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$ 1469. Forfeiture on creditor's bill.— The act of June 16, 1852, of the legislature of Indiana, provided that whenever a judgment was recovered against a corporation other than banking, and it remained unpaid for the space of a year after the rendition thereof, and execution was not stayed by appeal or supersedeas, the proper court should have power to declare the franchises of the corporation forfeited, and to appoint a receiver, who was to reduce the assets of such corporation to possession and pay the debts of the same. Held, that under this statute a court could not, upon the bill of a judgment creditor of the corporation, forfeit its charter, that having been granted by the state, which alone had the right to have the court forfeit it, although upon a bill by a creditor setting forth the facts made essential by the statute, a receiver would be appointed for such corporation and other necessary equitable relief granted. Gaylord v. Fort Wayne, M. & C. R. Co.,* 6 Biss., 286.

$ 1470. Corporate assets. – Assets of a corporate company are regarded in equity as held in trust for the payment of the debts of the corporation, and courts of equity will enforce the execution of such trusts in favor of creditors, even when the matter in controversy may not be recognizable in a court of law. Bradley v. Converse, * 4 Cliff., 375.

$ 1471. Corporate assets are usually controlled and managed by directors or trustees, but courts of equity will not permit such managers, in dealing with the trust, to obtain any undue advantage for themselves to the injury or prejudice of those for whom they are acting in a fiduciary capacity. Ibid.

$ 1472. Exact equality and benefit may be enjoyed, but corporate officers or trustees are forbidden to protect, indemnify or pay themselves at the expense of those who are similarly situated in relation to the same funds. Ibid.

$ 1473. The property of corporations is held in trust for creditors, and may be pursued by them into whosesoever hands it may come, as well after as before dissolution, unless it may have come to the hands of bona fide purchasers. Fisk v. Union Pac. R. Co., * 10 Blatch., 519.

$ 1474. Where it is sought to charge the assets of a corporation in the hands of shareholders with an equitable lien in favor of creditors, the bill must allege that such assets were divided among the shareholders before the corporate debts were paid. United States v. Globe Works, 7 Fed. R., 530.

$ 1475. Waiver of forfeiture.— The government may waive a forfeiture of a charter, and will be considered as having done so unless it be shown to have been enforced. Kanawha Coal Co. v. Kanawha & Ohio Coal Co., 7 Blatch., 403.

$ 1476. Bankruptcy.- Proceedings in bankruptcy are not an exclusive method of winding up insolvent corporations or companies. Chandler v. Siddle, 3 Dill., 477.

$ 1477. Omission to elect officers.- Where a medical association intentionally neglected to elect the president, vice-president, and secretary and treasurer, for several years after the organization of the society, and at the times directed by its charter; and neglected to fill the vacancies occurring in the medical board; and some of the members withdrew from the society, declaring that they considered the corporation dissolved; and the association determined, by a resolve of the board, to divide the property and effects of the association among its members, the court instructed the jury that, on the finding of these facts, they would find that the corporation was dissolved. United States v. Williams, 5 Cr. C. C., 62.

$ 1478. Power of equity.- A court of chancery, by virtue of its general equity powers, in the absence of statutory provisions, is not authorized to dissolve a corporation, or to distribute the assets of a corporation, which is pursuing its ordinary business, ainong its shareholders, so as to effect a practical and actual dissolution. Hardon v. Newton, * 14 Blatch., 378.

$ 1479. Power to close up business.- The state of Indiana chartered a bank, providing that it “ should continue as such until the first day of January, 1857," and further providing that all banking powers should cease after the first day of January, 1857, "except those in. cidental and necessary to collect and close up its business." In 1849 the bank was sued in ejectment. In 1861 this suit was still pending, when the attorney of the bank asked for an abatement of the writ of error on the ground that since the trial of the case in the circuit court, and before the prosecution of the writ of error, the bank had been dissolved and ceased to exist as a corporation by reason of the expiration of its charter. Held, per Wayne, J., that there could be no abatement of the case upon the counsel's suggestion, as it was declared in the charter of the bank that though its charter should continue as such until the first of January, 1859, and that all its banking powers should cease after the first day of January, 1857, it should have “ all the necessary and incidental powers to collect and close up its business,” within which the rights of the plaintiff in the ejectment suit were comprehended. Pomeroy v. Bank of Indiana, * 1 Wall., 23.

