh. 429, § 1 ; 2 Rev. 1877, panies existing under the laws of another 
 p. 944, § 165. For provisions for the for- state, but having part of their route in 
 mation of new corporations upon fore- this state, see Laws 1876, ch. 88, §§ 4-10. 
 
 654
 
 ORGANIZATION INTO NEW CORPORATION. [§ 67-4. 
 
 New Jersey, sitting in equity, and execution or executions issued 
 thereon, to satisfy any mortgage debt or debts, or other incum- 
 brances thereon, and the purchaser or purchasers thereof shall, in 
 the manner provided by the statute in such cases made and pro- 
 vided, have formed a new body politic and corporate, and shall 
 have made and filed with the secretary of state at Trenton a cer- 
 tificate of the organization of such corporation ; and whenever the 
 new corporation so formed shall have acquired title to the railroad 
 property and franchises aforesaid, pursuant to any plan or agree- 
 ment for the readjustment of the respective interests therein of the 
 mortgage creditors, other creditors, and stockholders of the com- 
 panv theretofore owning such property and franchises, and for the 
 representation of such interests of the creditors and stockholders 
 in the bonds, debts, or stock of the new corporation so formed, 
 then and in such case the said new corporation shall be author- 
 ized and have the power to issue its bonds and stock in con- 
 formity with the provisions of such plan or agreement ; and the 
 said new corporation may, at any time within six months after 
 its organization, compromise, settle, or assume the payment of 
 any debt, claim, or liability of the former company upon such 
 terms as may be approved by a majority of the agents or trus- 
 tees intrusted with the carrying out of the plan or agreement of 
 reorganization as aforesaid ; and for the purposes of such plans 
 and of such settlements, the said new corporations may and shall 
 be authorized to establish preferences in respect to the payment 
 of dividends in favor of any portion of its said capital stock, ami 
 to divide such stock into classes ; provided, nevertheless, that 
 nothing herein contained shall be held to authorize the issue of 
 capital stock by the said new company to an aggregate amount 
 exceeding the maximum amount of such stock mentioned in the, 
 certificate of incorporation filed by such new corporation. 
 
 Whenever any railroad, canal, turnpike, bridge, or plank road 
 of any corporation created by or under any law of this state shall 
 be sold and conveyed, under and by virtue of any process or de- 
 cree of any court of this state or of the Qnited Slates, or of any 
 power or authority duly granted or conferred in and by any mort- 
 gage or deed in the nature thereof, the person or persons for or 
 on whose account such railroad, canal, turnpike, or plank road 
 may be purchased shall be constituted a body politic and corpo-
 
 § 674.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 rate, 1 and shall be vested with all the right, title, interest, prop- 
 erty, possession, claim and demand, in law and equity, of, in, and 
 to such railroad, canal, turnpike, bridge, or plank road, with its 
 appurtenances, with all the rights, powers, immunities, privileges, 
 and franchises of the said corporation which may have been 
 granted to it or conferred thereupon by statute or statutes in 
 force at the time of such sale and conveyance, and subject to all 
 the restrictions imposed upon such corporation by any such act or 
 acts, except so far as the same are modified by this act; but the 
 provisions of this act shall, notwithstanding anything therein con- 
 tained to the contrary, extend and apply to any case in which a 
 railroad, canal, turnpike, bridge, or plank road, or any corporation 
 created by or under any law of this state, has been sold and con- 
 veyed before the passage of this act in the manner hereinbefore 
 described. 
 
 The person or persons for or on whose account any such rail- 
 road, canal, turnpike, bridge, or plank road may have been pur- 
 chased, shall meet within thirty days after the conveyance made 
 by virtue of said process or decree shall have been delivered, 2 at 
 the county town of any one of the counties through which the said 
 railroad, canal, turnpike, bridge, or plank road may run, public 
 notice of the time and place of such meeting having been given 
 at least once a week for two weeks, in at least one newspaper pub- 
 lished in each of the counties in or through which the said rail- 
 road, canal, turnpike, bridge, or plank road may run, and organize 
 said new corporation by electing a president and board of six 
 directors, to continue in office until the first Monday of May suc- 
 ceeding such meeting, when, and annually thereafter, on the said 
 day, a like election for a president and six directors shall be held, 
 to serve for one year. At such meeting so held, the said person 
 or persons shall adopt a corporate name and corporate seal, de- 
 termine the amount of the capital stock thereof, and shall have 
 power and authority to make and issue certificates therefor to the 
 purchaser or purchasers aforesaid, to the amount of their respec- 
 tive interests therein, in shares of fifty dollars each. The said 
 corporation may then, or at any time thereafter, create and issue 
 
 1 Laws 1877, ch. 92; 2 Rev. 1877, p. new corporations, see Laws 1876, ch. 157, 
 
 945, § 167. For statute authorizing pur- § 1 ; 2 Rev. 1877, p. 923, § 82. 
 
 chasers of turnpike road or steamboat com- 2 Laws 1875, ch. 235; 2 Rev. 1877, p. 
 
 pany's property on execution to organize 945, §§ 168-171. 
 
 656
 
 ORGANIZATION INTO NEW CORPORATION. [§ 675. 
 
 preferred stock, to such an amount and at such times as they may 
 deem necessary, and from time to time issue bonds at a rate of 
 interest not exceeding seven per centum, to any amount not ex- 
 ceeding their capital stock. It shall be the duty of such new 
 corporation, within one month after its organization, to make a 
 certificate thereof under its common seal, attested by the signa- 
 ture of its president, specifying the date of such organization, the 
 name so adopted, the amount of capital stock, and the name of its 
 president and directors, and transmit the said certificate to the 
 secretary of state at Trenton, to be filed in his office, and there 
 remain of record. 
 
 675. New York. 1 — In case the railroad and property con- 
 nected therewith, and the rights, privileges, and franchises of any 
 corporation, except a street railroad company, created under the 
 general railroad law of this state, or existing under any special or 
 general act or acts of the legislature thereof, shall be sold under 
 or pursuant to the judgment or decree of any court of competent 
 jurisdiction made or given to execute the provisions, or enforce 
 the lien of any deed or deeds of trust, or mortgage theretofore exe- 
 cuted by any such company, the purchasers of such railroad prop- 
 erty and franchises, and such persons as they may associate with 
 themselves, their grantees, or assignees, or a majority of them, 
 may become a body politic and corporate, and as such may take, 
 hold, and possess the title and property included in said sale, and 
 shall have all the franchises, rights, powers, privileges, and im- 
 munities which were possessed before such sale by the corporation 
 whose property shall have been sold as aforesaid, by and upon 
 filing in the office of the secretary of state a certificate, duly 
 executed under their hands and seals, and acknowledged by an 
 officer authorized to take the acknowledgment of deeds, in which 
 certificate the said persons shall describe by name, and reference 
 to the act or acts of the legislature of this state under which it 
 was organized, the corporation whose property and franchises they 
 shall have acquired as aforesaid, and also the court by authority 
 of which such sale shall have been made, giving the dale of the 
 judgment or decree thereof authorizing <>r directing the same, to- 
 gether with a brief description of the property sold, and shall also 
 
 i Lawa 1870, ch. 446. Fur prior act, sec Laws 1874, ch. 480 J '-? If. B. Is7.'., p. 553, 
 §§111,112. 
 
 42 057
 
 § 675.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 set forth the following particulars : 1. The name of the new cor- 
 poration intended to be formed by the filing of such certificate. 
 
 2. The maximum amount of its capital stock, and the number of 
 shares into which the same is to be divided, specifying how much 
 of the same shall be common, and how much preferred stock, 
 and the classes thereof, and the rights pertaining to each class. 
 
 3. The number of directors by whom the affairs of the said new 
 corporation are to be managed, and the names and residences of 
 the persons selected to act as directors for the first year after its 
 organization. 4. Any plan or agreement which may have been 
 entered into pursuant to the second section of this act. 
 
 And upon the due execution of such certificate, and the filing 
 of the same in the office of the secretary of state, the persons ex- 
 ecuting such certificate, and who shall have acquired the title to 
 the property and franchises sold as aforesaid, their associates, suc- 
 cessors, and assigns, shall become and be a body politic and cor- 
 porate by the name specified in such certificate, and shall become 
 and be vested with, and entitled to exercise and enjoy, all the 
 rights, privileges, and franchises, which at the time of such sale 
 belonged to or were vested in the corporation which last owned 
 the property so sold, or its receiver, and shall be subject to all the 
 provisions, duties, and liabilities imposed by the act to authorize 
 the formation of railroad corporations ; and a copy of the said 
 certificate, certified by the secretary of state or his deputy, shall 
 be presumptive evidence of the due formation of the new corpo- 
 ration therein mentioned, provided always, that a majority of said 
 persons shall be citizens and residents of this state. In the cer- 
 tificate so to be filed shall be inserted the whole of the plan or 
 agreement in the next section referred to. And such plan, agree- 
 ment, and articles may regulate voting by and on the part of the 
 holders of the preferred and common stock of said company, and 
 may also allow, provide for, and regulate voting at and in said 
 meetings, and also for directors, by and on the part of the holders 
 and owners of any or all of the bonds of the company foreclosed, 
 or of the bonds issued or to be issued, and payable by the new 
 company, pursuant to any such plan, agreement, or articles ; such 
 right of voting by bondholders to be in Such manner, for such 
 period or periods, and upon such conditions as said articles may 
 authorize and declare; but such articles shall contain suitable pro- 
 visions for voting by proxy. Said articles shall not be inconsist- 
 658
 
 ORGANIZATION INTO NEW CORPORATION. [§ 676. 
 
 ent with the Constitution or laws of this state, and shall not be 
 binding upon the company until changed as therein provided for, 
 or until otherwise provided by law. 
 
 In case the persons organizing, or whose duty it may be to or- 
 ganize the new corporation, to be formed as provided in the first 
 section of this act, shall have acquired title to the railroad prop- 
 erty and franchises which may have been sold as in said section 
 mentioned, pursuant to any plan or agreement for or in anticipa- 
 tion of the readjustment of the respective interests therein of the 
 mortgage creditors and stockholders of the company owning, or 
 which last owned, such property and franchises at the time of any 
 such sale, and for the representation of such interests of creditors 
 ami stockholders in the bonds or stock of the new corporation, to 
 be formed as provided for in said section, the said new corporation 
 shall be authorized, and shall have the power to issue its bonds 
 and stock in conformity with the provisions of such plan or agree- 
 ment ; and the said new corporation may, at any time within six 
 months after its organization, compromise, settle, or assume the 
 payment of any debt, claim, or liability of the former company, 
 upon such terms as may be lawfully approved by a majority of 
 the agents or trustees intrusted with the carrying out of the plan 
 or agreement of reorganization aforesaid. 
 
 Neither the sale nor the formation of such corporation shall in- 
 terfere with the authority or possession of any receiver of the 
 property and franchises, but he shall remain liable to be removed 
 or discharged at such time as the court may deem proper. No 
 suit or proceeding shall be commenced against said receiver, un- 
 less founded on wilful misconduct or fraud in his trust, except 
 such as shall be commenced before the expiration of sixty days 
 from the time of the discharge of said receiver; but after the ex- 
 piration of said sixty days, the corporation that shall own or 
 operate said railroad shall be liable in any action that may be 
 commenced against such company, founded on any act or omis- 
 sion of such receiver, and to the same extent as such receiver, but 
 for this provision, would be or remain liable, or to the Bame ex- 
 tent that such corporation would be, had it done or omitted the 
 acts complained of against such receiver. 
 
 676. Ohio. 1 — The purchaser or purchasers of the real and 
 
 1 Law., L869, p. 334, §§1,2; Hauler's Stat. p. 2207. See, also, Supplement to K. 8. 
 
 659
 
 § 677.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 personal property, road-beds, rights of way, fixtures, and fran- 
 chises of any railroad company in the State of Ohio that shall 
 have been or shall hereafter be sold pursuant to judicial order, 
 judgment, or decree, and which sale has been confirmed by the 
 court making the order of sale, may sell the same, or any portion 
 thereof ; and the title thereto, with all the rights, liberties, faculties, 
 and franchises, shall pass by such sale and vest in the purchaser 
 or purchasers thereof as fully as the same had been possessed, ex- 
 ercised, and enjoyed by such railroad company, and which passed 
 by said judicial sale ; which grant, being in the same form as by 
 law required to pass real estate, shall be recorded in the record of 
 deeds of the county or counties in which said real or personal 
 property is situated, and said rights and franchises are or may be 
 exercised. 
 
 Any railroad company organized or existing under the laws of 
 this state may become the purchasers of such property ; and any 
 number of persons, not less than five, may become the purchasers 
 of such road, road-bed, rights of way, property, and franchises, 
 and upon filing a copy of said grant in the office of the secretary 
 of state shall become a corporation, with perpetual succession, by 
 such name as they may assume for themselves, under the general 
 laws of this state regulating corporations, and shall hold the 
 property, rights, and franchises so purchased free and discharged 
 from all liability from the debts of the original corporation. 
 
 677. Pennsylvania. 1 — Where a mortgage, executed by a 
 railroad company incorporated under the laws of another state, 
 grants and conveys a railroad, situated partly within this and 
 partly within another or other states, and where the mortgage of 
 the railroad within this state has been authorized or confirmed by 
 the laws of this state, any corporation formed under the laws of 
 the state within which the corporation which last owned the said 
 railroad was incorporated, that shall, under the said laws, succeed 
 to or become invested with the title acquired by purchasers or 
 mortgagees of the said railroad, and the franchises appurtenant 
 thereto, under any sale or foreclosure thereof under the said mort- 
 
 1868, pp. 125-131; Acts April 13,1865; their road, or purchasing rolling stock, see 
 
 April 7, 1863; April 11, 1861. For statute Laws 1873, p. 291, § 5 ; Sayler's Stat. p. 
 
 authorizing purchasers to issue bonds for 3140. 
 
 the purpose of completing or extending x Laws 1876, p. 93, § 1, No. 57. 
 
 660
 
 ORGANIZATION INTO NEW CORPORATION. [§ 678. 
 
 gage, adjudged, ordered, or decreed by a court of competent juris- 
 diction of the said last mentioned state, shall succeed to or become 
 invested with the ownership of the said railroad within this state, 
 and the franchises appurtenant thereto, and with all other the 
 estate, real and personal, rights, privileges, and franchises in this 
 state, the title to which of the said purchasers or mortgagees has 
 become vested in the said corporation ; and said corporation shall 
 hold and enjoy the same free and discharged from every incum- 
 brance or charge thereon subsequent in lien to that of the mort- 
 gage or mortgages under which the said sale or foreclosure was 
 had, except where otherwise provided in the said order or decree, 
 as fully and completely as the same were possessed by the com- 
 pany as whose property they were sold, and with every power 
 relating to the use, management, disposition, sale, or mortgage 
 thereof, which was held and enjoyed by the said company, but 
 subject, nevertheless, to all the provisions of the laws of this com- 
 monwealth under which the same were held or possessed by the 
 last named company, and without any greater or other estate, 
 right, title, or privilege therein ; provided, however, that the said 
 order or decree of sale or foreclosure shall, as to the said railroad 
 within this state, franchises appurtenant thereto, and other the 
 estate, real and personal, rights, privileges, and franchises within 
 this state, included within the said sale or foreclosure, have been 
 adopted or enforced by an order or decree, confirmatory thereof 
 or ancillary thereto, made by a state or federal court of competent 
 jurisdiction within this state. 
 
