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leases, or the bonds of another railroad compary which it receives in payment of a debt due itself, and which it sells for value or transfers in payment of its own debts, the guaranty being given as the means of augmenting the value of the bonds or to enable it to obtain an adequate price for them."

1 Railroad Co. v. Howard, 7 Wall. 392; Bonner v. City of New Orleans, 2 Wood, 135.

2 Low 7. California Pacific R. R. Co. 52 Cal. 53; Taylor on Corporations, § 127..

3 Rogers Locomotive Works v. Southern R. R. Assoc. 34 Fed. Rep. 278.

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§ 608. Authority to mortgage property and to mortgage franchises, distinguished.--To confer upon a corporation the power to mortgage its property, it is not requisite that the words of the statute or of its charter should expressly authorize it so to do. Thus, authority to sell its property is held to give by implication authority to mortgage its property. But no implied power would be thereby conferred to mortgage its franchise. And the weight of authority is adverse to any implication of authority to mortgage the corporate franchises even from an express power to mortgage the property of the company. Such a power is not to be lightly presumed. It is said, however, that a corporation authorized by its charter to mortgage its "means, property and effects," may mortgage any of its franchises other than that of being a corporation. On the other hand, the power to mortgage the franchises of a corporation necessarily implies the right to transfer both the franchises and the corporeal property requisite to their exercise, to the purchaser at the foreclosure sale. A mortgage of franchises and property may create a valid lien

upon the latter, although illegal with respect to the former.7

1 East Boston etc. R. R. Co. v. Eastern R. R. Co. 18 Allen, 422.

2 McAllister v. Plant, 54 Miss. 106.

3 McAllister v. Plant, 54 Miss. 106.

4 Pullan v. Cincinnati etc. R. R. Co. 4 Biss. 35; Pollard v. Maddox, 28 Ala. 321; Dunham v. Isett, 25 Iowa. 284. But see Pierce v. Miliran 'ee etc. R. R Co. 24 Wis. 551; 1 Am. Rep. 203; McAllister v. Plant, 54 Miss. 106. 5 Meyer v. Johnston, 53 Ala. 237. Cf. Louisville R. R. Co. v. Metcalf, 4 Met. (Ky.) 199.

6 New Orleans etc. R. R. Co. v. Delamore, 114 U. S. 501: Galveston etc. R. R. Co. v. Cowdrey, 11 Wall. 459; Phillips v. Winslow, 18 Mon. B. 431. Cf. Traer v. Clews, 115 U. S. 534.

7 Central etc. Mining Co. v. Platt, 3 Daly, 263.

§ 609. Of the authority of directors herein.— When authority has been conferred upon a corporation to borrow money and to pledge its personalty or mortgage its realty as security for the debt, the right to exercise this power vests in the directors of the company, unless ex pressly reserved to the shareholders; and an executive committee of the directors, authorized by the board to procure a loan and possessing power according to the constitution of the corporation to transact "any official business," may execute a mortgage." The charters of many corporations, however, and the general laws of some of the States, prohibit the directors to mortgage the corporate property without authority from the shareholders. Thus, in Massachusetts no mortgage of the real estate of a corporation can be legally made by the directors, unless authorized by a vote of the stockholders at a meeting called for that purpose. So, also, in Texas, no mortgage of a railroad is valid, unless authorized by a vote of two-thirds of all the stock of the company.* And in England the power to authorize the borrowing of money upon bond or mortgage is vested in the

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shareholders, in general meeting assembled. This provision of the English act is held to be directory only, and does not invalidate securities issued without the authority of a general meeting, even in the hands of the original allottee, if he has no notice of any irregularity. In this country it is held that the public has no interest in the compliance with these restrictions; that they are for the benefit and protection of the shareholders alone; that they cannot be plea led by the creditors of the company; and that, when a mortgage has been executed by the directors, and the bonds have been issued, the company receiving the proceeds thereof, the shareholders will be estopped from pleading that the action of the directors was taken without authority from them." But a court of equity, in a case where it would interpose at the suit of a shareholder to enjoin the president of the company from illegally delivering bonds in payment of the debts of other corporations which he controls, will step in subsequently to the delivery, and cancel the bonds in the hands of holders with notice, and release the trust deed securing them.10

1 Taylor v. Agricultural etc. Assoc. 68 Ala. 229; Burrill v. Nahant Bank, 2 Met. 163; 35 Am. Dec. 335; Hendee v. Pinkerton, 14 Allen, 331; Tripp v. Swanzey Paper Co. 13 Pick. 291; Wood v. Whelen, 93 Ill. 153.

2 Taylor v. Agricultural etc. Assoc. 68 Ala. 229; Taylor on Corporations, § 225.

3 Mass Pub. Stat. ch. 106, § 23. Held not applicable to foreign corporations in Saltmarsh v. Spaulding, 147 Mass. 224; 4 R'y & Corp. Law J. 151, 152

4 Tex. Rev. Stat. art. 4220.

5 8 Vict. ch. 13, § 38.

6 In re Romford Canal, 24 Ch. Div. 85; Landowners etc. Co. v. Ashford, 16 Ch. Div. 1; Fontaine v. Cormarthen R'y Co. 5 Eq. 316; Browne & Theoball's Railway Law, 85; Hodges on Railways, 121.

7 Thomas v. Citizens' Horse R. R. Co. 104 Ill. 462.

8 Hervey v. Illinois Midland R'y Co. 28 Fed. Rep. 169.

9 Hadder v. Kentucky etc. R. R. Co. 7 Fed. Rep. 793; Texas etc. R'y Co. v. Gentry, 69 Tex. 625; McCurdy's Appeal, 65 Pa. St. 290. 10 City of Chicago v. Cameron, 120 Ill. 447.

§ 610. Legislative recognition of ultra virəs mortgage.—'l he commonwealth alone being interested in restraining railway corporations from alienating that property, without which their duties to the public could not be performed,' it may by subsequent legislation cure the invalidity of a mortgage executed without authority. And this may be done either by a statute expressly directed to that end, or indirectly by legislative recognition of the mortgage as an existing obligation.3

1 Hatcher v. Toledo etc. R. R. Co. 62 Ill. 477.

2 White Water etc. Canal Co. v. Vallette, 21 How. 414; Shaw v Norfolk County R. R. Co. 5 Gray, 162; Shepley v. Atlantic etc. R. R. Co. 55 Me. 395

3 Troy etc R. R. Co. v. Boston etc. R. R. Co. 86 N. Y. 107; Richards v. Merrimac etc. R. R. Co. 41 N. H. 127; Shepley v. Atlantic etc. R. R. Co. 55 Me. 395; Gardner v. London etc. R'y Co. Law R. 2 Ch. App. 201; Shrewsbury etc. R'y Co. v. Northwestern R'y Co. 6 H. L. Cas. 113; East Anglian R'y Co. v Eastern Counties R'y Co. 11 Com. B. 775; Winch v. Birkenhead etc. R'y Co. 5 De Gex & S. 562; Bagshaw v. Eastern Union R'y Co. 7 Hare, 114; Northern R'y Co. v. Eastern Counties R'y Co. 21 Law J. Ch. 8.

611. Of the remedies of shareholders and creditors with respect to an ultra vires mortgage or debt.-At the instance of a stockholder, equity will enjoin the execution of an ultra vires mortgage.1 When a company mortgages its property without legal authority, any creditor standing in the same right with the mortgagee may file his bill in equity to compel an equal distribution of the mortgaged estate among all the creditors of that class. Or the creditors may have recourse against the directors. For where a company ultra borrows money vires, the directors by whose authority it was done