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§ 624. Of the title of purchasers as against mortgage lien, and of mort

gagees as against vendor's lien. § 625. The mortgage lien not impaired by change of route $ 626. The mortgage lien not impaired by consolidation. § 627. Of mortgage trustees. $ 628. Of the duties, liabilities and remuneration of mortgage trustees. $ 629. Of supplying vacancies. § 630. Of the removal of mortgage trustees.



Ø 602. Of the power of corporations in general to borrow and to mortgage.—A corporation has authority to borrow money, to give its notes,' or to issue bonds therefor;; and, as incidental to this power, it may mortgage its property, or give other security for the payment of its indebtedness.5

1 Kent v. Quicksilver Mining Co. 78 N. Y. 159; Curtis v. Leavitt, 15 N. Y. 9; Clark v. Titcomb, 42 Barb. 122; Commissioners of Craven v. Atlantic etc. R. R. Co. 77 N. C. 239; Burr v. McDonald, 3 Gratt. 215; Union Bank v. Jacobs. 6 Humph. 515; Savannah etc. R. R. Co. v. Lancaster, 62 Ala. 555: Oxford Iron Co. v. Snradley, 46 Ala. 98; Booth v. Robinson, 55 Md. 419; Lucas v. litney, 27 N. J. 221; Thompson v. Lambert, 44 Iowa, 239; Philadelphia etc. R. R. Co. v. Stichter (Sup. Ct. of Pa.), 21 Am. Law Reg. N. S. 713; Ward v. Johnson, 95 11. 215; Bradley v. Ballard, 55 Ill. 413; 7 Am. Rep. 656; In re International etc. Society, Law R. 19 Eq. 312; Australian etc. Co. v. Mounsey, 4 Kay & J. 733; Bank of Australia . Breillat. 6 Moore C. P. 152, 193.

2 Taylor on Corporations, $ 125. 3 Commissioners of Craven v. Atlantic etc. R. R. Co, 77 N. C. 289. 4 Commissioners of Craven v. Atlantic etc. R. R. Co. 77 N. C. 289.

5 Hope etc. Ins Co. v. Perkins, 33 N. Y. 401; Nelson v. Eaton, 26 N. Y. 410; Uncas National Bank v. Rith, 23 Wis. 339.

Ø 603. Of the power of railway companies to borrow and to mortgage. It is generally held that railway corporations, being erected for the benefit and accommodation of the public, cannot without legislative authority, either absolutely or conditionally, by way of mortgage, alienate their franchises, or that property without which their franchises could have little more than a nominal existence.' d railway company may, however, assign a call made but not yet payable, and give a specific charg' on money


to arise from the sale of surplus lands as security for a valid pre-existing debt. So alsu, an assignment of rolling stock under similar circumstances may be valid. And property which a railway company has not acquired under the right of eminent domain, and which is not requisite to the performance of its duties to the public, may be alienated or mortgaged without legislative authority.*

And there are cases, holding that a company having anthority to borrow: money for the construction of its railway, has authority also to secure the debt by a mortgage of its property, unless forbidden by statute 5

1 Pullan v. Cincinnati etc. R. R. Co. 4 Biss. 35; Carpenter v. Black Hawk etc. Co. 65 N. Y. 43; Troy etc. R. R. Co. v. Kerr, 17 Barb. 581; Arthur v. Commercial etc. Bank, 11 Miss. 334; State v. Mexican etc. R.R. Co. 3 Rob. (La.) 513; Richardson v. Sibley, 11 Allen, 65, 67; 87 Am. Dec. 100; Commonwealth v. Smith, 10 Allen, 418; 87 Am. Dec. 672; Black v. Delaware etc. Canal, 22 N. J. Eq. 130; Stewart's Appeal, 56 Pa. St. 413; Randolph v. Wilmington etc. R. R. Co. 11 Phila. 502; Hays v. Ottawa etc. R. R. 61 Ill. 422; New Orleans etc. R. R Co. v Harris, 27 Miss. 517; Stewart V. Jones, 40 Mo. 140; Daniels v. Hart, 118 Mass. 543; Pierce v. Emery, 32 N. H. 484; Wood v. Bedford eto. R. R. Co. 8 Phila. 91; Atkinson v. Marietta etc. R. R. Co. 15 Ohio St. 21; Hart v. Eastern Union Ry Co. 7 Ex. 246. But see White Water etc. Canal Co. v. Vallette, 21 How. 414, where it was held that a mortgage might be validly made for the purposes of the regular business of the company: Kennebec etc. R. R. Co. v. Portland etc. R. R. Co. 5) Me. 9; Shepley v. Atlantic etc. R. R. Co. 55 Me. 395.

2 Pickering. v. Ilfracombe R’y Co. Law R. 3 Com. P. 235; Gardner v. London etc. R’y Co. 2 Ch. 201. See, however, Landowners etc. Co. v. Ashford, 16 Ch. Div. 411, 437.

3 Blackmore v. Yates, Law R. 2 Ex. 225; Brown & Theobald's Railway Law, 85.

4 Farnsworth v. Minnesota etc. R. R. Co. 92 U. S. 49; Tucker v. Ferguson, 22 Wall. 527; Hendee v. Pickerton, 14 Allen, 381.

5 Savannah etc. R. R. Co. v. Lancaster, 62 Ala. 555: Kelly v. Alabama etc. R. R. Co. 58 Ala. 489; Commissioners v. Atlantic etc. R. R. Co. 77 N. C. 289.