 678. South Carolina. 1 — In case of the sale of any railroad, 
 situated wholly within this state or partly within this state and 
 partly in an adjoining state, by virtue of any mortgage <>r deed 
 of trust, whether under foreclosure or other judicial proceeding, 
 or pursuant to any power contained in such mortgage or deed of 
 trust, the purchaser or purchasers thereof, or his or their survivor 
 or Burvivors, representatives or assigns, may, together with their 
 iates, form a corporation for the purpose of owning, possess- 
 ing, maintaining, and operating such railroad, or such portion 
 thereof as may lie situated within this state, by filing in the office 
 of the secretary of state a certificate specif) ing the mime and slylo 
 
 1 Art- 1876, page 100. Fur provision allowing connecting road to pnrcha 
 R, s. i -:.;,<■. 65, § u. 
 
 661
 
 § G79.] EIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 of such corporation, the number of directors of the same, the name 
 of its first directors and the period of their services, not exceeding 
 one year, the amount of the capital stock of such corporation, and 
 the number of shares into which it is to be divided ; and the per- 
 sons signing such certificate and their successors shall be a body 
 corporate and politic, by the name specified in such certificate, 
 with power to sue and be sued, contract and be contracted with, 
 and to own, possess, maintain, and operate the railroad referred to 
 in such certificate, and to transact all business connected with the 
 same ; and a copy of such certificate, attested by the secretary of 
 state or his deputy, shall, in all courts and places, be evidences of 
 the due organization and existence of such corporation and of the 
 matters specified in such certificate. 
 
 Such corporation shall possess all the powers, rights, immuni- 
 ties, privileges, and franchises in respect to such railroad, or the 
 part thereof included in such certificate, and in respect to the real 
 and personal property appertaining to the same, which were pos- 
 sessed or enjoyed by the corporation which owned or held such 
 railroad previous to such sale under or by virtue of its charter 
 and any amendments thereto, and of other laws of this state or 
 the laws of any other state in which any part of such railroad may 
 have been situated, not inconsistent with the laws of this state. 
 Such corporation shall also have power to make and issue bonds, 
 bearing such rate of interest, not exceeding seven per cent, per 
 annum, payable at such times and places, and in such amount or 
 amounts, as it may deem expedient, and to sell and dispose of such 
 bonds at such prices and in such manner as it may deem proper, 
 and to secure the payment of such bonds by its mortgage or deed 
 of trust of its railroad or any part thereof, and its real and per- 
 sonal property and franchises. 
 
 679. Tennessee. 1 — The purchasers of any railroad chartered 
 by this state, and lying in whole or in part in this state, which is 
 sold under any mortgage heretofore or hereafter executed by it, 
 who shall be, under said sale, put in possession of said railroad by 
 any court of competent jurisdiction, shall have the same rights to 
 operate the same in this state as the incorporated company which 
 executed said mortgage had by the laws of this state. 
 
 The purchasers of such railroad, its property and franchises, 
 1 Acts 1877, ch. 12, §§ 1, 3. 
 
 662
 
 ORGANIZATION INTO NEW CORPORATION. [§ 680. 
 
 may, after being put in possession of said property under such 
 sale, meet together, adopt a name for the company or corporation 
 to operate said railroad, and elect a board of directors of such 
 members as they may see fit, not less than three, at least one of 
 whom shall reside in this state. The said board of directors shall 
 make a certificate showing the name of the corporation, the 
 amount of its capital stock, the shares into which the same is 
 divided, the number and residence of the board of directors, 
 where the road lies, and the name or names by which it has here- 
 tofore been chartered and known, and shall cause the same to be 
 signed by the president and the members of such board, and to be 
 filed with the secretary of state ; and thereupon the said pur- 
 chasers shall be a body corporate, under the name so adopted, 
 with all the rights, powers, privileges, immunities, and franchises 
 possessed under the laws of this state by the company or com- 
 panies whose road and franchises were sold as aforesaid, under 
 the acts of incorporation thereof, any amendments thereto, or 
 any subsequent act or acts of this state, and with all the rights, 
 powers, privileges, and franchises possessed by the corporation 
 formed and organized for the building of railroads. 
 
 680. Texas. 1 — The road-bed, track, franchise, and chartered 
 powers and privileges of a railroad company shall be deemed an 
 entire thing, and must be sold as such ; and in case of the sale of 
 the same, whether by virtue of an execution, order of sale, deed 
 of trust, or any other power, the purchaser or purchasers at such 
 sale, and their associates, shall be entitled to have and exercise 
 all the powers, privileges, and franchises granted to said com- 
 pany by its charter, or by virtue of the general laws of this state ; 
 and the said purchaser or purchasers and their associates shall be 
 deemed and taken to be the true owners of said charter, and cor- 
 porators under the same, and vested with all tin; powers, rights, 
 privileges, and benefits thereof, in the same manner and to the 
 same extent, as if they were the original corporators of said com- 
 pany ; and shall have power to construct, complete, equip, and 
 work the road, upon tin; same terms and under the same condi- 
 tions and restrictions as an; imposed by their charter and tl ;en> 
 
 eral laws of this Btate. 
 
 1 I v. -Hud's Dig. 1866, p. 820, arts. .i;h'j, ate, Witherspoon v. Texas Pacific R. It 
 4916. See, as to construction <>f this stat- Co 18 I ■ 
 
 668
 
 § 681.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 The directors or managers of the old company at the time of 
 such sale are made trustees of the creditors and stockholders of 
 that company, with power to settle its affairs, collect and pay its 
 debts, to sue and be sued, and to divide the surplus among the 
 stockholders. 
 
 681. Vermont. 1 — In all cases where a mortgage of any rail- 
 road or an} 7 part thereof made by any railroad company in this 
 state, to secure the payment of bonds, shall have been foreclosed, 
 and the legal title to the mortgaged premises vested in the mort- 
 gagees, any number of persons holding a majority in amount of 
 the principal of the bonds so secured may form themselves into a 
 corporation for the purpose of owning or maintaining and oper- 
 ating such railroad, or part thereof, for public use, in the convey- 
 ance of persons and property, in the manner following : they 
 may make, subscribe, and file articles of association, in which shall 
 be set forth a brief statement of the making and foreclosure of 
 the mortgage under which they have become interested in such 
 railroad ; the amount of bonds which were owing upon and se- 
 cured by the mortgage ; the name of the corporation to be 
 formed ; the amount of its capital stock, which shall not exceed 
 the amount of principal and interest of said bonds, and twenty- 
 five per cent, on the same in addition thereto, and the number of 
 shares, each of which shall be fifty dollars, into which the capital 
 stock shall be divided ; the number of directors by whom the cor- 
 poration shall be managed ; the names of the persons who shall 
 be directors for the first year, and until others are chosen in their 
 places, and a majority of the directors of such corporation shall be 
 residents of this state. Each subscriber to such articles shall 
 state in his subscription the number of shares which he takes or 
 agrees to take, and the amount of bonds held by him and secured 
 by such mortgage which he intends to surrender in payment or 
 part payment of his subscription ; such subscription may be made 
 by the holder in person, or by his attorney or agent, and any 
 three of the persons named in said articles as directors may be 
 inspectors of such subscriptions, and the production of any such 
 bond shall be evidence of the right of the person holding the same 
 to subscribe to said articles. 
 
 Such ai'ticles of association shall be filed in the office of the 
 1 Gen. Stat. 1870, ch. 28, §§ 104, 105, 110, 112. 
 
 664
 
 ORGANIZATION INTO NEW CORPORATION. [§681. 
 
 secretary of state, and a copy thereof filed and recorded in the 
 offices of the clerks of each of the counties through which the said 
 railroad shall jiass ; and a notice of the formation of such corpora- 
 tion, and of the filing of the articles, shall be published once a 
 week for three successive weeks in a newspaper published in each 
 of said counties, if any be published therein, and for six successive 
 days in two or more dailies published in each of the cities of New 
 York and Boston ; but such articles shall not be so filed until the 
 amount of bonds, to be surrendered by the subscribers thereto for 
 that purpose, shall be at least a majority in amount of the princi- 
 pal of the bonds secured by the mortgage referred to in such arti- 
 cles ; nor until there is indorsed thereon, or annexed thereto, an 
 affidavit made by at least three of the directors named in such 
 articles, that they have in good faith examined the list of such 
 subscribers, and that they believe the said subscribers to be the 
 holders or representatives of the amount of bonds therein stated, 
 and that they believe the said subscribers intend, in good faith, to 
 comply with the terms of their subscription. If there should be 
 any case of neglect or failure to organize a new corporation under 
 the provisions of this statute, when a mortgage has been fore- 
 closed, or if the railroad on which the mortgage exists shall be 
 sold or assigned by virtue of any order, decree, or judgment of 
 any court, then and in that event, when the purchaser, purchasers, 
 grantee, or grantees shall acquire title to the same in the manner 
 prescribed by law, such purchaser, purchasers, grantee, or grantees 
 shall have, take, and possess all the rights, powers, and privileges 
 in this statute hereinbefore granted to a majority of the bond- 
 holders, and be subject to like duties; and may associate with 
 him or them any number of persons, and make, sign, and file arti- 
 cles of association as before prescribed by this chapter, and shall 
 thereupon be a corporation with all the powers, privileges, and 
 franchises, and be subject to all the duties granted to or imposed 
 upon railroad corporations. 
 
 Whenever a sale shall be made of any railroad and franchises, 
 either with or without other property, under or by virtue of any 
 railroad mortgage or power of sale thereof, for the security of any 
 debi of any railroad company, or when any Buch sale shall be 
 made under the order of any court, any creditor or any number 
 of creditors of such road, under such mortgage, may, within three 
 months next after such sale, pay into the Court <>f Chancery 
 
 665
 
 § 682.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 making such order of sale, or if no order of sale has been made, 
 into the Court of Chancery in some county through which such 
 road is located, for the use of the purchaser at such sale, a sum 
 bearing the same proportion to the price paid by such purchaser 
 with twelve per cent, interest thereon from the time of such sale, 
 that the debt so held by such creditor under such mortgage 
 bears to the whole amount of debt outstanding under such mort- 
 gage ; whereupon such creditor so paying shall have a legal and 
 equitable interest in all the property so sold in common with such 
 purchaser in the proportions aforesaid ; and in all such cases the 
 Court of Chancery shall have power in a summary manner to ad- 
 just the rights of the parties, and to grant such specific relief as 
 the nature of the case may require. 
 
 When a railroad and the property connected therewith is sold 
 under a mortgage by virtue of a power of sale or under decree of 
 court, and the same is subject to a prior mortgage, the sale is 
 made subject to such prior incumbrance. The purchasers may 
 organize in the manner above provided ; and the new corporation 
 may issue preferred stock to discharge such incumbrance. The 
 capital stock of such new corporation is required to be divided 
 into shares of not less than fifty dollars each. 1 
 
 682. Virginia. 2 — If a sale be made under a deed of trust or 
 mortgage executed by a company on all its works and property, 
 and there be a conveyance pursuant thereto, such sale and con- 
 veyance shall pass to the purchaser at the sale, not only the works 
 and property of the company as they were at the time of making 
 the deed of trust or mortgage, but any works which the company 
 may, after that time and before the sale, have constructed, and 
 all other property of which it may be possessed at the time of the 
 sale, other than debts due to it. Upon such conveyance to the 
 purchaser, the said company shall ipso facto be dissolved. And 
 the said purchaser shall forthwith be a corporation, by any name 
 which may be set forth in the said conveyance, or in any writing 
 signed by him and recorded in the court in which the conveyance 
 shall be recorded. 
 
 The corporation created by or in consequence of such sale and 
 conveyance shall succeed to all franchises, 3 rights, and privileges, 
 
 1 Act 1866, No. 13. 3 Code 1873, ch. 61, § 45. 
 
 2 Code 1873, ch. 61, § 44. 
 
 666
 
 ORGANIZATION INTO NEW CORPORATION. [§ 683. 
 
 and perform all such duties, as would Lave been had or should 
 have been performed by the first company, but for such sale and 
 conveyance ; save only that the corporation so created shall not 
 be entitled to the debts due to the first company, and shall not be 
 liable for any debts of or claims against the said first company, 
 which may not be expressly assumed in the contract of purchase, 
 and that the whole profits of the business done by such corpo- 
 ration shall belong to the said purchaser and his assigns. His 
 interest in the corporation shall be personal estate, and he or his 
 assigns may create so many shares of stock therein as he or they 
 may think proper, not exceeding together the amount of stock in 
 the first company at the time of the sale, and assign the same in 
 a book to be kept for that purpose. The said shares shall there- 
 upon be on the footing of shares in joint stock companies gener- 
 ally, except only that the first meeting of the stockholders shall 
 be held on such day and at such place as shall be fixed by the said 
 purchaser, of which notice shall be published for two weeks in a 
 newspaper. 
 
 683. West Virginia. 1 — If a sale be made under a deed of 
 trust or mortgage, executed by a railroad or other internal im- 
 provement company in this state, on all its works and property, 
 and there be a conveyance pursuant thereto, such sale and con- 
 veyance shall pass to the purchaser at the sale, not only the works 
 and property of the company as' they were at the time of making 
 the deed of trust or mortgage, but any works which the company 
 may, after that time and before the sale, have constructed, and 
 all other property of which it may be possessed at the time of the 
 sale, other than debts due to it. Upon such conveyance to the 
 purchaser, the said company shall ipso facto be dissolved. And 
 the said purchaser shall forthwith be a corporation by any Dame 
 which may be set forth in said conveyance, or in any writing 
 signed by him or them, and recorded in the recorder's office of 
 any county wherein the property so sold, or any part thereof, is 
 situated, or where; said conveyance is recorded. The corporation 
 created by or in consequence of such sale and conveyance shall 
 succeed to all such franchises, rights, and privileges, and perform 
 
 1 Arts 1^71, eli. 70, §§1,2. Act of Dec. pressly continued in force by Acl L877, 
 80, 1875, with similar provisions, was re- ch. 23. 
 pealed, and tin; above Act of usTi i 
 
 667
 
 § 684.] RIGHTS OF PURCHASERS AT FORECLOSURE SALES. 
 
 all such duties as would have been had or should have been per- 
 formed by the first company, but for such sale and conveyance ; 
 save only that the corporation so created shall not be entitled to 
 debts due to the first company, and shall not be liable for any 
 debts of, or claims against, the said first company, which may not 
 be expressly assumed in the contract of purchase ; and that the 
 whole profits of the business done by such corporation shall be- 
 long to the said purchaser and his assigns. His interest in the 
 corporation shall be personal estate, and he or his assigns may 
 create so many shares of stock therein as he or they may think 
 proper, not exceeding, together the amount of stock in the first 
 company at the time of the sale, and assign the same in a book 
 kept for that purpose. The said shares shall thereupon be on the 
 footing of shares in joint stock companies generally, except only 
 that the first meeting of the stockholders shall be held on such 
 day and at such place as shall be fixed by the said purchaser, of 
 which notice shall be published for four successive weeks in a 
 newspaper printed in each county in the state wherein said cor- 
 poration may do business. 
 
 684. Wisconsin. 1 — In case of sale of any railroad or rail- 
 roads, or any part thereof, constructed or in process of construc- 
 tion by any railroad company, on or by virtue of any trust deed 
 or on any foreclosure of any mortgage thereupon, the party or 
 parties acquiring title under such sale, and their associates, succes- 
 sors, and assigns, shall have and acquire thereby, and shall ex- 
 ercise and enjoy thereafter, all and the same rights, privileges, 
 grants, franchises, immunities, and advantages in and by said 
 mortgage or trust deed enumerated and conveyed, which belonged 
 to and were enjoyed by the company making such deed or mort- 
 gage, or contracting such debt, so far as the same relate and ap- 
 pertain to that portion of said road, or the line thereof mentioned 
 and described in and conveyed by said mortgage or trust deed, 
 and no further, as fully and absolutely in all respects as the cor- 
 porators, shareholders, officers, and agents of such company might 
 or could have done therefor, had not such sale or purchase taken 
 place ; such purchasers, their associates, successors, or assigns, 
 may proceed to organize anew by filing articles of association and 
 electing directors as provided in this act ; and may distribute and 
 1 Laws 1877, ch. 144, § 1. 
 