$ 1480. Enjoined from taking steps to dissolve.- Where a corporation was defendant in a suit in equity and was liable to respond pecuniarily to the plaintiff in the suit, the court restrained the corporation from taking any proceedings for its own dissolution, or for the appointment of a receiver of its effects, or for the distribution of its effects among its stock


holders or any other persons, or from making any distribution or transfer of any of its effects, the pursuit of the stockholders making it necessary to retain jurisdiction over the corporation. Fisk v. Union Pacific R. Co.,* 10 Blatch., 518.

$ 1481. Proceedings must conform to law.- The trustees of a corporation petitioned the supreme court of New York for a dissolution of the corporation, proceeding under 2 R. S., 466, a statute which required that on the papers provided for by certain sections of such statute being filed, “an order shall be entered requiring the persons interested in such corporation to show cause, if any they have, why such corporation should not be dissolved, before some master in the court, to be named in such order, at some time and place therein to be specified, in less than three months from the date thereof." Notice of the contents of such order was to be published in certain newspapers; and another section of the statute provided for a hearing before the master, and for a taking of testimony by him, and for a report thereunder by him to the court; and, finally, section 63 provided as follows: “Upon the giving in of the report of the master, if it shall appear to the court that such corporation is insolvent, or that for any reason a dissolution thereof will be beneficial to the stockholders, and not injurious to the public interest, a decree shall be entered dissolving such corporation, and appointing one or more receivers of its estate and effects, and such corporation shall thereupon be dissolved and shall cease.” Upon presentation of the petition as above stated, the court made an order, not to show cause, but an order that the said corporation be and the same hereby is dissolved, and shall from henceforth cease and determine, except only that power is hereby reserved to the officers of said company to convey its property to the said receiver as hereby directed.” Held, that the powers conferred upon the supreme court by the foregoing statute were special powers, to be exercised in a special manner, and over a subject not within the ordinary jurisdiction of the court; that these powers are to be exercised on the performance of prescribed conditions; that no presumption of jurisdiction attends the judgment of the court, but that the facts essential to the exercise of the special jurisdiction must appear upon the record of the court; that the order of the supreme court dissolving the corporation was without jurisdiction. It had no power to make an order of dissolution without first making an order to show cause, returnable not less than three months afterwards, and without seeing that the order was duly published and without receiving the report of the master. Until after that should have been done it had no power to make a decree dissolving the corporation, and only " thereupon” can the corporation be dissolved. None of these prerequisites were complied with, and the corporation retained its corporate existence and its title to its property, notwithstanding these proceedings before the supreme court. Subsequently it filed a voluntary petition in bankruptcy. Held, that it had power to do so, and that an application to vacate an adjudication by the bankrupt court, that the corporation was bankrupt, would not be allowed on the ground that it was dissolved when its petition in bankruptcy was filed. In re Pensacola Lumber Co., * 8 Ben., 171.

$ 1482. The jurisdiction of the New York supreme court to make an order dissolving a corporation exists only after the notice, required by the New York statutes, has been given. Freeman's National Bank of Boston v. Smith, 13 Blatch., 221.

$ 1483. Ou a petition in the supreme court of New York for a voluntary dissolution of a corporation, it is necessary that an order be entered calling upon all persons interested to show cause against the prayer of the petition, at some time and place not less than three months from the date of the order. Ibid.

$ 1481. Life insurance company, failure of.— The failure of a life insurance company is prima facie proof that its operations have been conducted in a fraudulent manner. Buck v. Insurance Co., 4 Hughes, 420.

$ 1455. Discharge of stockholders, erroneous.- In proceedings to wind up an insolvent corporation, to which stockholders, who are personally liable if the assets of the company be insufficient to pay its debts, are not made parties, a decree discharging them from all liability is erroneous. Terry v. Commercial Bank, 2 Otto, 455.

§ 1486. Where a bill was filed by creditors to wind up the affairs of a bank, the stockholders of which were personally liable for any debts unpaid after the assets of the bank were exhausted, a decree, which ordered that the bank, its officers and stockholders, be forever discharged from any and all liability for and on account of any debt due by the bank or its stockholders, was held void, the creditors of the bank not having been paid the full amount of their claims, and the stockholders not having been made parties to the bill. Ibid.

