11. And it is, we think, impossible to doubt that the final result * arrived at, is far more consonant with acknowledged principles than the one first attempted to be maintained, and is attended with fewer embarrassments and refinements. And it is by no means certain that it is not equally in accordance with

been deposited with an agent of a railway company, with power to sell or pledge the same, for the purpose of raising money for the use of the company, and which it was alleged had been misapplied by such agent, and were now in the hands of numerous parties, upon different and independent contracts, which were severally alleged to be invalid as against the company, could not be maintained against the agent, and the several persons into whose hands he had passed the securities, there being no privity among the several defendants. But upon general principles of equity, it would seem that such a joinder amounts to multifariousness only when the securities in the hands of the different defendants are wholly distinct; in which case only the agent, and the particular person or persons obtaining each separate parcel of the securities, constituting one transfer, should be joined. But if the fund were one and inseparable, all participating in its transfer may be joined. Lexington & Big Sandy Railw. v. Goodman et als., 9 Am. Railw. Times, No. 52.

In a very recent case, before V. C. Stuart, it was decided, upon great consideration, that where the directors of a joint-stock corporation issue debentures (which are, in form, the bonds of the company, but not negotiable) without complying with the requirements of the deed of settlement, in regard to borrowing money, and such securities came into the possession of bonâ fide holders, for value, without notice of any infirmity affecting them, such holder could not recover for them, as against the great body of the shareholders. The learned Vice-Chancellor professed to base his judgment upon the authority of Ernest v. Nicholls, 6 H. Lord's Cases, 401.

The learned judge seems to have arrived at a similar conclusion to that stated in the text, that persons dealing in the market for the debentures of a company of this sort, are bound to use reasonable precaution in seeing to the authenticity of the documents they are purchasing. But see Greenwood's case, 23 Eng. L. & Eq. 422; s. c. 3 De G. M. & G. 471. Athenæum Assurance Co. v. Pooley, 31 Law Times, 70. In a later English case, however, it was held, that where shares in a company have been issued fraudulently, a bonâ fide purchaser of such shares in the market, before any bill has been filed impeaching the transaction, is entitled, upon the winding up of the company, notwithstanding the fraud, and notwithstanding that he bought the shares at a very great discount, to prove on equal terms with the other shareholders of the company who have bought their shares at par; but this privilege does not extend to any person who bought the shares after the filing of the bill, unless his vendor was a bonâ fide holder of the shares before the bill was filed; and the onus of showing that such was the case is upon him. Barnard v. Bagshaw, in re the Lake Bathurst Australasian Gold-Mining Co., 1 H. & M. 69.

the soundest principles of equity and moral justice. For whatever may be said of the duty of corporations to employ only reliable directors and transfer agents, and of the justice of the company being bound by their acts, within the apparent scope of their employment, all of which are in general terms most undeniable propositions, still, something is due to common prudence and reasonable caution on the part of those who deal in stocks, to see at least what the charter and books of the corporation will at once exhibit to any one who will examine.

And if, instead of making reasonable examination of matters obviously within his reach, one sits down blindly to adventure millions upon a spurious issue of stock in such sums and at such times as to induce most prudent men to hesitate about its genuineness, it is perhaps not unreasonable that he should be held bound by such facts as the slightest examination must have disclosed. This is the rule in regard to most commercial and business transactions, and we see no special hardship in its application here, within reasonable limits. In a recent English case,11 debentures, under the common seal of a joint-stock company, were given to P. in July, 1854, in pursuance of an arrangement made between him and the chairman of the directors, which was a fraud upon the company. These debentures were afterwards bought by another in the market, in the ordinary course of business. The last transfer was registered in the books of the company, and interest was paid to July, 1855, but the matter was not made known to the shareholders till December in that year, when an investigation of the affairs of the company took place, and further payment of interest was refused. It was held, that although the purchase was bonâ fide, for value, yet being only that of a chose in action not assignable at law, it must be taken subject to all equities attaching to it, and that, under the above circumstances, neither the registration nor the payment of interest had the effect of a confirmation of the title, and that the holder ought to be restrained from suing at law the debentures. This seems to be an entire confirmation upon

of the views already stated.

12. In a recent case in Pennsylvania it is held, that a canal 11 Athenæum Life Insurance Co. v. Pooley, 3 De G. & Jones, 294; post,

§ 240.

company cannot, without the consent of the legislature, mortgage either its tolls, or such real estate, as is necessary for the enjoyment of its corporate franchises.12

13. The purchasers under a mortgage sale of a railway and all its apparatus, in conformity with the powers contained in the mortgage, and who were afterwards incorporated by a new name, succeed to all the rights vested in the old company by a deed of land for the purposes of constructing their road.13

14. Some questions have arisen in the English courts as to the effect of a parol gift of railway debentures where the act of parliament requires the transfer to be by deed duly stamped. The decision of Vice-Chancellor Shadwell, in 1846, would seem. to indicate that the parol gift, with the delivery to the donec of the paper evidences of title, would have no legal effect, and that the executor of the donor was entitled to have the muniments of title restored to him, since the title of the debt had not passed.14 But the late examination of the question in the Court of Exchequer,15 would seem to indicate a different result.