 668
 
 ORGANIZATION INTO NEW CORPORATION. [§ 684. 
 
 dispose of stock, take the same or another name, and may conduct 
 their business generally in the manner provided in this act ; and 
 such purchaser or purchasers and their associates shall thereupon 
 be a corporation, with all the powers, privileges, and franchises 
 conferred by, and be subject to the provisions of this act ; pro- 
 vided, that if the parties purchasing at such foreclosure sale, and 
 so organized anew, own or represent a majority of the bonds se- 
 cured by said mortgage or trust deed, and also include the per- 
 sons who at the rendition of such judgment or foreclosure decree 
 owned a majority of the capital stock of said company, the sale 
 under such judgment or decree shall not be deemed or held to be 
 such a sale within the meaning of any law of this state, particu- 
 lar^ applicable to said company, as to deprive the parties so pur- 
 chasing and organizing anew, or the company so organized, of any 
 special exemption, privilege, or immunity granted by any law of 
 this state to the company which executed such mortgage or trust 
 deed, and operating upon any of the property in such instrument 
 described, embraced, or referred to ; but such parties so purchas- 
 ing, as in this proviso first mentioned, and the company organized 
 by such purchasers, shall have, possess, and enjoy any such special 
 exemption, privilege, or immunity as fully as the company exe- 
 cuting such mortgage or trust deed might or could have done if 
 such foreclosure or sale had not taken place. 
 
 669
 
 CHAPTER XXIV. 
 
 PROCEEDINGS IN BANKRUPTCY AND INSOLVENCY AGAINST 
 RAILROAD COMPANIES. 
 
 685. Railroad companies are within the operation of the 
 late Bankrupt Act of the United States, which in terms was 
 made to apply " to all moneyed, business, or commercial corpora- 
 tions and joint stock companies." 1 It provided that like proceed- 
 ings may be had and taken as are provided in the case of other 
 debtors, either " upon the petition of any officer of such corpora- 
 tion or company, duly authorized by a vote of a majority of the 
 corporators at any legal meeting called for the purpose, or upon 
 the petition of any creditor of such corporation or company." But 
 no discharge could be granted to such corporation or company, or 
 to any officer or member of it. 2 The constitutionality of this act, 
 as applied to persons other than merchants and traders, has been 
 called in question, on the ground that at the time of the adoption 
 of the Constitution the English system of bankrupt laws was lim- 
 ited to such persons, and therefore it was argued that the grant to 
 Congress of the power to establish uniform bankrupt laws must 
 be construed as limited to the making of a bankrupt law which 
 should apply only to the same persons. But this limitation in 
 the English system is a mere matter of policy, and by no means 
 enters into the nature of such laws. 3 This question of constitu- 
 tionality is, however, no longer open to discussion. 4 
 
 686. The Bankrupt Act not inapplicable to corporations on 
 
 1 "Winter v. Iowa, Minn. & N. Pacific Boston, Hartford & Erie R. R. Co. 4 N. 
 
 Ry. Co. 2 Dill. 487 ; S. C. 7 N. B. Reg. B. Reg. 314. 
 
 291 ; In re California Pacific R. R, Co. 3 2 Bankrupt Law, § 5122, Rev. Stat, of 
 
 Sawyer, 240; Sweatt v. Boston, Hartford U. S. ; Bump's Law of Bankruptcy, 10th 
 
 & Erie R. R. Co. 3 Cliff. 339; 5 N. B. ed. 791. 
 
 Reg. 234 ; Alabama & Chattanooga R. R. 3 Story's Com. on Const. § 1113. 
 
 Co. v. Jones, 5 N. B. Reg. 97 ; Adams v. 4 In re California Pacific R. R. Co. 3 
 
 Sawyer, 240. 
 
 670
 
 PROCEEDINGS IN BANKRUPTCY, ETC. [§ 687. 
 
 the ground that it provides no discharge for them. — It has 
 also been objected that the Bankrupt Act is unconstitutional so far 
 as it applies to corporations, because it denies to them the right 
 in any case to obtain a discharge. But it has never been decided 
 that " a law on the subject of bankruptcy, within the meaning of 
 the Constitution, must provide for the discharge of all persons 
 subject to its provisions." Mr. Justice Hoffman, of the District 
 Court of the United States for California, 1 in overruling this 
 objection, said : " The books contain about forty reports of such 
 cases in the District and Circuit Courts, and in the Supreme 
 Court of the United States. In no one has the objection I have 
 been considering been noticed. I do not claim that this general 
 acquiescence in the validity of the law has the authority of an 
 express judgment on the point ; but surely such a tacit admission 
 and consent, semper ubique et ab omnibus, are entitled to great 
 weight in determining a doubtful question of constitutional con- 
 struction, even conceding this question to be such." 
 
 Railroad and other private corporations are also, like natural 
 persons, severally subject to compulsory proceedings in insolvency 
 under the state insolvent laws, 2 or may voluntarily take advan- 
 tage of such laws. 3 
 
 687. Authority to present a petition in behalf of the corpo- 
 ration. — In bankruptcy proceedings against the Alabama and 
 Florida Railroad Company it was objected that no officer of the 
 company had been duly authorized by a vote of the majority of 
 the corporators present at a legal meeting called for the purpose 
 to present any petition for adjudication of bankruptcy. The Cir- 
 cuit Court of the United States held, however, that the proceed- 
 ings were regularly instituted, since, if any irregularity occurred in 
 the call for the stockholders' meeting, by which tin- direction was 
 given to institute the proceedings, it arose from the contumacy "I 
 certain directors, who resigned their offices for the purpose oi em- 
 barrassing the stockholders. The city of Pensacola owned more 
 
 1 In re California Pacific R. It. Co. 3 corporations of the Btate except railroad 
 
 Sawyer, 240. and banking companies. G. S. I860, ch. 
 
 a Piatt v. N. T. & Boston B. B. Co. 26 118, § 113. A street railway company 
 
 Conn. 544. cannot be subjected t" proceedings under 
 
 8 The Insolvent Act of Massachusetts, this act. Central Nat Bank 
 
 from which the National Bankrupt Act ter v. Worc< tei Horse B. R. Co. 13 Allen 
 
 was for the most part taken, applies to all (Ms 
 
 671
 
 § 688.] PROCEEDINGS IN BANKRUPTCY AND INSOLVENCY 
 
 than five sevenths of the stock of the company, and it was suffi- 
 ciently clear that the city authorities took all practicable measures 
 for having a fair stockholders' meeting and vote on the subject ; 
 and that the vote of the city was positive in favor of the bank- 
 ruptcy proceedings, and of the instruction to the president of the 
 railroad company to institute them. 1 
 
 The provisions in regard to authorizing proceedings in bank- 
 ruptcy apply only to voluntary proceedings. No vote of the cor- 
 porators is necessary to authorize counsel to appear for a corpo- 
 ration and consent to an adjudication of bankruptcy, or to admit 
 acts of bankruptcy when involuntary proceedings against it have 
 been commenced by a creditor. In such case the usual course is 
 adopted, and the case proceeds as in ordinary cases when legal 
 measures are instituted against corporations. They have the 
 power to appear by counsel, and counsel have the power to admit 
 facts and to bind corporations in the same manner as they do in 
 other suits. 2 
 
 Upon the filing of a petition in bankruptcy against a railroad 
 company by creditors the court has authority to inquire into the 
 value of securities held by the petitioning creditors and others, in 
 order to ascertain whether the petitioners hold provable claims to 
 the amount required by the Bankrupt Act. 3 
 
 Service of the petition in bankruptcy upon a corporation is 
 made personally by delivering a copy of the petition and order to 
 show cause to its head or principal officers, or by leaving the or- 
 der at the principal place of business of the corporation, which, 
 within the meaning of the law, is its "usual place of abode." 4 
 
 688. After bankruptcy proceedings have been commenced 
 against a railroad corporation in one of two states in which 
 it has a place of business, and under the laws of which it is char- 
 tered, these proceedings should be allowed to proceed to their 
 final conclusion without the interference of the District Court of 
 the other state. The Boston, Hartford and Erie Railroad Com- 
 pany was chartered by the State of Connecticut, and afterwards 
 
 i Davis v. Railroad Co. 1 Woods, 661, Sawyer, 240; In re Osage Valley & So. 
 
 per Bradley, Circuit Justice. Kansas R. R. Co 9 N. B. R. 281. 
 
 2 Lister v. Republic F. Ins. Co. 7 Biss. 4 In re California Pacific R. R. Co. 3 
 26. Sawyer, 240. 
 
 3 In re California Pacific R. R. Co. 3 
 
 672
 
 AGAINST RAILROAD COMPANIES. [§ 6S8. 
 
 received a grant of corporate privileges from the State of Massa- 
 chusetts. The company was adjudged bankrupt in the latter 
 state, and subsequently proceedings in bankruptcy were com- 
 menced in Connecticut. The creditor on whose petition the adju- 
 dication had been made in Massachusetts petitioned the District 
 Court in Connecticut, alleging that the proceedings in Connec- 
 ticut were collusive, and would prejudice the creditors of the com- 
 pany, and embarrass the settlement of the estate, and praying to 
 be allowed to appear and defend against the petition, and for fur- 
 ther relief. 
 
 This petition was dismissed by the District Court in Connec- 
 ticut, which proceeded to adjudicate the corporation bankrupt. 
 Upon a petition of review the Circuit Court of the United States 
 held that this petition should have been entertained ; that the 
 facts set forth warranted the creditor's intervention, and that the 
 District Court for Massachusetts should be permitted to exercise 
 the jurisdiction it had acquired, and that the proceedings in the 
 District Court for Connecticut should be stayed. Judge Wood- 
 ruff, delivering the opinion of the court, said : * " I am of opinion 
 that, in the absence of any express provision, it would be the duty 
 of the other District Courts to yield the control and direction of 
 the entire proceeding to that one whose jurisdiction was first in- 
 voked, and whose power is ample to accomplish all the purposes 
 of the law, and protect the rights of all parties interested, under 
 the authority of the same act which governs each of them. With- 
 out this, it is difficult to see how the law can be safely, uniformly, 
 and legally administered. On the appointment of an assignee, 
 all the property of the bankrupt is, by express terms, vested in 
 him by the assignment made, and such assignment relates back 
 to the commencement of the proceedings. When, therefore, one 
 court, having jurisdiction, has adjudged a debtor a bankrupt, ap- 
 pointed an assignee, and executed the assignment, nothing of tho 
 property of the bankrupt remains to him to be taken or admin- 
 istered by another tribunal. All is vested in the assignee ap- 
 pointed by the other, as of the time when tin- iir.sL petition was 
 filed." 
 
 Whether the bankrupt company was to be regarded as a sin Mm 
 corporation, or as two corporations united in interest, having one 
 and the same corporators, the same creditors, and the Bame prop- 
 
 1 In re Boston, Hartford & Erie It. K. Co. 'J Blatchf. 101. 
 
 4-J 678
 
 §§ 689, 690.] PROCEEDINGS IN BANKRUPTCY AND INSOLVENCY 
 
 erty, the District Court for Massachusetts, having first acquired 
 jurisdiction of the case, should be permitted to retain jurisdiction 
 until the proceedings should be closed. The proceedings in the 
 District Court for Connecticut need not be necessarily dismissed ; 
 but if not dismissed must be stayed. 
 
 Whether the insolvency courts of a state have jurisdiction of 
 a consolidated corporation formed in part of railroad companies 
 originally organized under the laws of other states, the consolida- 
 tion having been effected by concurrent legislation of the several 
 states in which the entire line of road was located, is a different 
 and more difficult question. 1 It would seem that such courts 
 would have no jurisdiction of the companies organized in other 
 states, and holding property in them by virtue of such organiza- 
 tion, except so far as these courts could reach the property and 
 franchises in other states through the jurisdiction and control of 
 the courts over the officers of the consolidated company. 
 
 689. A railroad company is not a " banker, broker, mer- 
 chant, trader, manufacturer, or miner," within the terms of the 
 Bankrupt Act, providing that the fraudulent stopping of pay- 
 ment by any person included in any one of these classes, or the 
 stopping or suspension and non-resumption of payment by any 
 person included in any of these classes of his commercial paper 
 for fourteen days, though not fraudulent, shall be acts of bank- 
 ruptcy. 2 
 
 690. Whether precedence will be given to foreclosure suits 
 or to proceedings in bankruptcy depends upon the discretion of 
 the court in view of the circumstances of the case. The Lake Su- 
 perior Ship Canal, Railroad, and Iron Company having executed 
 four successive mortgages of its canal and property, the trustee 
 under the first mortgage filed a bill in equity in the Circuit Court 
 of the United States for the Eastern District of Michigan to fore- 
 close the mortgage, and to this bill the company and the subse- 
 quent mortgagees were made parties. A receiver was appointed 
 in this suit, and authority given him to create an indebtedness 
 which should be a first lien upon the property. The second and 
 third mortgagees soon afterwards filed bills in the same court to 
 
 1 See Piatt v. N. Y. & Boston R. R. Co. 2 Winter v. Iowa, Minn. & North Pacific 
 26 Conn. 544. Ry. Co. 2 Dill. 487. 
 
 674
 
 AGAINST RAILROAD COMPANIES. [§ 690. 
 
 foreclose these mortgages, without first obtaining leave of court. 
 The mortgagor was then adjudged bankrupt and assignees ap- 
 pointed, who by supplemental bills were made parties to the sev- 
 eral foreclosure suits. Subsequently the trustee under the fourth 
 mortgage tiled a bill to foreclose that mortgage in the Bank- 
 ruptcy Court. The assignees objected to the maintenance of the 
 suits by the subsequent mortgagees, because they were already 
 impleaded in the suit on the first mortgage, and their rights 
 could be adjusted in that suit; and moreover the amount of the 
 prior lien being in doubt and having been put in issue by the 
 pleadings, it would be impossible to make a proper decree under 
 either of the subsequent bills. The assignees therefore filed an 
 original bill in the Circuit Court, which had for its object a sale 
 of the mortgaged premises free of liens and the ascertainment of 
 the rights of the various parties interested in the proceeds, and 
 their distribution accordingly. The proceedings in the foreclosure 
 cases were stayed. The question then arose whether the fore- 
 closure suits should be permanently stayed, or whether the equi- 
 ties of the parties should be worked out in those suits, or some 
 one of them. 1 
 
 In regard to the subsequent foreclosure suits the court was of 
 opinion that they should not be prosecuted without leave of court, 
 and that such leave should not be granted, inasmuch as the relief 
 sought could be had in the pending legislation. A strong prefer- 
 ence was expressed for continuing the working of the causes in 
 the hands of the mortgagees, whose interests were greater than 
 those of the assignees ; and for making the suit on the first mort- 
 gage the means of working out the rights and remedies of all 
 parties. 
 
 The court, however, declared its power to order all matters 
 pending in the several foreclosure suits in that court to be abju- 
 dicated in an original suit, commenced in that court by the as- 
 signees in bankruptcy; that it was a question of practice and 
 
 convenience whether the court would take tin- one court t the 
 
 other. The court might also entertain a bill by the assignees 
 in bankruptcy against the several Lien-holders t" ascertain the 
 amounts due, and to s<-ll tin; property free "I" incumbrances. The 
 power exercise! in the Court of Bankruptcy, to Bell mortga I 
 
 1 Sutherland v. Lake Superior ship Canal, B. B. ft Iron <'<•• i Cent. Lm Jour. 
 
 127 . '.. B, Bi g.298 307. 
 
