Statement of Cash Disbursements and Investments from August 11th, 1868, to June 30th, 1878, both inclusive. (b.)

$15,170 99 $148,092 76 $137,660 11 $68,598 87 $76,568 99 $379,617 47 $335,411 54 $203,918 36 $159,720 09 $231,456 83 $1,756,216 21

* Secretaries, Curators, Land Agents, Janitors, etc. (b.) See Appendix "B."

$356,273 03

19,505 99
480 00

14,599 56

35,609 03

27,217 00

CORPORATIONS.

MR. FREEMAN. I move that the Convention now resolve itself

my report to the President, contain the gist of the whole matter, so far as my views on the past, present, and future of the Agricultural Department are concerned; and I have only to add that, with the aid of the appropriation made by the last Legislature, these views are now being carried out as rapidly as possible, in accord-into Committee of the Whole, the President in the chair, for the purance with a printed, but not as yet published, programme, of which, unfortunately, pose of continuing the consideration of the report of the Committee on I have no copy to send you, but which is in the hands of both Mr. Martin and Mr. Corporations. Winans. This programme includes: MR. INMAN. Before that motion is made, I desire to avail myself of my notice to amend Rule Fifty-Six, and ask that it lay over until there

1. Courses of lectures on "special cultures," in accordance with the circular

herewith inclosed. This is given regularly by Mr. C. H. Dwinelle, and by other
lecturers specially competent in particular subjects, as these can be obtained.
Among the latter, a clinical lecture on "glanders" was last week delivered by Dr.
A. De Tavel, of San Francisco, to a large audience. Mr. Dwinelle's lectures are
regularly attended by four students, and almost always by from two to six persons
not regular students in the agricultural course, of which this is the "senior"
2. A garden of economic botany. This is now being laid out and occupied, on
the level tract next the entrance from the railroad depot. It will embrace, as fully
as possible, all the economically useful plants capable of outdoor culture in this
climate. At the same time, culture experiments on a larger scale are being carried
out on the grounds north of the branch of Strawberry Creek; and, for the cul-

year,

ture of plants requiring heat, an addition is being made to the propagating houses already occupied. A large number of seeds of important forest trees have lately been put into the ground, to be later transplanted to suitable positions in the University domain, which will ultimately (if my plans are carried out) be to the agricultural student what the cabinet of minerals and laboratory are to the mining

student.

3. Increased and improved means of demonstration in instruction in the several practical courses, in the way of collections, illustrations, implements, etc.

4. The continuation, to the extent rendered possible by our means, of the work of an agricultural survey, as explained in my report to the President, page eleven and following ones, and exemplified in the appendix, pages twenty to sixty-three. A number of important matters have been under examination since the date of this report, and will be published before long. At the moment, the work has received a check in the resignation of my assistant, who can be replaced only by training up another graduate in his stead. For this purpose, I have selected Mr. F W. Morse, of the class of eighteen hundred and eventy-eight.

I consider the prosecution of this work as the key to the situation, as it is the most direct means of proving to farmers how great are the benefits to be derived by their sons from the study of the scientific principles underlying agriculture. I can. not but ascribe largely to the published and unpublished results of this work, the gratifying increase of students in the strictly agricultural course, and the increased attendance of others upon the lectures of the department, so far from the "single student" of current report (which doubtless originated in the statement that there was but one student in the senior class this session), the facts now are as follows: Regularly attending senior course of special cultures.

Regularly attending junior course of agricultural chemistry.
Electing the course of economic botany, second term, sophomore.

Total in agricultural course proper, by January 1st, 1879.

Deduct as twice mentioned..

Total attending regularly..

4

is a full house.

allowed until Monday or Tuesday.
THE PRESIDENT. If there be no objection, the gentleman will be
Hearing no objection, it is so

ordered.

MR. MCCOMAS. I desire to present a memorial from the Board of Supervisors of Santa Clara County, asking for the establishment of a State Hospital, and ask that it be referred to the Committee on State Institutions and Public Buildings, without printing.

THE PRESIDENT. If there be no objections it is so ordered.
MR. REYNOLDS. I hope the gentleman will withdraw his motion
to go into Committee of the Whole, for one moment-

resolve itself into Committee of the Whole, for the purpose of further
considering the report of the Committee on Corporations other than
Municipal-
MR. REYNOLDS. I insist that I have the floor, and had it while
the motion was being put.

THE PRESIDENT. It is moved and seconded that the Convention

THE PRESIDENT. The gentleman did not have the floor.
The motion prevailed.

IN COMMITTEE OF THE WHOLE.

THE CHAIRMAN. The Secretary will read the next section, section eight.

EMINENT DOMAIN AND POLICE POWER.

THE SECRETARY read:

SEC. 8. The exercise of the right of eminent domain shall never be so abridged or construed as to prevent the Legislature from taking the property and franchises of incorporated companies, and subject them to public use the same as the property of individuals; and the exercise of 6the police power of the State shall never be so abridged or construed as to permit corporations to conduct their business in such a manner as to 22 infringe the equal rights of individuals or the general well-being of the 4 State.