$ 1457. Whether a creditor must put his demand into a judgment.— It may be doubted whether a creditor of a dissolved corporation may not, under certain circumstances, claim to be exempted from the operation of the rule that a creditor must put his demand into judg. ment against his debtor and exhaust his remedies at law before he can proceed in equity to subject choses in action to its payment. Terry v. Anderson, 5 Otto, 636. $ 1488. If he can, it is upon the ground that the assets of the corporation constitute a trust fund which will be administered by a court of equity in the absence of a trustee; the principle being that equity will not permit a trust to fail for want of a trustee. Ibid.

$ 1459. Defense to suit by a receiver.- A bank was by judicial forfeiture deprived of its charter, and one Robertson was appointed a trustee to wind up its affairs. Subsequently he was removed and required to deliver the effects of the bank to a receiver, who brought suit in the name of Robertson, in whom the legal title still rested, upon two notes. Held, that the delinquent debtor could not plead the extinguishment of his debt by the judgment of forfeiture, nor could be be permitted to show (not having a meritorious defense to the suit) that Robertson, in whose name the suit was brought, was no longer the real party in the suit. Lum v. Robertson,* 6 Wall., 277.

$ 1490. Reduction of number of trustees.- A corporation consisting of the board of trustees of a university is not dissolved by a reduction of the number of trustees to a less number than are authorized to act by the charter, by failure to elect when vacancies occur. Vincennes University v. Indiana, 14 How., 269.

$ 1491. Charging receiver personally.– Where it is sought to make the receiver of a corporation personally liable, the bill shoulď charge that he was notified of the existence of the debts. United States v. Globe Works, 7 Fed. R., 530.

$ 1492. Appointment of receiver.- Defendants obtained judgment against plaintiff, a banking corporation, and thereupon it filed a bill in equity, confessing its insolvency and asking that a receiver be appointed. Held, that a court of equity will not appoint a receiver for a banking corporation simply because it is insolvent, nor at its own instance. Hugh v. McRae, * Chase's Dec., 466.

$ 1493. Equity may appoint a receiver to take possession of a bridge owned by an insolvent corporation and apply tolls and profits derivable therefrom to satisfy a judgment against the company. Covington Drawbridge Co. v. Shepherd, 21 How., 124.

$ 1494. Not eligible as a receiver.- One who has been officially and responsibly connected with the mismanagement which brought about an insurance corporation's insolvency and ruin is not competent to act as receiver for it. Buck v. Insurance Co., 4 Hughes, 420.

§ 1495. Priority of United States.- A bill which seeks to establish the priority of a claim in favor of the United States must show whether the corporation was insolvent at the time when it was being wound up, and whether the receiver was notified of the debt. United States v. Globe Works, 7 Fed. Pc., 530.

$ 1496. A Missouri statute provided that upon the rendition of a final judgment dissolve ing an insurance company or declaring it insolvent, all the assets of such company should vest in fee simple and absolutely in the superintendent of the insurance department of the state, etc., who should hold and dispose of the same for the use and benefit of the creditors and policy holders of such company and such other persons as might be interested in such assets. Held, that a charter granted a life insurance company while this statute was in force was governed by it. That a suit having been previously instituted in a court of Louisiana by citizens of that state against an insolvent company, the superintendent of the insurance department, on being admitted a party thereto, was entitled, by reason of his citizenship, to remove it to the United States circuit court. Relfe v. Rundle, 13 Otto, 222.

& 1497. Policy holders in a mutual life insurance corporation created by the state of Missouri, who signed the constitution of the corporation, thereby assented to all of the provisions of the statutes of the state of Missouri, where the corporation was created, including that provision which vests all its property in the superintendent and gives him authority to wind up its affairs. And where a receiver in Louisiana has been appointed at the instance of Louisiana policy holders in such corporation, and has taken possession of its assets in that state, he will be directed to turn over such assets to the officer designated by the Missouri law to collect them and settle its affairs. Rundel v. Life Association of America, * 10 Fed. R., 720.

$ 1498. In Orezon.- Under the Oregon statute (Oregon Laws, page 528), while the majority of the stock at a stockholders' meeting may authorize the dissolution of the corporation, they cannot and do not by such authorization in fact dissolve it or compel the directors to do SO; and in case the directors refuse to dissolve it, their only remedy is by the creation of a new board, who will effectuate the authority conferred by a vote of the stockholders in favor of dissolution. Wallamet Falls Co. v. Kittridge,* 5 Saw., 44.

$ 1499. The dissolution of a corporation under the Oregon statute (Oregon Laws, page 528) prevents it from engaging in a new business, but does not prevent the proper settlement of its affairs. Until this is accomplished the corporation continues in existence. Ibid.