 675
 
 § 691.] PROCEEDINGS IN BANKRUPTCY AND INSOLVENCY 
 
 property free from all incumbrances, is but an instance of the ex- 
 ercise of a power familiar to a Court of Chancery. 1 
 
 691. The Bankruptcy Court has no authority to take prop- 
 erty out of the possession of a receiver appointed under order 
 of a state court in chancery, in proceedings for foreclosure pre- 
 vious to the commencement of proceedings in bankruptcy. The 
 possession of the receiver in such case is the possession of the 
 mortgagees, and cannot be interfered with without liquidating 
 the debt. The trustees of the first mortgage of the Alabama and 
 Florida Railroad Company, on the first day of June, 1867, filed 
 a bill to foreclose it in a county court of the State of Florida, 
 and on the eleventh day of the following month a receiver was 
 appointed, who took possession of the railroad and mortgaged 
 property. Two days after the appointment of the receiver the 
 company, by its officers, filed a petition in bankruptcy, and was 
 adjudged bankrupt by the District Court of the United States 
 for the Northern District of Florida, and subsequently an assignee 
 was appointed. On his application the District Court ordered 
 the mortgaged property to be taken out of the hands of the re- 
 ceiver and delivered to the assignee, by the United States mar- 
 shal. Afterwards, in February, 1868, the same court ordered the 
 property to be sold as perishable property. The sale took place 
 on* the twenty-fifth day of March following, the trustees of the 
 mortgage giving public notice that they claimed the proceedings 
 to be illegal. The purchasers of the road organized a new corpo- 
 ration under the name of the Pensacola and Louisville Railroad 
 Company. The trustees and receiver then filed a petition in the 
 Circuit Court of the United States for a revision of the proceed- 
 ings of the District Court. The circuit justice, Mr. Bradley, 
 made a decree declaring the taking of possession of the property 
 by the assignee to be illegal, and setting aside the order of the 
 District Court requiring the receiver to surrender the property. 
 The question whether the sale in bankruptcy should be set aside 
 was reserved, and after argument was now decided ; the sale being 
 set aside and the purchase money paid to the assignee ordered to 
 be returned. 2 Mr. Justice Bradley, delivering the opinion of the 
 
 1 See, also, Ellis v. Boston, Hartford & See, also, Sutherland v. Lake Superior 
 Erie R. R. Co. 107 Mass. 1, 32. Ship Canal, R. R. & Iron Co. 1 Cent. Law 
 
 2 Davis v. Railroad Co. 1 Woods, 661. Jour. 127 ; 9 N. B. Reg. 298, 307; Myer 
 
 676
 
 AGAINST RAILROAD COMPANIES. [§§ 691, 692. 
 
 court, said : " The respondents' assignee contended that the sale 
 should stand although the order of sale was illegal. I do not 
 think so in such a case as this. It is analogous to that of a sale 
 by a sheriff on execution against A. of property belonging to B. 
 The sale is void. The owner may recover his property of the 
 purchaser. So may the trustees in this case. They ought not to 
 be compelled to take the proceeds arising from the unlawful sale. 
 
 Their rights might, in this way, be wholly sacrificed The 
 
 question then arises as to the disposition to be made of the pur- 
 chase money paid or secured to be paid by the respondents. The 
 purchasers insist that it should be returned ; the assignee, that it 
 should be retained by him for the benefit of the general creditors. 
 From an examination of the evidence it seems clear that the as- 
 signee assumed to sell the property clear of the mortgage. He 
 did not profess to sell the mere equity of redemption. The re- 
 spondents in their answer claim that the sale was made free from 
 the lien of the mortgage. They claim that the mortgage was 
 void. And whilst it is true that the petitioners gave notice at 
 the time of the sale that it would be subject to their lien, the 
 assignee and the purchasers did not act on this view. The latter 
 never intended to purchase subject to the lien, but clear of the 
 lien. Had the receiver sold the property subject to the first mort- 
 gage, the amount bid for it by the respondents would have been 
 payable by them, and would have been a proper asset of the. 
 bankrupt company's estate. But as they did not sell it in that 
 manner, but sold it as unincumbered property, so far as the first 
 mortgage was concerned, and as that was a clear mistake, since 
 the first mortgage was a valid lien and absorbed the entire prop- 
 erty, the sale ought to be held invalid, and the proceeds of the 
 sale ought to be returned to the purchasers. This is clearly the 
 justice of the case, and in my judgment the law is not contrary 
 thereto." 
 
 692. For what amount a holder of bonds as collateral may 
 prove. — When a company has pledged its own mortgage bonds 
 
 for ;i debt of a less amount, w|>"ii a winding up of the piny, 
 
 tin- holder is entitled to receive dividends on the whole amount 
 
 v. Crystal Luke Pickling & Preserving 53. Bat see, contra, In rt Merchant*' Ins. 
 Works, 1 1 X. B. ft g. 9; Freeman v. I o. 3 Bis . 162 
 Fort, lb. 46 j High on Receivers, §§ 52 & 
 
 077
 
 §§ 693, 694.] PROCEEDINGS IN BANKRUPTCY, ETC. 
 
 expressed to be secured by the debentures pari passu with the 
 holders of the other debentures; but of course is not to receive 
 more in the whole than what is due upon the original debt with 
 interest. 1 The debenture holder could not otherwise reach his 
 share of the property mortgaged, as to which he bad priority over 
 other creditors. 2 
 
 A creditor holding the guaranty of a third person may prove 
 his claim in full against the principal debtor without surrendering 
 the guaranty. 3 The dividend received in respect to the amount 
 guaranteed goes to reduce the claim against the guarantor. 4 
 
 693. Fraudulent mortgagees allowed to prove their actual 
 advances as an unsecured debt. — A mortgage given by a rail- 
 road company to an association organized as a corporation whose 
 declared object was " the completion and ownership " of such rail- 
 road, and of which association the president and vice president of 
 the railroad company were secret members, was held to be con- 
 structively fraudulent by reason of the trust relations between the 
 parties to it, and in view of the effect on the company and its 
 creditors of giving judicial sanction to the transaction ; but upon 
 the bankruptcy of the railroad company the association was al- 
 lowed to prove the amount actually advanced by the association 
 in money to the company as an unsecured debt. 5 
 
 694. Bankruptcy proceedings against a railroad company 
 should be dismissed when its stockholders have in good faith 
 purchased nearly all the floating debt of the company, and are 
 willing to give proper security for the payment of the balance of 
 such indebtedness. It being evidently for the best interest of all 
 parties, and the desire of a large majority, that the corporation 
 shall be managed by its own officers, the court will not retain the 
 custody and control of its property, in order to assist a few object- 
 ing creditors to coerce their claims. For such purposes the Bank- 
 ruptcy Court has full equitable jurisdiction. 6 
 
 1 Regent's Canal Iron Works Co. in re, 4 Raikes v. Todd, 8 Ad. & El. 846. 
 
 L. R. 3 Ch. D. 43 ; Jerome v. McCarter, 5 Kappner v. St. Louis & St. Joseph R. 
 
 94 U. S. 734, 740. R. Ass'n, 3 Dill. 228. 
 
 2 Per Colt, J., in Third Nat. Bank v. 6 In re Indianapolis, Cincinnati & La 
 Eastern R. R. Co. 122 Mass. 240. Fayette R. R. Co. 5 Biss. 287. 
 
 3 In re Anderson, 7 Biss. 233. 
 
 678
 
 INDEX. 
 
 Reference is to Sections. 
 
 ACCOMMODATION PAPER, when binding upon corporation, 308. 
 ACCOUNTS of receivers. See Receivers, 527-530. 
 
 ADVANCES by officers of corporation for preservation of property not en- 
 titled to priority, 565. 
 
 by creditor to preserve property have no priority, 552. 
 AFTER-ACQUIRED PROPERTY may be embraced in a statutory mort- 
 gage, 81. 
 
 may be charged on what principle, 121-127. 
 
 how regarded at law, 121. 
 
 how regarded in equity, 122. 
 
 in Louisiana, not subject to mortgage, 122. 
 
 railroad company may include in mortgage, 123. 
 
 railroad regarded as an entire thing, 124, 125. 
 
 covered under implied authority to mortgage, 124. 
 
 doctrine that it passes as incident to franchise, 126. 
 
 not applicable to mortgages of divisions of road, 127. 
 Wliat terms sufficient to include, 128-141. 
 
 word " undertaking" may have the effect, 128. 
 
 whether branch road might be included as, 129. 
 
 new location of road covered as, 130. 
 
 lien takes effect upon as soon as acquired, 130. 
 
 operation of mortgage upon may be limited, 131. 
 
 land not within the terms of the mortgage, 132. 
 
 personalty not within the terms of mortgage, 133. 
 
 land grant which corporation has no power to accept, 134. 
 
 land grant not yet earned, 135. 
 
 lease may be included in mortgage, 136. 
 
 enumeration of some articles excludes others, 137. 
 
 capital stock of another company, 138. 
 
 iron rails not laid down, 139. 
 
 fuel for use of road, 140. 
 
 office furniture suitable for company, 111. 
 Mortgage* attach in, subject to existing liens, 142-3 i">- 
 
 bought under conditional Bale, l L8. 
 
 verbal agreement does not constitute lien upon, ' 18. 
 
 obtained through fraud nut subject to mortgage, ' 14. 
 
 when junior mortgagees take subject i" prior mortgage "t\ 1 1"». 
 
 679
 
 INDEX. 
 
 Reference is to Sections. 
 
 ALABAMA, statute authorizing railroad mortgages, 27. 
 legal nature of rolling-stock in, 152. 
 constitutional provision prohibiting municipal aid to private corporations, 
 
 232. 
 statute giving special lien upon railroads, 583. 
 
 statute organizing purchasers at foreclosure sale into new corporation, 
 GG2. 
 ALTERATION of negotiable bonds. See Bonds, 211-216. 
 ARKANSAS, statute authorizing railroad mortgages, 28. 
 rolling stock is personal property in, 171. 
 
 constitutional prohibition of municipal aid to private corporations, 233. 
 statute for organizing purchasers of railroad at foreclosure sale into cor- 
 poration, 663. 
 ASSIGNMENT of debenture, form of, 72. 
 
 BANKRUPTCY, proceeding against railroads, 685-694. 
 railroad companies within the Bankrupt Act, 685. 
 although it provides no discharge, 686. 
 authority to present petition for corporation, 687. 
 of railroad corporation existing in several states, 688. 
 railroad company does not become bankrupt by stopping payment, 689. 
 whether foreclosure proceedings have precedence to, 690. 
 court cannot take property out of possession of receiver, 691. 
 for what amount holder of bonds as collateral may prove in, 692. 
 fraudulent mortgagee may prove actual advances as unsecured debt, 693. 
 proceedings should be dismissed when, 694. 
 BONDHOLDERS are represented by the trustees in suits affecting the secu- 
 rity, 361. 
 may sue when trustees fail or refuse to act, 362. 
 notice to trustees is generally notice to, 363. 
 
 when not notice to, 364. 
 statutes authorizing nomination of new trustees by, 374, 377-382. 
 may maintain foreclosure suit when, 432, 433. 
 provision for foreclosure on election of a majority of, 433. 
 must sue in behalf of all the bondholders, 434, 477. 
 not necessary that all should actually join, 434. 
 holding bonds as collateral may sue, 437. 
 to whom mortgage is made directly must all join, 437. 
 not necessary parties defendant to foreclosure suit, 438. 
 fraudulent sale by will be set aside, 645. 
 may become purchasers at foreclosure sale, 647. 
 BONDS which are a charge upon the property are equitable mortgages, 75. 
 should be fully described in mortgage, 93. 
 provision in, for conversion into stock, 97. 
 convertible into stock after limit of capital is reached, 97. 
 Of corporations secured bij mortgage, 188-221. 
 formalities in making and issuing, 188-196. 
 680
 
 INDEX. 
 Reference is to Sections. 
 
 BONDS (continued). 
 imply a seal, 189. 
 
 how far formalities as to making are binding, 190. 
 ■whether stockholders' vote is essential to issuing, 191. 
 an unusual requirement is directory only, 192. 
 requirements as to election of officers, 193. 
 knowledge of irregularity of issue, 194. 
 not void by reason of being secured by void mortgage, 195. 
 certificate indorsed upon, construed with, 196. 
 Negotiability of corporate bonds, 197-210. 
 usually made negotiable in form, 197. 
 although under seal, 198. 
 although overdue coupons are attached, 199. 
 although convertible into stock, 200. 
 not negotiable are merely choses in action, 201. 
 referring to mortgage affected by its statements, 203. 
 word "consolidated" puts purchaser upon inquiry, 203. 
 with payee in blank may be filled by holder, 204. 
 subject to be called at stated times, 205. 
 payable to " assigns," 206. 
 rights of bondjide purchaser of, 207. 
 
 when taken in payment for goods, 208. 
 when pledged for loan to maker, 209. 
 presumption of issue simultaneously with mortgage, 210. 
 Incomplete and altered, 211-216. 
 
 not entitled to privileges of negotiable paper, 211. 
 must be complete when issued, 212. 
 place of payment left blank, 211, 212. 
 over-issue of, 213. 
 
 numbering of gives no preference, 214. 
 presumed that all are issued at same time, 215. 
 alteration of number immaterial, 216. 
 Remedies upon, 217-221. 
 
 allegations when money was borrowed for specified purpose, 217. 
 illegally issued cannot be enforced, 218. 
 relief in equity for lost or destroyed, 219. 
 liability of seller of void bonds, 219. 
 who may enforce right of conversion into stock, 220. 
 non-resident stockholders not taxable, 221. 
 taxation of bonds of road lying in two states, 221. 
 Unsecured, of corporations, S12 816. 
 implied power of corporations to issue, 312. 
 issued in acknowledgment of corporate debt, 318. 
 statutory or debenture bonds in England, 31 L. 
 prohibition against issuing n '■.'•■ 815. 
 
 income bonds do not prevent the making of a mortgage, 810. 
 suit at law upon mortgage bond . 100. 
 
 681
 
 INDEX. 
 
 Reference is to Sections. 
 
 BRANCH RAILROADS do not pass by mortgage of main line, 104. 
 ma}' be covered by mortgage of after-acquired property, 129. 
 
 CALIFORNIA, statute authorizing railroad mortgages, 29. 
 
 rolling stock is personal property in, 172. 
 
 constitutional prohibition of loaning state credit, 234. 
 
 statutory provisions respecting municipal aid bonds, 234. 
 
 enforcement of executions against railroads in, 429. 
 
 statute giving special lien upon railroads, 584. 
 CALLS ON STOCKHOLDERS not subject to mortgage without legislative 
 
 authority, 103. 
 CANAL BOATS, whether they pass as appurtenant to railroad, 107. 
 CERTIFICATE indorsed on mortgage bonds to be construed with them, 196. 
 CHANGE OF ROUTE, mortgage covers, 105. 
 
 statutes respecting in Ohio and Iowa, 105. 
 
 mortgage of after-acquired property may cover, 130. 
 CHARTER, effect of forfeiture on a mortgage, .25. 
 
 of railroad company authorizing municipal aid is a contract, 274. 
 CHATTEL MORTGAGE, mortgage of rolling stock need not be recorded as, 
 
 156. 
 COLLATERAL bonds in distribution of proceeds of foreclosure sale, 639. 
 
 for what amount proof in bankruptcy may be made, 692. 
 COLORADO, statute authorizing railroad mortgages, 30. 
 
 constitutional prohibition of municipal aid to private corporations, 235. 
 
 statute giving special lien upon railroads, 585. 
 COMMON CARRIERS, mortgage trustees operating railroad are, 370. 
 
 whether receivers are liable as, for negligence of employees, 509-515. 
 
 liability of trustees in possession as, 556. 
 COMPENSATION of receivers. See Receivers, 527-529. 
 COMPROMISE agreements of mortgage creditors of corporations. See Re- 
 organization, 614-624. 
 CONDITIONS precedent to granting municipal aid, 267-277. 
 
 contained in municipal subscriptions, waiver of, 279. 
 
 as to amount of bonds to be issued, 295. 
 CONFIRMATION by legislature of mortgages made without authority, 6-14. 
 CONNECTICUT, statute authorizing railroad mortgages, 31. 
 
 provisions as to mortgages of rolling stock in, 173. 
 
 statute respecting rights of railroad mortgage trustees, 382. 
 
 statute giving special lien upon railroads, 586. 
 CONSIDERATION, what sufficient for upholding a mortgage, 84. 
 CONSOLIDATION of railroad companies, effect upon jurisdiction, 415-420. 
 
 whether it works dissolution of old companies, 416. 
 
 of stock of companies does not make them one, 417. 
 
 new company is successor of old, 418. 
 
 assumption by new company of debts of old, 419. 
 
 does not make new company identical with old as regards executory con- 
 tracts, 420. 
 