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8 604. Statutos authorizing borrowing and mortgaging.-In New York, the General Railroad Act of 1850 authorizes companies formed thereunder " from time to time to borrow such sums. of money as may be necessary for completing and finishing, or operating their railroad, and to issue



and dispose of their bonds for any amount so borrowed, and to mortgage their corporate property and franchises to secure the payment of any debt contracted by the company

for the

aforesaid.” So in California, railway companies are authorized by statute to mortgage their property. And in England, the Companies' Clauses Consolidation Act of 1045 enacts that if the company be authorized by the special act of incorporation to borrow money on mortgage or bond, it shall be lawful for it, subject to the restrictions contained in the special act of incorporation; to borrow on mortgage or bond such sums of money as shall from time to time, by an order of a general meeting of the company, be authorized to be borrowed, not exceeding in the whole the sum prescribed by the special act of incorporation, and for securing the repayment of the money so borrowed, with interest, to mortgage the undertaking and the future calls on the stockholders, or to give bonds in the manner thereinafter mentioned. The same statute further provides, that if, after having borrowed any part of the money so authorized to be borrowed on mortgage or bond, the company pay off the same, it shall be lawful for it again to borrow the amount so paid off, and so from time to time; but that the power of reborrowing shall not be exercised without the authority of a general meeting of the company, unless the money be so reborrowed in order to pay off an existing mortgage or bond.4

1 N. Y. Laws of 1850, ch. 140, $ 10.

2 Cal. Acts of 1861, ch. 532, § 15, as amended by Cal. Acts of 1862, ch. 424, § 1; McLane v. Placerville etc. R. R. Co. 66 Cal. 606.

3 8 Vict. ch. 16, § 33. See, also, Hodges on Railways (7th ed.), 121. 4 4 Vict. ch. 16, $ 39,

The power


Ø 605. Statutory restrictions-Exceptions in favor of current obligations-Lloyd's bonds. —

of a corporation to borrow is sometimez restricted by its charter or by the incorporating act, in which case it can borrow money only within the limits and in the manner so authorized. In England it is provided by the standing orders if Parliament for the session of 1889, tbat no railway company shall be authorized to borrow a larger sum than one-third of its capital stock, or to borrow at all until half the capital be paid up.? If a company be prohibited from borrowing, it cannot issue bills of exchange. So, also, an overdraft of a banking account is in effect a borrowing; therefore, if it has no power to borrow, it is equally ultra vires to overdraw the banking account. But it would seem that a prohibition against horrowing on mortgage or bond before a certain amount of capital is paid, would not extend to borrowing without the security of mortgage or bond, nor to incurring debts in the crdinary course of business. And notwithstanding restrictions upon its power to borrow, it may issue Lloyd's bonds in acknowlment of valid subsisting debts so incurred. These bɔnds are acknowledgments under seal of debts due for a bona fide consi leration. They usually purport to be for work done or materials supplied for the purposes of the undertaking; and, when in fict issued for those purposes, there is no doubt of the right of their holders to sue upon them and to issue cxecution against the company.' So, also, a person who lends money to a company for the purpoze of paying its debts, whether existing, or, it would seem, s.ibsequently incurred, has a valid


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claim against the company to the extent to which liis loan has been so applied.8 But the burden of showing that the loan has been applied in payment of debts lies upon the claimant.' The English statute known as the “Cheap Trains Act,” after reciting that many railway companies have borrowed money,

in a manner unauthorized by their acts of incorporation, upon the security of “loan notes” which have no legal validity, but which have been received in good faith and issued for the most part for the lawful purposes

of the undertaking and in ignorance of their legal invalidity, declares it expedient to confirm such as have been already issued, but imposes a penalty for any

further issue. 11 1 Baroness Wenlock v. River Dee Co. 10 App. Cas. 354. See 7 & 8 Vict. ch. 18, § 19.

2 House of C. Stand. Ord. (for 1839) 153; House of L. Stand. Ord. (for 1889) 112; 1 Hodges on Railways (7th ed.), 13.

3 Bateman v. Mid Wales Ry Co. Law R. 1 Com. P. 499. 4 Blackburn etc, Soc. v. Cunliffe etc. Co. 22 Ch. Div. 61. 5 Nowell v. Andover etc. Ry Co. 3 Giff. 112.

6 Fontaine v. Cormarthen etc. R’y Co. 5 Eq. 316, 325; Browne & Theobald's Railway Law, 85.

7 White v. Cormarthen etc. R’y Co. 33 Law J. Ch. 93; S. C 1 Hem & N. 786; In re Bagnalstown etc. Ry Co. I. R. 4 Eq. 505, where the cases are fully reviewed.

8 Blackburn etc. Soc. v. Cunliffe etc. Co. 22 Ch. Div. 61; 9 App. Cas. 857; Bironess Wenlock v. River Dee Co. 19 Q. B. Div. 155; In re Cork etc Ry Co. 4 Ch. 748; In re German Mining Co. 4 De Gex, M. & G. 19; Corry v. Londonderry etc. Co. 29 Beav. 263; Troup's Case, 29 Beav. 353; Ulster Ry Co. v. Banbridge etc. R’y Co. Ir. Rep. 2 Eq. 190. See In re National Permanent Benefit Building Soc. Ex parte Williamso:2, 5 Ch. 379; Browne & Theobald's Railway Law, 85.

9_Blackburn etc. Soc. v. Cunliffe etc. Co. 22 Ch. Div. 61; 9 App. Cas. 857; Browne & Theobald's Railway Law, 85.

10 7 & 8 Vict. ch. 85.
11 7 & 8 Vict. ch. 85. § 19; 1 Hodges on Railways (7th ed.), 131, 132.


$ 606. Of the extent of the statutory authority.-A statute subjecting the road and chartered rights of all railroad companies to sale for their

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