[Consult subdivisions VII, VIII, IX, X, XI. As to Municipal Subscriptions, see BONDS.)

SUMMARY – Çonstruction of charter; doctrine of ultra vires, SS 1500–1502.— Crossing other

roads, SS 1503–1508.- Consolidation, SS 1509–1516, 1518.– Mortgage on road running through several states; jurisdiction, $ 1517.- Power of sale; preferred stockholders, Ss 1518, 1519.— Mortgage of after-acquired property, $ 1520.- Power to sell road, SS 1520, 1521.Vendors of railway accepting preferred stock, $ 1522. — Money does not pass by sale on foreclosure, $ 1523; what property passes, & 1524.- Effect of making a road a public highway, SS 1525, 1526. – Grant of right of way without reservation, $ 1527.— Lands taken subject to right of way, $ 1528.— Terminus of Union Pacific Railroad, $ 1529.- Location of right of way, $ 1530.- Bonds issued in aid of Union Pacific Railroad Company, SS 1531–1535, 1547.— Net earnings, SS 1536–1540, 1542-1544.— Application of earnings to improvements, $ 1541.- Bonds issued to Kansas Pacific Railway Company, SS 1545, 1516.— Sinking fund established by act of 1868, § 1548. — Union Pacific Railway subject to control, SS 1549, 1550.— Act authorizing suit against Union Pacific Ruilroad Company, $ 1551.

$ 1500. Railway charters are liberally construed, and the question of ultra vires has not been of late years construed with that strictness that existed in former times. Dimpfel v. Osio & Mississippi R. Co., SS 1561-64.

$ 1501. Where a railway corporation has acted under a contract and received the benefits arising from it, it is not competent for it to deny its validity as being ultra vires. Ibid.

$ 1502. Where a railway company made a contract of purchase of another company in 1875, which other company was operated as a part of the purchasing company for four years, and a mortgage thereof to secure bonds issued had been made, and the bonds had passed into the hands of bona fide purchasers, all this taking place without any objection on the part of a stockholder having been made, held, that neither the purchasing railway company nor its stockholders can object to what was done on the ground that it was beyond the power of the company. Ibid.

$ 1503. The provision of the constitution of Texas, that “every railroad company shall have the right with its road to intersect, connect with, or cross any other road,” is not self. executing. It does not authorize the railroad companies to cross each others' tracks until by negotiations or by proper legal proceedings they shall have fixed their right to make such crossing. Mo., K. & T. Ry Co. v. Texas & St. L. R’y Co., SS 1552–55.

$ 1504. Railway crossings are such sources of danger of collision in the transit of trains as cannot adequately be compensated by any moneyed consideration, and will therefore be enjoined unless warranted by the pressure of paramount necessity for the service of the public convenience or of the state. Ibid.

$ 1505. When the right of way over private property, or the right of crossing an established public highway, has been acquired and fixed by acts of the competent parties, either voluntarily contracting or judicially constrained to consent, then certain common rights attach to this new acquisition of right, and they will be considered and protected and enforced by the federal courts whenever the character of the parties brings the case within their jurisdiction. Ibid.

$ 1506. Where the legislature of a state has not prescribed the manner in which one rail. re shall cross another, a court of equity may control the railroads as to such crossing. Chicago & N. W. R. Co. 1. Chicago & Pacific R. Co., SS 1556–58.

$ 1507. The fact that one railroad had been constructed does not give it any absolute rights, except so far as the question of mere property is concerned, over a new railroad, which takes its rights always subject to the power of the state to authorize any other railroad to cross or intersect it, as the case may be. Ibid.

$ 1508. The Chicago & Pacific Railroad Company undertook to lay its railroad across the line of the Chicago & Northwestern Railroad Company at a point where the grade of the Litter road was one thousand feet to the mile, which grade was increased by a sharp curve through a deep cut about a thousand feet in length, which would shut out from view trains approaching from the west on either line, were the crossing made at the point designated. If trains were required to stop on that grade, locomotive engines could not start and carry over it as heavy trains by at least five loaded cars as they could without stopping. In certain conditions of the track it would be impossible to stop heavily loaded trains, coming down the grade, as required by law. A crossing at another point by a bridge could, however, be made at an extra expense of only about $13,000, and such crossing would be perfectly safe and fea. sible. Held, that an injunction would be issued to restrain the making of the crossing at the point first named, and the court inclined to apportion the expense, under the circumstances of the case, of constructing the elevated crossing, between the two roads, instead of compelling the new road to bear all of the expense. Such an apportionment being made because the old railroad caine in and asked for the interposition of a court of equity, and under the equity rule might be required to bear its proper share of the expense, and because the crossing at the elevation was for its advantage as well as for that of the new company. Ibid.