 682
 
 INDEX. 
 
 Reference is to Sections. 
 CONTRACTS, though payable to bearer, not necessarily negotiable, 202. 
 subsequent to mortgage not binding upon mortgagee, 566-568. 
 for carrying not binding upon mortgagee, 567. 
 for payment of rent not binding upon mortgagee, 568. 
 CORPORATIONS, having no public functions have an implied power to mort- 
 gage, 5. 
 manufacturing, may mortgage their property, 5. 
 steamship, may mortgage their property, 5. 
 express power of to mortgage negatives implied power, 6. 
 unless restrained by their objects may mortgage like individuals, 19. 
 may borrow as individuals do, 19. 
 unless restricted as to purposes or amounts, 20. 
 may borrow from directors, 22. 
 
 may be estopped to set up defence of ultra vires, 23. 
 generally impose formalities in making and issuing securities, 190. 
 formality of stockholders' vote for issuing bonds, 191. 
 special and unusual requirements as to obligations, 192. 
 requirements as to election of officers, 193. 
 Implied power to issue negotiable paper, 306. 
 
 in England decisions against such power, 307. 
 may issue accommodation paper, 308. 
 paper given to prosecute unauthorized business, 309. 
 Unsecured bonds of, 312-315. 
 implied power to issue, 312, 313. 
 statutory bonds and debentures in England, 314. 
 prohibition against issuing notes for circulation, 315. 
 Jurisdiction of state and federal courts over, 406-414. 
 amenable to process only in state where created, 406. 
 foreign to any state to which they nowise owe their existence, 407. 
 may be made answerable to suit by statute, 408. 
 
 conclusively presumed to be citizens of the state of incorporation, 409. 
 citizenship of, based on that of corporators, 409. 
 stockholders presumed to be citizens of state of incorporation, 409. 
 existing in several states, subject to federal jurisdiction, 412, 489. 
 
 court in either state has jurisdiction, 413. 
 cannot themselves obtain appointment of receivers of, 479. 
 not liable for injuries after receiver has assumed possession, 516. 
 otherwise if receiver's possession is not exclusive, 517, 518. 
 receivers in possession not agents of, 520. 
 
 organization of purchasers at foreclosure sales into new, 661-684. 
 COUPONS, overdue do not alone discredil a bond, 199, 209. 
 long, overdue is a circumstance of suspicion, 199. 
 in what terms expressed, 317. 
 may be Bigned by fac-simile o£ autograph] 817. 
 Negotiability of, 320-326. 
 to bearer are in effect promissory notes, '■'<-"■ 
 negotiable although payee not named, 821. 
 
 688
 
 INDEX. 
 
 Reference is to Sections. 
 
 COUPONS (continued). 
 
 detached from bonds subject to rules of negotiable paper, 322. 
 are still a lien under the mortgage, 322. 
 
 not payable to bearer or order are not negotiable, 323. 
 
 overdue subject to defences and equities, 324. 
 
 when considered due, 325. 
 
 entitled to days of grace, 326. 
 Order of payment of, 327-331. 
 
 should be paid in order they fall due, 327. 
 
 overdue entitled to no priority, 328. 
 
 taken up by third person when not entitled to share in security, 329. 
 entitled to payment from surplus, 330. 
 
 when a transfer rather than payment presumed, 331. 
 Overdue interest upon, 332-336. 
 
 lost, recovery upon, 332. 
 
 when interest upon recoverable without presentation, 334. 
 Suits upon, 337-340. 
 
 holder may sue without producing bond, 337. 
 
 when authority to issue should be alleged, 337. 
 
 not negotiable, should be sued in name of bondholder, 338. 
 
 when they import no promise to pay, 338. 
 
 when existence of net revenues should be alleged, 339. 
 
 plea of statute of limitations, 340. 
 
 when statute begins to run against, 340. 
 
 when may be preferred in distribution of proceeds of foreclosure sales, 
 638. 
 
 DAKOTA TERRITORY, statute authorizing railroad mortgages, 32. 
 
 provisions as to mortgages of rolling stock in, 174. 
 
 statute giving special lien upon railroads, 587. 
 DEBENTURE, nature and form of used in England, 72. 
 
 mortgages not accompanied by bonds, 102. 
 
 bonds, negotiability of, 197. 
 DEBT, due upon any default, 90. 
 
 mortgagee cannot be forced to receive till maturity, 91. 
 Changes inform and amount of, 385. 
 
 substitution of new bonds, 385. 
 
 amount cannot be enlarged, 386. 
 
 without consent of subsequent incumbrancers, 387. 
 
 extension of time of payment, 388. 
 DECREES in foreclosure suits. See Foreclosure Suits, 452-455. 
 DEED of corporation, who may execute, 84-88. 
 
 seal not conclusive that corporation executed it, 85. 
 DEFAULT, provision that whole debt shall become due upon, 90, 433. 
 DEFENCES to foreclosure suits. See Foreclosure Suits, 449-451. 
 DELAWARE, no general statute authorizing railroad mortgages, 33. 
 DIRECTORS may loan to their corporations and take securities, 22. 
 
 684
 
 INDEX. 
 
 Reference is to Sections. 
 
 DIRECTORS (continued). 
 
 may authorize execution of corporate mortgages, 84. 
 
 may purchase at foreclosure sale, Gil. 
 DISTRIBUTION of proceeds of foreclosure sale. See Foreclosure, 636— 
 
 638. 
 DISTRICT OF COLUMBIA, statute authorizing railroad mortgages, 84. 
 
 EARNINGS of railroads when covered by mortgage. See Income, 114- 
 
 120. 
 EMINENT DOMAIN, lands acquired by right of can be mortgaged only by 
 statutory authority, 3. 
 lands not acquired by can be mortgaged, 12. 
 EMPLOYEES, equities of against existing mortgages, 557. 
 grounds upon which preference is given to, 558. 
 meritorious character of claims of, 559. 
 claims of sometimes assumed as matter of policy, 560. 
 preference never given to as a legal right, 561. 
 EQUITABLE MORTGAGES, what corporate mortgages are, 73-77. 
 a contract to give a mortgage constitutes, 74. 
 bonds providing that they shall be a lien are, 75. 
 informal agreements may be, 75. 
 agreements to set apart specific property are, 76. 
 must arise by contract or necessary implication, 77. 
 EQUITIES arising subsequently to mortgages do not affect them, 557-572. 
 employees have none in preference to mortgagees, 557-561. 
 of contractors and material-men for supplies, 562. 
 subject to liens at law in distribution of proceeds of sale, 636. 
 EXECUTION of corporate mortgage, 84-88. 
 directors may authorize, 84. 
 must be in name of the corporation, 86. 
 of mortgage with usual provisions, implied authority for, 8D. 
 EXECUTION, LEVY OF upon rolling stock not allowed, 158-160. 
 policy of the law as to in Pennsylvania, 159, 160. 
 in Kentucky, 161. 
 in Tennessee, 162. 
 in New Jersey, 163, 164. 
 in New York, 165. 
 in Ohio, 167. 
 in New Hampshire, 168. 
 in Massachusetts, 169, 177. 
 franchises and property of railroad company not liable to without author- 
 ity, 423. 
 mortgage does not exempt personal property from, 424. 
 what mortgaged property exempted from execution, 125. 
 what is proper remedy of judgment creditor, 428. 
 statutory provisions regarding, 429. 
 cannot be made against property in bands of reoeh
 
 INDEX. 
 Reference is to Sections. 
 
 FIXTURES, tohat railroad property passes as, 109-113. 
 
 side tracks may be, 109. 
 
 material for use in repairing road, 110. 
 
 iron safe not attached to freehold, 111. 
 
 iron planing-macliine, 111. 
 
 tools and implements in workshops, 111. 
 
 cast-off articles, broken wheels, rails, &c., 112. 
 
 coal, wood, oil, &c, 113. 
 Rolling stock regarded as, 154-163. 
 
 actual fastening to freehold not necessary, 155. 
 FLORIDA, statute authorizing railroad mortgages, 35. 
 
 provisions as to mortgages of rolling stock in, 175. 
 
 constitutional prohibition of municipal aid, 236. 
 
 organization of purchasers at foreclosure sale into new corporation, 664. 
 FORECLOSURE of railroad mortgages usually effected in equity, 69. 
 
 sale of railroad running through several states, 414. 
 Sale of entire properly, 625-628. 
 
 when deed contemplates but one sale, 625. 
 
 special provision by statute for sale of whole property, 626. 
 
 sale of specific property subject to a separate incumbrance, 627. 
 
 sale upon default in interest only, 628. 
 Conduct of sale, 629-631. 
 
 officer conducting sale must use discretion, 629. 
 
 mortgage trustee may use his discretion as to sale, 630. 
 
 time and manner of making in Kansas, 631. 
 What franchises pass by, 632-635. 
 
 franchise to be a corporation does not pass, 632. 
 
 land occupied by railroad but not paid for does not pass, 633. 
 Distribution of proceeds of sale, 636-641. 
 
 liens at law have precedence of equities, 636. 
 
 every bond entitled to a, pro rata share, 637. 
 
 whether coupons may be preferred, 638. 
 
 rights of holders of bonds as collateral, 639. 
 
 stockholders entitled to nothing, 640. 
 
 surplus belongs to corporation, 641. 
 Setting aside of sale, 642-652. 
 
 proceedings for, must be within reasonable time, 642. 
 
 by reason of fiduciary relation of purchaser, 643. 
 
 a director may purchase, 644. 
 
 made by bondholder in fraud of other bondholders, 645. 
 
 mortgage trustee cannot properly purchase, 646. 
 
 bondholders and creditors may purchase, 647. 
 
 made by conspiracy of officers and others, 648. 
 
 for fraud in notice, 649. 
 
 sale before default passes only mortgage title, 650. 
 
 parties to suit to set aside sale, 651. 
 
 legislature cannot confirm fraudulent sale, 652. 
 
 686
 
 INDEX. 
 
 Reference is to Sections. 
 
 FORECLOSURE SUIT, court first assuming jurisdiction retains it, 421. 
 proceedings in second suit while first is pending, void, 422. 
 Parties plaintiff in, 431-437. 
 
 mortgagee must be plaintiff although he has no interest, 431. 
 a single bondholder may be, 432. 
 
 although the mortgage provides for foreclosure by trustee, 433. 
 not necessary that, all bondholders join, 434. 
 single bondholder must sue in behalf of all, 433, 434. 
 one holding bonds as collateral may maintain, 435. 
 trustees may come in after bondholders have filed bill, 436. 
 all bondholders to whom mortgage is made directly must join, 437. 
 Parties defendant in, 438-448. 
 
 bondholders are not necessary parties, 438. 
 whether a state having a statutory lien should be joined, 439. 
 whether the United States can be made a party, 440. 
 a subsequent mortgagee not joined is not bound, 441. 
 subsequent judgment creditors should be joined, 412. 
 prior mortgagees not proper parties, 443. 
 
 mortgagee of another distinct portion of the road not a necessary party, 444. 
 individual stockholders not allowed to be parties, 445. 
 stockholders may intervene in cases of fraud, 446. 
 questions between co-defendants cannot be decided, 447. 
 strangers to a cause cannot be heard in it, 448. 
 Defences to, 449-451. 
 
 same as those to suits upon the bonds, 449. 
 one who has assumed a mortgage cannot contest it, 450. 
 subsequent contracts of the company cannot be set up, 451. 
 Decrees in, 452-455. 
 
 may be for sale of railroad situate in several states, 452. 
 by consent are subject to control of court, 453. 
 when beyond scope of bill not binding, 454. 
 fixing amount due are final, 455. 
 confirming sale are final, 635. 
 
 whether precedence will be given to proceedings in bankruptcy, 690. 
 FORFEITURE of charter on failure of railroad company to complete ite 
 
 road, 25. 
 FORM of corporate mortgages, 68-98. 
 of mortgage deed in England, 72. 
 of bond used in England, 72. 
 of assignment of debenture, 72. 
 FORMALITIES in making and issuing corporate bonds, 188 196. 
 FRANCHISES OF CORPORATIONS, transferable onlj bj legislative au- 
 thority, 1-25. 
 legislative authority essential t.. mortgage of, :; - 
 authority to mortgage need nol !»• given in express terms, 7. 
 transferred by mortgage do nol include the franchi e to exi t, 15. 
 what arc included in -i corporate a ,,; -
 
 INDEX. 
 
 Reference is to Sections. 
 
 FRANCHISES OF CORPORATIONS (continued). 
 
 what property passes as appurtenant to, 104. 
 
 mortgage trustees in possession may use, 365. 
 
 not subject to sale on execution without legislative authority, 423. 
 
 what pass by foreclosure sale, 632. 
 
 what right of way passes by foreclosure of railroad, 633. 
 
 effect of sale of under foreclosure, 653-660. 
 FRAUD in foreclosure sales ground for setting aside, 642-652. 
 
 GEORGIA, no general statute authorizing railroad mortgages, 36. 
 
 constitutional prohibition of municipal aid to corporations, 237. 
 
 the enforcement of executions against railroads in, 429. 
 
 statute giving special lien upon railroads, 588. 
 GRACE, interest coupons entitled to, 326. 
 GUARANTY, nature of the contract, 341-349. 
 
 is a secondary and contingent obligation, 341, 347. 
 
 the degree of diligence required of holder, 342. 
 
 of principal debt and of its incident interest, 343. 
 
 consideration for, 343. 
 
 principal creditors entitled to benefit of, 344. 
 
 of negotiable bond, is itself negotiable, 345. 
 
 when not provable in bankruptcy, 346. 
 or in schemes of liquidation, 346. 
 corporations cannot enter into without authority, 350. 
 
 authority for need not be expressly conferred, 351. 
 
 right to enter into may be implied, 352. 
 
 railroad company may make of municipal aid bonds, 354. 
 
 when a representation of in bonds of another company binding, 355. 
 
 when corporation estopped to claim the contract ultra vires, 356. 
 
 HOLDERS of negotiable bonds of municipalities, rights of. See Purchasers, 
 287-299. 
 
 ILLINOIS, statute authorizing railroad mortgages, 37. 
 
 doctrine as to nature of rolling stock in, 157, 171. 
 
 constitutional prohibition of municipal aid to corporations, 238. 
 
 statute giving special lien upon railroads, 589. 
 INCOME, when covered by railroad mortgage, 114-120. 
 
 not while company i - emains in possession, 115. 
 
 subject to garnishment while company in possession, 115. 
 
 future, not subject to mortgage as against creditors, 116. 
 
 only net, covered by mortgage while mortgagor in possession, 117. 
 
 in hands of treasurer when possession is taken, 118. 
 
 in hands of station agent, 118. 
 
 mortgage held to cover in exceptional cases, 119. 
 
 estimate of for a section of a road, 120. 
 
 receiver may be appointed to secure, 468. 
 
 688
 
 INDEX. 
 