A

15. In this last case, the testator, about a year and half before his death, gave the defendant two debentures, or railway mortgages, with the coupons attached, saying, "Take them and keep them for yourself, but you must give me the coupons that I may have the interest during my life," which defendant did do, keeping the debentures and coupons not due at the decease of the donor. This was an action of trover brought for the recovery of the debentures and coupons, in the name of the exccutor. verdict passed for the plaintiff, and on a hearing before the full court, upon a rule for entering the verdict for defendant, the rule was made absolute. The views of the court do not seem to be very clear or determinate, in regard to the true ground upon which the case should rest. Pollock, C. B., says, "I should consider that if a person gives the parchment upon which the mortgage is written, we ought to give effect to his act as far as we can.' The judges all concur to this extent. Watson, B., 12 Steiner's Appeal, 27 Penn. St. 313. See this subject further discussed in § 235.

13 Pollard v. Maddox, 28.Ala. R. 321.

14 Searle v. Law, 15 Simons, 95.

15 Barton v. Gaines, 3 H. & N. 387.

in the course of the argument, suggests the true ground, we think. That "the debt passes in equity." No American court of equity would hesitate to give effect to the gift upon that ground; or if there is any ground of hesitation, it is one which has certainly never occurred to us.

16

SECTION II.

Rights and Remedies of Bondholders and Mortgagees.

1. Under English statutes tolls only mort-10. Power to buy and sell real estate, and to

5. All parties, standing in same right, neces- 13. Statement of a leading case in New

Similar decision in equity in New Jersey.

7. Priority of right determinable only upon

motion to discharge the order of appoint- 16. And in the Circuit Court of the United

ment.

*8. Where charter creates a lien in favor of 17.

bill-holders, this is subject to the lien of

contractors or construction.

9. Some American cases hold railway com

panies may mortgage franchise without
consent of legislature.

18.

States.

Neither sale nor foreclosure allowed in
England.

Lien for construction under agreement of
company with contractor, preferred to
that of the mortgagees.

§ 235. 1. The remedies under railway mortgages will depend very much, of course, upon the powers granted by the legislature, and the forms of the contracts by which the mortgages are created. By the English acts more commonly it is only the tolls, and accruing profits of the road, and future calls, which are allowed to be mortgaged.1 Under these mortgages it was

16 Ante, § 35; post, § 239.

1 8 & 9 Vict. c. 16.

decided that the mortgagee could not maintain ejectment, even where the deed purported to convey the undertaking, with all the estate, right, title, and interest of the company in and to the same. This decision goes mainly upon the ground of defect of authority under the act. Similar decisions were made at an early day, in regard to mortgages of canal and turnpike property, by trustees under act of parliament.4

2

2. But where these mortgages create successive liens, it has been held that ejectment will lie, and even a second or subsequent mortgagee of turnpike and canal tolls, including tollhouses, may maintain ejectment, and after the satisfaction of his own debt, hold for the benefit of those entitled.5 So, too, when the mortgage is of an aliquot portion of the tolls and toll-houses, the trustees of the work, who receive sufficient tolls on the portion conveyed to meet the interest on the mortgage, are not liaable to an action for money had and received; but only in equity, which would seem to be the only remedy of the mortgagee, unless by taking possession of the works, and receiving the tolls.6

*

2 Doe dem Myatt v. St. Helen's & Runcorn Gap Railw., 2 Q. B. 364; s. c. 2 Railw. C. 756. But in the later case of Wickham v. New B. & Canada Railw., 12 Jur. N. S. 34, before the Judicial Committee of the Privy Council, Lord Chelmsford said of the preceding case: “That case did not determine that the conveyance of an undertaking by a railway company would in no case carry the land. The word is ambiguous,' and may include the land or only the speculation." 3 The acts under which these contracts were made were in these words: The directors for the borrowing of not exceeding £ 30,000, may "charge the property of the said undertaking, and the rates, tolls, and other sums, arising and to arise by virtue of this act."

Fairtitle v. Gilbert, 2 T. R. 169. But see Doe d. Banks v. Booth, 2 B. & P. 219.

5 Doe d. Thompson v. Lediard, 4 B. & Ad. 137; Doe d. Watton v. Penfold, 3 Q. B. 757; Doe d. Levy v. Horne, Ib.

And where a prior mortgagee, under a power of sale, disposes of the property, the purchaser takes the property relieved of all subsequent mortgages, and the only remedy remaining to such mortgagees is a resort to the surplus accumulated by the sale, if any, in the hands of the prior mortgagee. This point was decided in the House of Lords (1857), in Southeastern Railw. Co. v. Jortin, 31 Law Times, 44, reversing the decisions of the Vice-Chancellor and of the Chancery Court of Appeals.

Pardoe v. Price, 11 M. & W. 427; 13 M. & W. 267; 16 M. & W. 451. But a trustee under a trust deed from a railroad company has no title to the income