$ 1503. Two or more railroad companies cannot consolidate. It is not within the scope of their authority unless power be conferred by the legislature. Pearce v. Madison & Indianapolis R. Co., SS 1559–60. See SS 324, 599, 830–832, 1236, 1396, 1793, 1871.

$ 1510. A railroad company formed of two other railroad companies, which consolidated without authority from the legislature, has no power to purchase a steamboat to run on a river in connection with the railroad, and notes given by officers of such consolidated company for the price of the steamboat are ultra vires, and cannot be collected by suit against the two companies consolidated. Ibid.

$ 1511. In Illinois, legislation has encouraged the consolidation of railways into systems, Dimpfel v. Ohio & Mississippi R'y Co., SS 1561–61.

$ 1512. Power to consolidate includes power to do anything necessary to effect a consolidation. Ibid.

$ 1513. The statutes of Indiana authorize railway companies to consolidate in general terms, but make no provision as to the consent of stockholders; a case presenting a question as to the consent of the stockholders to the consolidation of their corporation must be adjudicated upon general principles of law regardless of the statutes. Mowrey v. Indianapolis & Cincinnati R. Co., SS 1565–73.

$ 1514. The consolidation of two railway companies, under the Indiana statutes, extinguishes them both. A consolidated corporation is a new company, distinct from all the old ones out of which it was formed. Ibid.

$ 1515. A director, who is present at a meeting of his board when a proposed consolidation is discussed and a meeting of stockholders called to approve the same, and who makes no objection to such consolidation and meeting of shareholders, will be held to consent to such proceeding; but such consent to the proposed consolidation does not estop the director, after resigning his office as such, from proceeding as a stockholder to enjoin such consolidation. Ibid.

$ 1516. Where a corporation created by the laws of Iowa consolidated with one created by the laws of Missouri, by virtue of the laws of both states, the consolidated company remained a corporation of Iowa for the purposes of the jurisdiction of federal courts. Muller v. Dows, SS 1574–79.

§ 1517. A federal court may foreclose a mortgage covering a line of railway running through several states. Ibid.

$ 1518. The Savannah & Alabama Railroad Company by its charter had power “to have, purchase, possess, enjoy, and retain lands, rents, hereditaments, tenements, goods, chattels and effects, of whatsoever kind, nature or quality the same may be, and the same to sell, grant, demise, alien or dispose of," which power was, by reference to the charter of the Savannah & Alabama Company, transferred to the Georgia & Florida Railway Company, which by its charter might at any time incorporate its stock with the stock of any other company on such terms as might be mutually agreed upon. These two powers thus given to the Georgia & Florida Railway. Company were conferred upon the South Georgia & Florida Railroad Company subsequently. Held, that this last company had express power to incorporate its stock with the stock of any other company; that this power enlarged its ordinary power to sell and dispose of property belonging to it, and that a sale of its road, equipment and franchises to the Atlantic & Gulf Railroad Company was not ultra vires, but lawful and valid; that the South Georgia & Florida Ruilroad Company, having been given in consideration for its road, equipment and franchises a priority as to its bonds and mortgages, and its stock having been incorporated with that of the Atlantic & Gulf Railroad Company, and it having thus received all that it stipulated for therefor, it became merged in the Atlantic & Gulf Railroad Company, and could not dispute the legality of the sale and transfer of its road, equipment and franchises to that company. Branch v. Jesup, SS 1580-86.

$ 1519. A quantity of guarantied scrip (i. e., certificates of preferred stock), having been given by the Atlantic & Gulf Railroad Company to the South Georgia & Florida Railroad Company in payment for its road, etc., which scrip or preferred stock was given to contractors in payment for building the suid railroad, held, that such contractors, by accepting this scrip, became preferred stockholders in the Atlantic & Gulf Railroad Company, and the acceptance of the stock by them was an acknowledgment of the validity of the contract of sale between the two companies, the issue of the stock being in part performance of that contract. Held, further, that the holders of this preferred stock who were, before becoming

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