 Reference is to Sections. 
 INCOMPLETE BONDS. See Bonds, 211-216. 
 INDIANA, statute authorizing railroad mortgages, 38. 
 
 constitutional prohibition of county aid to corporations, 239. 
 statutory provisions for township aid to railroads. 239. 
 statute giving special lien upon railroads. 590. 
 statute relating to foreclosure sales of railroads, 626. 
 
 organization of purchasers of railroad at foreclosure sale into new corpora- 
 tion, 666. 
 INDORSEMENT, nature of contract of, 341. 
 how it differs from a guaranty, 341. 
 of railroad bond, 348. 
 
 presumed regular in hands of bona fide holder, 349. 
 corporations cannot enter into without authority, 350. 
 of securities taken in usual course of business, 353. 
 INJUNCTION against suits in foreign courts against receivers, 500. 
 INSOLVENCY proceedings against railroad companies. See Bankruptcy, 
 
 685-694. 
 INTEREST, the contract to pay, 317-320. 
 in what terms expressed, 317. 
 overdue entitled to no priority, 328. 
 recoverable on overdue coupons, 332. 
 without demand of payment, 332. 
 upon called bonds, 333. 
 none upon coupons when there were funds at place of payment, 334. 
 
 when bondholder absent from country, 335. 
 rate of interest after maturity of bond or coupon, 336. 
 on purchase money at foreclosure sale, 634. 
 INTERNAL IMPROVEMENTS, what may be aided by municipalities, 225. 
 IOWA, statute authorizing railroad mortgages, 39. 
 provisions as to mortgages of rolling stock in, 176. 
 decisions against municipal aid bonds in, 229. 
 statutory provisions for granting municipal aid to railroads, 240. 
 statute providing for liens attaching from commencement of building, 577, 
 
 578. 
 statute giving special lien upon railroads, 591. 
 
 JUDGMENTS, against receivers for injuries and losses not preferred to mort- 
 gages, 570. 
 forgoodslost in transportation when regarded as an expen e of manage- 
 ment, 571. 
 made subject to mortgages by statute in England, 572. 
 mortgage has priority of subsequent, 618. 
 JURISDICTION, of stair and federal courts of suiU porationa, 106. 
 
 foreign corporation not amenable to process, 106. 
 what corporations are foreign to the jurisdiction, 407. 
 foreign corporations may by statute I"- made answerable to suit, 108. 
 aship of corporations as regards the federal courts, 109. 
 u
 
 INDEX. 
 
 Reference is to Sections. 
 
 JURISDICTION (continued). 
 
 doctrine of citizenship based on that of the corporators, 409. 
 
 for the purpose of federal jurisdiction a corporation is a citizen of the state 
 that created it, 409. 
 
 federal courts have jurisdiction of suits against municipalities, 410. 
 none of suits between states and their own corporations, 411. 
 
 of suits against railroad companies chartered by several states, 412. 
 court in either state has jurisdiction of entire line, 413. 
 
 through jurisdiction of the mortgagor and mortgagee, court may compel 
 sale of entire line, 414. 
 
 independent suits may be prosecuted in each state, 414. 
 Effect of consolidation of railroad companies upon, 415-420. 
 
 consolidated company deemed the same as each of the old, 415. 
 
 two states may by concurrent legislation create one corporate body, 415. 
 
 whether a consolidation works a dissolution of the old companies, 416. 
 
 effect of consolidation of stock of companies, 417. 
 
 consolidated company is the successor of each of the old companies, 418. 
 
 when new company assumes the debts of the old, 419. 
 Cases of concurrent jurisdiction, 421, 422. 
 
 court which first assumes jurisdiction retains it, 421. 
 
 cannot be taken away by subsequent proceedings in another court, 421. 
 
 proceedings in second suit void, 422. 
 Of receivers. See Receivers, 483-492. 
 of court over purchasers at foreclosure sales, 635. 
 in bankruptcy of railroads organized in several states, 688. 
 
 KANSAS, statute authorizing railroad mortgages, 40. 
 
 statute authorizing municipal aid to railroads, 241. 
 
 statute giving special lien upon railroads, 592. 
 
 statute providing for sale of railroad as an entirety, 626. 
 
 statute as to time and manner of foreclosure sale of railroads, 631. 
 
 organization of purchasers at foreclosure sale into new corporation, 667. 
 KENTUCKY, no general law authorizing railroad mortgages, 41. 
 
 rolling stock not subject to execution in, 161. 
 
 provisions for enforcing executions against railroads in, 429. 
 
 statute giving special lien upon railroads, 593. 
 
 statutory provisions as to foreclosure sale of railroad, 626. 
 
 statute organizing purchasers at foreclosure sale into corporation, 668. 
 
 LAND GRANTS may be mortgaged without statutory authority, 12. 
 
 mortgage of by corporation having no power to accept, 134. 
 
 not yet earned, mortgage of, 135. 
 LANDS not connected with railroad, whether covered by mortgage, 106. 
 
 after-acquired, when not within terms of mortgage, 132. 
 LEASE may be included in mortgage of after-acquired property, 136. 
 
 mortgage trustees in possession of railroad may make, 36 7. 
 
 subsequent to mortgage not binding upon mortgagee, 566-568. 
 
 prior to mortgage, when binding upon mortgagee, 569. 
 
 690
 
 INDEX. 
 
 Reference is to Sections. 
 
 LEGISLATIVE AUTHORITY essential to a mortgage of franchises, 1-25. 
 the English doctrine, 1. 
 the American docti'ine, 2. 
 doctrine denied in Maine, 3 n., 19. 
 railroad companies within the rule, 3. 
 other companies having puhlic duties within the rule, 3. 
 general authority to convey does not give authority to mortgage, 4. 
 corporations having no public functions not within the rule, 5. 
 expressly conferred negatives implied authority, 6. 
 need not be given in express terms, 7. 
 to transfer property confers power to mortgage, 7. 
 may apply to property and not to franchises, 8. 
 scope and purpose of power must be regarded, 9. 
 for the purpose of constructing a railroad gives no power to secure the 
 
 debt of another, 10. 
 necessary for mortgages of corporate property, when, 11. 
 not necessary for mortgaging surplus land, 12. 
 to mortgage authorizes a mortgage of part of a road, 13. 
 mortgage without does not work dissolution of corporation, 15. 
 less stringent rule as to the power to mortgage, 17. 
 the rule denied in a few instances, 18. 
 coupled with a condition for the benefit of the state, 24. 
 forfeitui'e of charter of corporation, 25. 
 General statutes authorizing railroad mortgages, 2G-67. 
 essential to mortgages of calls on shareholders, 103. 
 essential for issuing municipal aid bonds, 222-283. 
 to municipalities to issue bonds for public purposes, 223. 
 
 for internal improvements, 225. 
 essential to issuing municipal bonds for extraneous objects, 226. 
 
 in aid of railroads, 226. 
 may confer power to municipalities to aid railroads, 227. 
 required for indorsements and guaranties by corporations, 350. 
 
 need not be conferred by express statute, 351. 
 cannot confirm fraudulent foreclosure sale, 652. 
 LESSEE in possession should be party to suit for appointment of receiver, 
 
 478. 
 LIENS affecting priority of railroad mortgages, 573-613. 
 application of general lien laws to railroads, 5 73-5 78. 
 railroad bridge not a building, 5 74. 
 
 not an improvement, 575. 
 meaning of terms structure, erection, improvement, 576. 
 attaching from commencement of the building, .>77. 
 
 in case of repairs, 578. 
 Special lien laws applicable to railroads^ 579 582. 
 within scope of legislature to provide, 57'J. 
 who is a laborer, 580. 
 rights conferred arc personal, 581. 
 
 691
 
 INDEX. 
 
 Reference is to Sections. 
 
 LIENS (continued). 
 
 none for advances of money to laborers, 582. 
 Statutes of the several states giving liens upon railroads, 583-610. 
 Of vendors, 611. 
 
 vendors with notice of mortgage covering after-acquired property have 
 
 none, 611. 
 of transportation subscriptions, 612. 
 By judgment, subsequent to mortgages, 613. 
 LLOYD'S BONDS, nature and validity of, 21. 
 LOST BONDS, relief in equity for, 219. 
 
 payment of indemnity for, 389. 
 LOUISIANA, statute authorizing railroad mortgages, 42. 
 
 statute authorizing municipal aid to internal improvements, 242. 
 
 MAINE, statute authorizing railroad mortgages, 43. 
 
 statute authorizing municipal aid to railroads, 243. 
 
 statute respecting duties and choice of mortgage trustees, 377. 
 
 statute giving security for labor upon railroads, 594. 
 
 statute organizing purchasers at foreclosure sale of railroad into corpora- 
 tion, 669. 
 MANDAMUS, the remedy to compel payment by municipalities, 302. 
 
 does not confer power, but enforces exercise of it, 303. 
 
 by federal court cannot be interfered with by state, 304. 
 
 municipal officers disobeying liable in damages, 304. 
 MARYLAND, statute authorizing railroad mortgages, 44. 
 
 constitutional prohibition of county aid, 244. 
 
 lien laws as affecting railroads, 595. 
 MASSACHUSETTS, statute authorizing railroad mortgages, 45. 
 
 rolling stock subject to attachment in, 169, 1 77. 
 
 statute authorizing municipal aid to railroads, 245. 
 
 statute respecting choice and duties of mortgage trustees, 380. 
 
 statute giving special lien upon railroads, 596. 
 MATURITY, meaning of word as applied to bonds, 92. 
 MICHIGAN, statute authorizing railroad mortgages, 46. 
 
 decisions against municipal aid bonds in, 229. 
 
 statute authorizing municipal aid to railroads, 246. 
 
 statute providing for securing laborers upon railroads, 597. 
 
 statute organizing purchasers of railroad at foreclosure sale into corpora- 
 tion, 671. 
 MINNESOTA, statute authorizing railroad mortgages, 47. 
 
 provisions as to mortgages of rolling stock in, 17 7. 
 
 constitutional prohibition of municipal aid, 247. 
 
 personal property of railroad may be seized on execution, 426. 
 
 statute providing security for laborers upon railroads, 598. 
 
 statute organizing purchasers at foreclosure sale of railroad into new cor- 
 poration, 672. 
 MISSISSIPPI, no general statute authorizing railroad mortgages, 48. 
 
 692
 
 INDEX. 
 
 Reference is to Sections. 
 
 MISSISSIPPI (continued). 
 
 constitutional prohibition of municipal aid, 248. 
 
 enforcement of executions against railroads in, 429. 
 
 organization of purchasers at foreclosure sale into corporation, 6 73. 
 MISSOURI, statute authorizing railroad mortgages, 49. 
 
 rolling stock is personal property in, 171. 
 
 constitutional prohibition of municipal aid, 249. 
 
 statute providing special lien upon railroads, 599. 
 MONTAXA TERRITORY, statute authorizing railroad mortgages, 50. 
 
 provisions as to mortgages of rolling stock, 179. 
 MORTGAGEE, in a strict mortgage holds the legal title, 71. 
 
 in statutory mortgage substituted by agreement, 83. 
 
 cannot be forced to receive payment till maturity, 91. 
 
 necessary plaintiff to foreclosure suit though having no interest, 431. 
 
 subsequent not bound unless party to foreclosure, 111. 
 
 prior, neither necessary or proper parties to foreclosure suit. 1 13. 
 
 not affected by judgment against receiver for negligence of employees, 515. 
 
 priority of right over subsequent equities, 557-572. 
 MORTGAGES OF CORPORATE PROPERTY AND FRA^XTIISES, 
 authority to make, 1-25. 
 
 may be valid in part and in part void, 8, 10. 
 
 made without authority may be good as an equitable charge, 9. 
 
 must be within the terms of the authority to mortgage, 10. 
 
 statutory and general power to mortgage, 10. 
 
 of corporate property essential to the use of the franchise, 11. 
 
 of land not acquired by right of eminent domain, 12. 
 
 of part of a railroad, 13. 
 
 made without authority may be ratified, G, 14. 
 
 a less stringent rule as to authority to make, 17. 
 
 the necessity of statutory authority denied in a few instances, 18. 
 
 may be void while the debts secured are valid, 20. 
 Form and construction of, 2G-67. 
 
 statutes authorizing, of railroads in the several states, 68-98. 
 
 usually in form of trust deeds, 68. 
 
 informally executed give equitable rights, 73. 
 
 execution of may be authorized by directors, 84. 
 
 ratification of, 88. 
 
 should fully describe the bonds secured, 93. 
 
 reservation of power to dispose of a iperty, 94. 
 
 to create a prior lien, 95. 
 provision for payment of taxes in, 96. 
 reformation of. 98. 
 Property covered by, 99-120. 
 of the under! iking, 99 i"-':. 
 
 equitable ri<_ r hl< of action may be Bubjei 
 
 cover wli;it personal property as fixtures, I": 1 i 18. 
 cover income in wh 
 
 698
 
 INDEX. 
 
 Reference is to Sections. 
 
 MORTGAGES OF CORPORATE PROPERTY, ETC. (continued). 
 Of after-acquired property, 121-145. 
 at law, 121. 
 in equity, 122. 
 may be limited as regards after-acquired property, 131. 
 when after-acquired land not within terms of, 132. 
 when after-acquired personalty not within terms of, 133. 
 invalidity of does not render void the bonds secured, 195. 
 a general creditor cannot prevent execution of, 403. 
 MUNICIPAL BONDS in aid of private corporations, power to issue, 222- 
 230. 
 no implied power to issue, 222, 283. 
 purposes for which legislature may confer power, 223. 
 power to tax can be conferred only for public purposes, 224. 
 under statutes authorizing internal improvements, 225. 
 cannot be issued without legislative authority, 226. 
 may be authorized in favor of railroads, 227. 
 public policy determines public use, 228. 
 few decisions that a railroad cannot receive, 229. 
 want of power to issue always open to inquiry, 230. 
 Constitutional and statutory provisions of the several states respecting, 231-266. 
 Conditions precedent to granting, 267-277. 
 effect of non-compliance with, 267. 
 validity between parties depends upon election, 268. 
 meaning of two thirds of qualified voters, 269. 
 effect of popular vote in favor of aid, 270. 
 actual subscription upon books not necessary, 271. 
 subscription released by change of organization, 272. 
 whether prior location of road is a condition, 273. 
 right conferred by charter cannot be taken away, 274. 
 power to subscribe annulled by constitutional provision, 275. 
 completed subscriptions not affected by Constitution, 276. 
 corporate existence of railroad cannot be questioned, 277. 
 nor that of municipality, 277. 
 Ratification of , irregularly issued, 278-282. 
 legalized by subsequent legislation, 278. 
 municipality may waive conditions, 279. 
 
 may be estopped by course of dealing, 280. 
 by its acts, 281. 
 by payment of interest, 282. 
 by holding stock, 282. 
 Negotiability of 283-286. 
 legislative authority essential to, 283. 
 of warrants and certificates, 283. 
 confer rights of ordinary negotiable paper, 284. 
 when name of payee is blank, 285. 
 recital of purpose of issue does not affect, 286. 
 
 694
 
 INDEX. 
 
 Reference is to Sections. 
 MUNICIPAL BONDS (continued). 
 
 Rights of bond fide holders of, 287-299. 
 how distinguished from bonds of private corporations, 2S7. 
 misconduct of municipal agents docs not affect, 288. 
 three important rules governing, 289. 
 
 violation of instructions by municipal officers does not affect, 290. 
 purchaser only bound to see that there was legislative authority, 291. 
 a recital in bonds of compliance with condition conclusive, 292. 
 recital of authority estops the setting up of defence, 293. 
 recital of authority is sufficient basis for purchaser, 294. 
 condition as to amount of bonds to be issued, 295. 
 when declared absolutely void by statute, 296. 
 when the bonds recite facts inconsistent with statute, 297. 
 when issued in excess of legislative authority, 298. 
 purchaser with notice of irregularities cannot claim protection, 299. 
 Enforcement of, 300-305. 
 
 provision for taxation becomes a part of the contract, 300. 
 
 cannot be impaired by legislation, 301. 
 mandamus the remedy to compel levy of taxes, 302. 
 
 does not confer power, but enforces the exercise of it, 303. 
 writ from federal court cannot be interfered with by state, 304. 
 municipal officers who disobey writ are liable in damages, 304. 
 remedy not limited to the special tax provided, 305. 
 MUNICIPAL CORPORATIONS, subject to suit in federal courts, 410. 
 
 NEBRASKA, statute authorizing railroad mortgages, 51. 
 rolling stock is personal property in, 171. 
 provisions as to recording railroad mortgages in, 180. 
 constitutional prohibition of municipal aid, 250. 
 NEGOTIABILITY of corporate bonds, 197-210. 
 
 of scrip-certificates of government loans, 197, 205. 
 of bonds under seal, 198. 
 of bonds convertible into stock, 200. 
 of contracts to bearer, 201. 
 of bonds in blank, 204. 
 of bonds subject to call, 205. 
 of bonds payable to " assigns," 206. 
 Of incomplete and altered bonds, 211-210. 
 ■ted by uncertainty of amount, 211. 
 when place of payment i< lefl blank, 211, 212. 
 effect of over-issue of bonds upon, 218. 
 higher numbers give no preference, 21 1. 
 Of municipal !86. 
 
 municipal warrants and orders, 
 municipal bonds to bearers, 28 I. 
 
 with blank for paj i 
 recital of purpose of issue I - 
 
 695
 
 INDEX. 
 
 Reference is to Sections. 
 
 NEGOTIABILITY (continued). 
 Of interest coupons, 320-326. 
 
 when not made payable to a particular person, 321. 
 
 when detached from the bonds, 322. 
 
 not payable to bearer or order not negotiable, 323. 
 
 overdue subject to defences and equities, 324. 
 
 entitled to days of grace, 32G. 
 Of receivers' certificates, 545, 546. 
 NET EARNINGS, meaning of term, 624. 
 NEVADA, statute authorizing railroad mortgages, 52. 
 
 constitutional prohibition of municipal aid, 251. 
 
 statute providing for special lien upon railroads, 600. 
 NEW HAMPSHIRE, statute authorizing railroad mortgages, 53. 
 
 legal nature of rolling stock in, 168. 
 
 statute against municipal aid to corporations, 252. 
 
 statute respecting duties and choice of mortgage trustees, 378. 
 
 statute giving special lien upon railroads, 601. 
 NEW JERSEY, statute authorizing railroad mortgages, 54. 
 
 nature of rolling stock in, 163, 164. 
 
 provisions as to recording railroad mortgages in, 181. 
 
 constitutional prohibition of loans of state credit, 254. 
 
 provisions for receivers of insolvent corporation, 469. 
 
 provisions for receivers to operate railroads, 470. 
 
 statute giving laborers of insolvent companies a lien, 581. 
 
 statute giving lien and security to laborers upon railroads, 602. 
 
 statute organizing purchasers at foreclosure sale into new corporation, 
 674. 
 NEW MEXICO TERRITORY, statute authorizing railroad mortgages, 55. 
 NEW YORK, statute authorizing railroad mortgages, 56. 
 
 legal nature of rolling stock in, 165, 166. 
 
 provisions as to recording railroad mortgages, 182. 
 
 decisions against municipal aid bonds in, 229. 
 
 constitutional prohibition of municipal aid, 255. 
 
 statute, regarding redemption of railroad mortgages, 397. 
 
 provisions for enforcing executions against railroads in, 429. 
 
 statute giving special lien upon railroads, 603. 
 
 statute relating to foreclosure sales of railroad, 626. 
 
 statute organizing purchasers of railroad at foreclosure sale into corpora- 
 tion, 675. 
 NORTH CAROLINA, statute authorizing railroad mortgages, 57. 
 
 statute authorizing municipal aid to railroads, 256. 
 
 statute protecting laborers upon railroads, 604. 
 NOTICE to trustees of an incumbrance affects the bondholders, 73. 
 
 of irregularities in the issue of corporate securities, 194. 
 
 to trustees when notice to bondholders, 363. 
 when not, 364. 
 
 fraudulent, of foreclosure sale, 649. 
 
 696
 
 INDEX. 
 
 Reference is to Sections. 
 
 NUMBERS upon bonds not a material part of them, 214. 
 alteration of immaterial, 216. 
 
 OHIO, statute authorizing railroad mortgages, 58. 
 
 legal nature of rolling stock in, 167. 
 
 provisions as to recording railroad mortgages in, 188. 
 
 constitutional prohibition of municipal aid to corporations, 2 -"> 7 . 
 
 statute giving laborers liens upon railroads, 005. 
 
 statute incorporating purchasers of railroads at foreclosure sale, 676. 
 OREGON, no general statute authorizing railroad mortgages, 59. 
 
 constitutional prohibition of municipal aid, 258. 
 
 PARTIES, plaintiff and defendant. Sec FORECLOSURE Suit, 131-448. 
 PAYMENT, stipulation for in gold or currency, 383, 384. 
 
 under legal tender acts undertaking to pay in gold must be express, 384. 
 Of lost bonds, 389. 
 
 indemnity for, 389. 
 
 of mortgage by mistake of facts, remedy for, 391. 
 PENNSYLVANIA, statute authorizing railroad mortgages, 60. 
 
 rollincr stock not subject to execution in, 159, 160. 
 
 constitutional prohibition of municipal aid, 259. 
 
 provisions for enforcing executions against railroads in, 429. 
 
 statute protecting laborers upon railroads, 606. 
 
 statute organizing purchasers of railroad at foreclosure sale into corpora- 
 tion, 677. 
 PLEDGE of negotiable bonds, rights of holder of, 209. 
 POSSESSION, Court of Equity may put trustees in, 101. 
 
 must be taken of a railroad as an entirety. 401. 
 POWER of ordinary corporations to mortgage their property implied, 5. 
 
 express negatives implied, 6. 
 
 to mortgage need not be given in express terms, 7. 
 
 scope and purpose of must be regarded, 9, 10. 
 
 to mortgage land not acquired by right of eminent domain. 12. 
 
 of officer to borrow includes power to pledge bonds as security, 
 POWER OF SALE usual in railroad mortgages, 69. 
 
 indefiniteness in will render void, 70. 
 
 is a cumulative remedy, 399. 
 
 ■whether it can be made exclusive remedy, 399. 
 PREFERRED STOCK, AND DIVIDENDS, meaning of terms, 623, 624. 
 PREFERRED STOCKHOLDERS, rights oi ibsequenl mort- 
 
 i 9. 
 
 entitled to have deficiencies of dividends made up, wh 
 
 rule fur ascertaining profits for making dividi 
 
 po ition of as parti< - to schemt ;anization, 622. 
 
 meaning of net > arnings, 62 I. 
 PRESIDENT OF( ORPOR ^TI ON, authority to borrow and Ity, 85. 
 
 irithoul authority give a a
 
 INDEX. 
 
 Reference is to Sections. 
 
 PRIORITY of mortgage to which another is made subject, 73, 75. 
 mortgage trustees cannot assent to, of unsecured debts, 359. 
 not affected by appointment of receivers, 515. 
 Of receivers' certificates and debts, 539-544. 
 Of mortgage lien, not affected by subsequent equities, 557-572. 
 employees have none except by force of statute, 557. 
 grounds on which employees have been given, 558, 559. 
 sometimes given as matter of policy, 560. 
 
 can be given to employees only by consent of mortgagees, 561. 
 contractors and material-men not entitled to, 562. 
 
 junior mortgagee not entitled to for means furnished to build road, 563. 
 none for materials furnished insolvent road, 564. 
 none for advances made by officers of company, 565. 
 subsequent contracts and loans have no, 568, 569. 
 judgments against receivers have no, 570-572. 
 Of railroad mortgages as affected by liens, 573-613. 
 
 of railroad mortgages as affected by schemes of reorganization, 614-624. 
 as between preferred stockholders and subsequent mortgagees, 619. 
 PROMISSORY NOTES of corporations, 306-311. 
 
 private corporations have implied authority to issue, 306. 
 
 English decisions to the contrary, 307. 
 may issue accommodation paper, 308. 
 
 paper given for the prosecution of unauthorized business, 309. 
 holder bound by notice of improper issue, 310. 
 negotiable though under corporate seal, 311. 
 signed by officers for the corporation, 311. 
 PROPERTY, what the word covers, 80, 81. 
 PURCHASERS of negotiable bonds before due, rights of, 207. 
 in good faith of stolen bonds, 207. 
 can recover of maker in full, 208. 
 presumed to hold for value, 208. 
 of bonds pledged for loans, 209. 
 not put upon inquiry whether bonds and mortgage are simultaneous, 210. 
 Of negotiable bonds of municipalities, 287-299. 
 in good faith not affected by fraud of officers, 288. 
 though officers violated instructions, 290. 
 
 need not look beyond authority of municipality to issue, 291. 
 of negotiable paper of corporations with notice of improper issue, 310. 
 at foreclosure sale subjects himself to jurisdiction of court, 635. 
 at foreclosure sale, fiduciary relation of, 643. 
 parties to fraudulent sale under foreclosure, 648. 
 Rights of under foreclosure sales of railroads, 653-684. 
 have no privity with old corporation, 653. 
 do not continue the old corporation, 654. 
 the old corporation does not vest in, 654. 
 not liable for debts of old corporation, 655. 
 have the right of purchasers under an ordinary mortgage, 655. 
 
 698
 
 INDEX. 
 
 Reference is to Sections. 
 PURCHASERS (continued). 
 
 when liable for damages occurring before confirmation of sale, G56. 
 when assumption of debts of old corporation a condition precedent, 657. 
 wbat proof of assumption of old debts required, 658. 
 acquire an exemption from taxes belonging to the old corporation, 660. 
 Organization of into new corporation, 661-t^ 1. 
 ■whether they can operate road as individuals, 661. 
 
 statutes of the several states for organizing into new corporations, 662- 
 684. 
 
 RAILROAD with its franchises regarded as an entire thing, 124. 
 doctrine of entirety as affecting after-acquired property, 124. 
 rests upon authority of a few cases, 125. 
 not generally supported, 126. 
 not applicable to mortgages of divisions of, 127. 
 RAILROAD COMPANIES cannot mortgage franchises or property without 
 legislative authority, 1-25. 
 because they have duties to the public, 3. 
 
 general authority to convey does not give authority to mortgage, 4. 
 must exercise power to mortgage for the purposes for which it is given, 
 
 10. 
 do not mortgage the franchise to exist as corporation, 15. 
 may issue negotiable certificates to contractors, 19. 
 statutes authorizing mortgages by, 26-6 7. 
 change of route of, 105. 
 not liable as common carriers after receiver has taken possession, 516- 
 
 519. 
 receivers not agents of, 520. 
 RAILROAD MORTGAGES, legislative authority essential for making, 1-25. 
 statutory provisions authorizing, 26-6 7. 
 form aud construction of, 68-98. 
 property covered by, 99-120. 
 of the undertaking, 99-103. 
 
 do not cover woodland not connected with road, 106. 
 cover what personal property as fixtures, 109-1 13. 
 cover tolls and income, when. Ill 1 20. 
 Of after-acquired property, 121 L45. 
 may properly include after-acquired property, L28. 
 what terms will include after-acquired property, 128. 
 when after-acquired land ooi within terms of, 132. 
 when after-acquired personalty nol within terms ol 
 of land grant which corporation has no power to accept, 184. 
 of land grant not yet earned. 
 Of after-acquired rolling stock, i 17. 
 
 mav be made before road is built, 1 17, 1 18. 
 cover rolling stock without special mention, l 19. 
 attach subject to existing liens upon it, 151. 
 
 oyy
 
 INDEX. 
 
 Reference is to Sections. 
 KAILS laid down are fixtures when, 109. 
 
 upon track for repairing are fixtures, 110. 
 
 not laid when covered by mortgage of after-acquired property, 139. 
 RATIFICATION. See Confirmation. 
 
 Of mortgage by payment of interest, 88. 
 by receiving and using the money, 88. 
 
 of municipal bonds irregularly issued, 278-282. 
 by subsequent legislation, 278. 
 RECEIVERS, grounds for the appointment of, 45G-479. 
 
 the English ride, 45C. 
 
 in United States the power more freely exercised, 457. 
 
 statutory provisions for appointment of, 457. 
 
 the appointment of an equitable remedy, 458. 
 
 appointment does not follow default as of course, 458, 459, 4G1. 
 
 urgent necessity for appointment must be shown, 459. 
 
 the question of appointment often one of difficulty, 460. 
 
 appointment will not be made against wishes of a great majority of bond- 
 holders, 462. 
 
 equities and interests of the majority considered, 462. 
 
 non-payment of interest for ten years ground for appointment, 463. 
 
 liability of being seized on execution ground for, 464. 
 
 conduct of officers of corporation may require, 465. 
 
 application of income to completion of road not ground for, 466. 
 
 refusal of trustees to perform trust, ground for, 467. 
 
 appointment to secure profits, 468. 
 
 appointment to sell corporate property and franchises, 469. 
 
 appointment to operate road, 470. 
 
 will not be made when road is in hands of state officers, 471. 
 
 whether the Supreme Court of the United States will appoint, 472. 
 
 appointment by Circuit Court more appropriate, 473. 
 
 distinction made when mortgage includes the tolls, 474. 
 
 general rule deduced from authorities, 474. 
 
 a receiver in prior suit should not be displaced in subsequent suit, 475. 
 
 should not be appointed without notice, 476. 
 
 mortgagee not required to establish conclusively his right to recover, 476. 
 
 individual bondholder must apply in behalf of all situated in like manner, 
 477. 
 
 tenant or lessee should be made party, 478. 
 
 corporation cannot itself apply for, 479. 
 Selection of receivers, 480-482. 
 
 not necessarily controlled by wish of parties, 480. 
 
 policy of agreement upon two or more representing different interests, 481. 
 
 appointment once made cannot be assailed collaterally, 482. 
 Jurisdiction of, 483-492. 
 
 whether limited to that of court appointing, 483. 
 
 can sue in another state only by comity, 483, 491. 
 
 court that first takes jurisdiction retains it, 484. 
 700
 
 INDEX. 
 
 Reference is to Section*. 
 RECEIVERS (continued). 
 
 where conflict of does not relate to the cause but to possession, 4S5. 
 mere filing of bill gives jurisdiction, 486. 
 actual possession cannot be interfered with, 487. 
 over line of railway extending through several states, 488. 
 the corporation may be one in the several states, 4S9. 
 court of coordinate jurisdiction cannot interfere, 490. 
 by comity the title of receivers recognized in other states, 491. 
 can take property vested in them into other states, 492. 
 courts will sometimes protect their own citizens against foreign receivers, 
 492. 
 Title and power of in general, 493-49S. 
 
 title relates back to order of appointment, 493. 
 
 when bonds required cannot recover possession till these are given, 493. 
 take the property subject to legal and equitable liens, 494. 
 cannot sue without express authority, 495. 
 represent creditors of the company in suits, 495. 
 relation of to leases of the property, 496. 
 court may adjust rent between receivers of two roads, 496. 
 whether may disregard statute fixing traffic rates, 497. 
 what payments are within discretion of, 498. 
 Cannot be sued without leave of appointing court, 499-508. 
 in what courts a receiver may be sued, 500. 
 
 court making appointment may draw to itself all suits against its receiv- 
 ers, 501. 
 the proper remedies against, 502. 
 statutes authorizing suits against do not avail. 
 execution cannot be levied upon property in hands of, 5 
 interference with possession of is contempt of court, 505. 
 a few decisions against doctrine that receiver is not amenable to other tri- 
 bunals, 506, 507. 
 soundness of the general doctrine, 508. 
 Liability for negligence oj' 509 515. 
 
 at law receivership no defence, 510. 
 doctrine of non-liability of in equity, 511. 
 examination of discordant decisions, 51'-'. 
 not personally liable for injuries by employees, 513. 
 liable for damages occasioned by wilful i iwer, ->\ i. 
 
 judgmenl for negligence not enforcible as againsl m 
 Company after appointment of , 516 520. 
 
 otherwise when possession of receiver is not exclusive, .'.i ;, ;.is. 
 liability of company as affected by Btatute, 519. 
 cannot hind corporation as agent, 
 hi charge and 
 will be discharged when security no longer requires, 521. 
 effect quenl payment of part of debl upon, 521. 
 
 barge is a matter of discretion with court, 
 
 701
 
 INDEX. 
 Reference is to Sections. 
 
 RECEIVERS (continued). 
 
 should not be heard in opposition to discharge, 523. 
 
 effect of rescission of order of appointment upon suits, 524. 
 
 specific complaints of maladministration will always receive attention, 525. 
 
 ground for removal of two receivers that they are hostile, 526. 
 Compensation and accounts of, 527-530. 
 
 questions of compensation referred to master, 527. 
 
 amount of compensation according to duties and responsibilities, 528. 
 
 counsel and witness fees in resisting removal, 529. 
 
 appeal from decree to account for a certain sum, 530. 
 
 after object of receivership has been accomplished are trustees, 548, 549. 
 
 bankruptcy court cannot take property from possession of, C91. 
 RECEIVERS' DEBTS AND CERTIFICATES, for what purposes they may 
 be incurred, 533-538. 
 
 general principles governing expenditures, 533. 
 
 analogy to mortgagees' expenses for repairs, 533. 
 
 authorized only for necessary repairs and protection of the property, 534. 
 
 rebuilding and building anew portions of the road, 535. 
 
 necessity the criterion of propriety of, 535. 
 
 should not go outside purpose of receivership, 536. 
 
 court may authorize negotiable certificates of indebtedness, 537. 
 
 certificates may be issued for materials and labor, 538. 
 Priority of over mortgage liens, 539-544. 
 
 no question of when mortgagees consent, 539. 
 
 claim that courts may give such priority without consent, 539. 
 
 with reference to what creditors question of priority may arise, 539. 
 
 bondholders or mortgagees obtaining the credit cannot question it, 540. 
 
 question of priority over existing mortgages, 541. 
 
 mortgage lien cannot be displaced without mortgagee's consent, 542. 
 
 mortgagor and his assignees cannot question the priority, 543. 
 
 statutory provisions as to receivers' liens, 544. 
 Negotiability of receivers' certificates, 545, 546. 
 
 are not commercial paper in hands of bond fide holder, 545. 
 
 consideration of, may be inquired into, 546. 
 RECITALS, in municipal bonds of authority to issue conclusive, 292-294. 
 REDEMPTION, statutes relating to are part of mortgage contract, 395. 
 do not apply to railroad existing in several states, 395. 
 
 vested right of cannot be impaired by statute, 396. 
 
 provision for in New York, 39 7. 
 
 mortgage an entirety as respects, 413. 
 REFORMATION of mortgage deeds, 98. 
 RESERVATION of power to dispose of property not necessary for use, 94. 
 
 of power to create prior lien, 95. 
 REMEDIES, upon corporate bonds, 217-221. 
 
 upon bonds illegally issued, 218. 
 For enforcement of corporate securities, 398-405. 
 
 may be used together or successively, 398. 
 702
 
 INDEX. 
 
 Reference is to Sections. 
 
 REMEDIES (continued). 
 
 jurisdiction in equity, though mortgage provides for a power of sale, 399. 
 
 suit at law upon the bonds, 400. 
 
 court of equity may deliver possession to trustees, 401. 
 
 power to take possession must be exercised upon the entire property, 401. 
 
 a threatened injury to the property may be enjoined, 402. 
 
 general creditor cannot prevent execution of mortgage, 403. 
 
 company may be enjoined from taking up track, 404. 
 
 a state cannot be sued without its consent, 405. 
 
 what are proper against receivers, 502. 
 REMOVAL of mortgage trustees and filling vacancies, 371-382. 
 
 of receivers. See Receivers, 521-526. 
 REORGANIZATION of corporations, schemes for, 614-618. 
 
 rights of secured creditors cannot be varied without their consent, Gil. 
 except through statute, 614. 
 
 what will absolve parties from agreement for, 615. 
 
 failure of bondholder to surrender bonds, GIG. 
 
 a party to cannot set up secret agreement, G17. 
 
 position of creditor holding bonds as collateral as to, 618. 
 
 as affecting preferred stockholders who join in, 619-624. 
 REPAIRS by receivers and mortgagees in possession. See Receivers' 
 
 Debts, &c, 533-544. 
 RHODE ISLAND, constitutional prohibition of pledges of state credit, 260. 
 
 statute respecting railroad mortgage trustees, 381. 
 
 statute giving special lien upon railroads, 607. 
 RIGHTS OF ACTION, whether subjects of mortgage, 108. 
 RIOTERS seizing railroad in hands of receivers punishable for contempt of 
 
 court, 505. 
 ROLLING STOCK OF RAILROADS, the legal nature of, L46-187. 
 
 after-acquired is subject to mortgage, 147-153. 
 
 though given before any part of road is built, 147, 1 18. 
 
 need not be specially mentioned in mortgage, 149. 
 
 regarded as an accession to the road, 1 19. 
 
 regarded as appurtenant to the road, L50. 
 
 mortgage attaches to subject to existing liens, 151. 
 
 doctrine as to, in Alabama. 152. 
 Regarded a&fixtun s, 154 163. 
 
 considerations why it should be so regarded, L54. 
 
 actual fastening to the freehold nol essential, 155. 
 
 mortgage of need not be recorded as chattel mortgage, 156. 
 
 may be assigned to particular divisions of a road, I 
 
 doctrine ae to, in Illinois, 1 57. 
 
 cannot be levied upon and Bold under execution, I 
 
 doctrine in Penn yl . l 60. 
 
 doctrine in Kentucky, L61. 
 doctrine in Tenne 
 doctrine in New Jer ey, 168, 164.
 
 INDEX. 
 Reference is to Sections. 
 
 ROLLING STOCK OF RAILROADS (continued). 
 Regarded as personal property, 164-170. 
 
 considerations why it should not be regarded as fixtures, 1G4. 
 
 doctrine in New York, 165. 
 
 within the statute relating to chattel mortgages, 166. 
 
 doctrine in Ohio, 16 7. 
 
 doctrine in New Hampshire, 168. 
 
 doctrine in Massachusetts, 169. 
 
 wei'dit of authority that it is personalty, 170. 
 Constitutional and statutory provisions concerning, 171-187. 
 
 constitutional provisions that it shall be considered personal property, 171. 
 
 important that status of should be fixed, 171. 
 
 statutes regarding in several states, 172-186. 
 
 how rewarded in Great Britain, 187. 
 
 how regarded in Canada, 187, n. 
 
 SALE under decree of foreclosure. See Foreclosure, 625-652. 
 SCRIP-CERTIFICATES of government loans are negotiable, 197, 205. 
 SEAL OF CORPORATION affords presumption of due execution, 85. 
 
 not conclusive that it was rightfully affixed, 87. 
 
 implied in corporate bonds, 189. 
 
 imports a consideration, 189. 
 
 is prima facie evidence of execution by proper authority, 189. 
 
 does not destroy negotiability of corporate notes, 311. 
 SET-OFF, right of against negotiated bonds, 208. 
 
 no ri'dit of against mortgage trustees in possession, 368. 
 SETTING ASIDE OF SALE. See Foreclosure, 642-652. 
 SOUTH CAROLINA, no general statute authorizing railroad mortgages, 61. 
 
 statute incorporating purchasers of railroad at foreclosure, sale into corpo- 
 ration, 6 78. 
 STATUTE OF LIMITATIONS, when it begins to run against coupons, 340. 
 STATUTES restricting mortgages become part of the contract, 89. 
 STATUTORY MORTGAGES, English debentures are in effect, 72. 
 
 effect of as to personal property, 74. 
 
 constituted without any deed of conveyance, 78. 
 
 can exist only when declared with a certainty, 79. 
 
 the intent to create a lien must be certain, 79. 
 
 construed like mortgages by deed, 80. 
 
 may embrace after-acquired property, 81. 
 
 release of by state, 82. 
 
 another mortgagee may be substituted by agreement, 83. 
 
 waiver of by state, 83. 
 STEAMBOATS, whether they pass as appurtenant to railroad, 107. 
 STOCR, provision in bonds for conversion into, 9 7. 
 
 power to issue for convertible bonds beyond the limited capital, 97. 
 
 of another company may be covered by mortgage of after-acquired prop- 
 erty, 138. 
 
 704
 
 INDEX. 
 
 Reference is to Sections. 
 STOCK (continued). 
 
 who may enforce right of conversion into, 220. 
 
 option to convert into must be exercised within time limited, 220. 
 STOCKHOLDERS, calls on not subject to mortgage without legislative au- 
 thority, 103. 
 
 cannot generally intervene in foreclosure suits, 146. 
 unless fraud is shown, t 16. 
 
 cannot share in distribution of proceeds of foreclosure sale, 640. 
 SUBROGATION, 390-394. 
 
 arises by operation of law when mortgage is paid by a third person, 390. 
 
 when payment is made under mistake of fact, 391. 
 
 to rights of a state under a railroad mortgage, 392. 
 difficulties in the way of, 393. 
 
 as between a state and a holder of its own bonds, 394. 
 SUBSCRIPTIONS of municipalities in aid of railroads, validity of, 268-276. 
 
 mav be annulled by constitutional provisions, 275. 
 
 when completed cannot be abrogated, 276. 
 SUITS AGAINST RECEIVERS-^ See Receivers, 499-515. 
 SUITS BY RECEIVERS. See Receivers, 491, 495. 
 SURPLUS LANDS may be mortgaged without statutory authority, 12. 
 SURPLUS PROCEEDS of foreclosure sale go to corporation, 641. 
 
 TAXATION of railroad bonds in hands of non-resident. 221. 
 
 power of can be conferred only for public purposes, 224. 
 
 public policy determines for what public uses it may be exercised, 228. 
 
 provision for taxation becomes part of contract of municipal bonds, 300. 
 state cannot impair such contract, 301. 
 
 not limited to the special tax provided, 305. 
 TAXES, provision in mortgages for payment of, 96. 
 TENNESSEE, statute authorizing railroad mortgages, 62. 
 
 rolling stock how regarded in, 162. 
 
 constitutional prohibition of municipal aid, 261. 
 
 statute incorporating purchasers of railroads at foreclosure Bale, 679. 
 TEXAS, statute authorizing railroad mortgages, 63. 
 
 rolling stock is personal property in, 171. 
 
 constitutional prohibition of municipal aid, 262. 
 
 enforcement of executions againsl railroads in, 
 
 statute incorporating purchasers of railroad al foreclosure sale, • 
 TOLLS, when covered by railroad mortgages. S i I ■' omi ,114 120. 
 TRACK, railroad company cannot take up after m< 104. 
 
 TRAFFIC i: \ IKS fixed by Mamie, whether receiver maj diari 
 TRANSPORTATION SUBSCRIPT [ONS, lien of, I 
 TRUST DEED, the usual form of a railroad morl 
 TRUSTEE PROCESS, funds in po P ftn ) ""' 
 
 ISO. 
 TRL'SI EES, railroad mortgages usuallj made to tw ■ more jointly, I 
 
 Nature >>/ the It 
 
 r?Af 
 
 46 lOO
 
 INDEX. 
 
 Reference is to Sections. 
 
 TRUSTEES (continued). 
 
 depends upon relations of the parties, and nature of the property, 357. 
 
 duty of, to protect the security, 358. 
 
 have no power to assent to priority of other debts, 359. 
 
 in possession, are trustees of the corporation and of bondholders, 360. 
 cannot deal in the securities for their private gain, 360. 
 
 represent the bondholders in suits affecting the security, 361. 
 
 failing or refusing to act, bondholders may sue, 362. 
 Effect of notice to, 363, 364. 
 
 is generally notice to the bondholders, 363. 
 
 is not always notice to bondholders, 364. 
 In possession, rights of, 365-370. 
 
 can use the franchise so far as necessary, 365. 
 
 entitled to retain possession until debt is paid, 365. 
 
 after an absolute foreclosure, hold title in trust, 366. 
 may lease the road, 367. 
 
 no right of set-off against, 368. 
 
 retain their trust until it is fulfilled, 369. 
 
 are liable as common carriers, 370. 
 Removal of and filling of vacancies, 371-376. 
 
 when may be removed in ex parte proceeding, 371. 
 
 absent from the country may be removed, 3 72. 
 
 sufficient grounds for must appear, 373. 
 
 when statute providing for election of new trustees void, 3 74. 
 
 may become bondholders to qualify themselves to act, 375. 
 
 when board must be kept filled, 376. 
 Statutory provisions regarding duties and choice of, 377-382. 
 
 court of equity may put in possession, 401. 
 
 may become plaintiff in foreclosure suit brought by bondholders, 433, 436. 
 
 may dismiss proceedings begun by bondholders and sue in another court, 
 436. 
 
 refusal of to perform trust ground for appointment of receivers, 467. 
 
 ex officio as state officers not superseded by receivers, 471. 
 Debts and expenses incurred in management of the property, 547—555. 
 
 lien upon the trust property for repayment, 54 7. 
 
 when receiver is in effect a trustee, 548, 549. 
 
 floating debts of entitled to no priority over other trust debts, 549. 
 
 the lien of redeemable, and confers no right to sale in first instance, 549. 
 
 policy of confining to legitimate objects of the trust, 550. 
 
 contracted for completing railroad, 551. 
 
 a creditor not a trustee has no claim to be reimbursed advances, 552. 
 
 compensation of, 553. 
 
 services of attorney employed in foreclosure suit, 554. 
 
 not liable for use of land outside location of railroad, 555. 
 Liability of as common carriers operating railroad, 556. 
 
 regarded as owners of the road as respects this liability, 556. 
 May use their discretion as to making foreclosure sale, 630. 
 
 706
 
 INDEX. 
 
 Reference is to Sections. 
 
 TRUSTEES (continued). 
 
 cannot properly become purchasers at their own sale, 646. 
 should be made party to suit to set aside foreclosure sale, 651. 
 
 ULTRA VIRES, mortgages of corporate franchises without statutory author- 
 ity. 1-25. 
 
 mortgages for purposes not within the statutory authority, 10. 
 
 corporations may be estopped to claim defence of, 23. 
 
 indorsement or guaranty when binding upon corporation, 35 
 UNDERTAKING, mortgage of, 99-103. 
 
 meaning of word, 100. 
 
 used in connection with other words, 101. * 
 
 word may include after-acquired property, 128. T^ ^P* 
 
 USAGE OF TRADE makes sealed bonds negotiable * J 9§i^fefco*J* 
 
 """' ' ' ■"— -^ 
 
 *rf!k 
 
 VENDORS' LIENS for land sold to railroad cofnpi/nW, 4ll. ? > & ^ 
 VERMONT, statute authorizing railroad mortgages,*^*.* * *, ,••* ,",' V> 
 
 provisions as to mortgages of rolling stock in, 184. ' -^ 
 
 statute authorizing municipal aid to railroads, 263. 
 
 statute respecting duties and choice of mortgage trustees, 379. 
 
 statute protecting laborers upon railroads, 608. 
 
 statute incorporating purchasers at foreclosure sale, 681. 
 VIRGINIA, statute authorizing railroad mortgages, 65. 
 
 statute authorizing municipal aid to railroads, 264. 
 
 provisions for enforcing executions against railroads in, 429. 
 
 statute incorporating purchasers at foreclosure sale, 
 VOTES, of municipalities to aid railroads, validity of, _■ 
 
 meaning of two thirds of qualified Voters, 269. 
 
 effect of is to empower municipal officers to act, 270. 
 
 WEST VIRGINIA, statute authorizing railroad m 
 
 rolling stock is personal property in, 171, 185. 
 
 statute authorizing municipal aid to railroads, 
 
 statute incorporating purchasers at foreclosure Bale, 
 WISCONSIN, statute authorizing railroad mortga 
 
 provisions as to recording mortgages of rolling Btock, I 
 
 statute authorizing municipal aid to railroads, 266. 
 
 statute protecting laborers upon railroad-, 610. 
 
 statute incorporating purchasers at foreclosure sale, 
 
 707
 
 # 
 
 N* 
 
 ^ 
 
 Li !Y 
 
 UNIVE? ORNIA
 
 Ill 
 
 ;