12

MR. BARBOUR. Mr. Chairman: I call attention to what appears to 18 be a clerical error in line three, the word "subject" should be "sub

It should be remembered that, moreover, the entire scientific division of the sopho-jecting." I have, however, another amendment to offer.
more class from forty-five, to fifty students) attend regularly the first term of my THE SECRETARY read:
course, to wit.: general botany, which begins the agricultural course. After the
first term they elect their college, as above stated.

When you remember that years ago not a single student elected the agricultural
course at this time of the year, the change that has occurred cannot but be gratify-
ing. The course has become acceptable and respectable, in the eyes of the students
and their parents, in proportion to its increased thoroughness and educational value
And I have no fears as regards its future increase of patronage and usefulness, if the
policy that has effected this change is continued. Let me add that I consider the
number of students now in attendance here, on this course, as a fair index of the
interest now taken by the farming population in the professional education of their
sons as farmers. If the means and appliances for such education here are not, at
this time, all that could be desired, whatever is offered is indispensable, and what is
lacking can in a great degree be made up by practice on any well conducted farm.
For mere drill in farm operations no sensible man will send his son to college; and
business management of a farm will never be learned under the artificial conditions
of a College farm. I am unable to see why, of all professional schools, the Agricul-
tural College should be saddled with the task of converting young men to farming,
by keeping them surrounded with what some are pleased to term an agricultural
atmosphere." It is the unintelligent drudgery of ordinary farm life that our
boys run away from; and it is only by rendering them intelligent laborers, and not
by rubbing in the drudgery, that their aversion to farm life (for which certainly the
colleges are not responsible) can be overcome Whenever farming comes to be a
learned profession amongst us, and to be considered as such, young men will not
need to be surrounded by a dense "agricultural atmosphere," in order to keep them
to their profession. And then, the many farmers who now send their sons to all but
the agricultural course at the University, will cease to tell their sons that they "can
teach them all the farming they need at home" I am hopeful that this day is
coming sooner in California than elsewhere, for natural reasons; but its coming
will not be hastened by removing our future farmers from contact with the rest of
the rising and cultured youth of the State; and if Mr. Morrill's own statement is to be
believed, that was assuredly not the object of the "Morrill grant."
In conclusion, allow me to suggest that the first thing needful for rendering the
aid of science accessible to the rural population is, that the rudiments, at least, of
natural science should be effectually, and not only nominally, taught in the common
schools. The reason why this is not now done, is simply that there are too few
teachers competent to give such instruction, and if the University does no more
than supply these teachers, it will have done the greatest possible service to the
cause of agriculture. Then, indeed, "farm schools" scattered over the country
could do real service, because they would have suitable material to work upon. But
so long as there are no teachers, no law or constitutional provision can create effi-
If there is any farther information that I can furnish you, please let me know,
and I will do so as rapidly as possible.
Very respectfully yours,

cient schools.

LOCAL OPTION PETITION.

EUG. W. HILGARD.

"Amend section eight as follows: after the word 'companies,' in line three, insert the words, at their own valuation as made for the purpose of taxation.'" Adopted.

MR. BLACKMER. Mr. Chairman: I notice in the same line what is

undoubtedly a clerical error. The word "subject" ought to be "sub-
jecting." It is not in grammatical form.
THE CHAIRMAN. That is a mere clerical error and will be corrected,
of course.
Secretary will read section nine.
If there be no further amendments to section eight, the

LIMITATION OF CORPORATIONS.

THE SECRETARY read:

SEC. 9. No corporation shall engage in business other than that expressly authorized in its charter, or the law under which it may have been or may hereafter be organized; nor shall it hold any real estate for a longer period than five years, except such as may be necessary for carrying on its business, or which is incident thereto. MR. TERRY. Mr. Chairman: I move to strike out the words "or which is incident thereto."

THE CHAIRMAN. The question is on the adoption of the amendment.

MR. ESTEE. Mr. Chairman: The reason that the committee put in the words, "or which is incident thereto," was to apply to savings banks and such institutions, where they are compelled to bid for property at public sales. Of course such purchases are not necessary to carrying on its business, but they are incident to its business, and the committee thought the amendment was very proper and ought to be put in there. The section is as follows: "No corporation shall engage in business other than that expressly authorized in its charter, or the law under which it may have been or may hereafter be organized; nor shall it hold any real estate for a longer period than five years, except such as may be necessary for carrying on its business, or which is incident thereto." We put it in there, for the purpose I have stated, and we think it ought to remain there.

MR. TERRY. Mr. Chairman: They are authorized to hold five years. If they are compelled to buy land to secure a debt, I think five years is long enough for them to dispose of that land. The construction placed upon these words by the gentleman, would enable any bank or corporation to buy land or other property, and hold it forever. That is not the policy of the State. The policy of the State is to prevent corporations from accumulating property in their hands. I think the words should be striken out.

period than five years; that is, that they shall not go on accumulating issued one million dollars of bonds-construction bonds, they were real estate and holding it. That is the statute now, I will state to the gentleman. It is only following the Code.

THE CHAIRMAN. There being no further amendments to section nine, the Secretary will read section ten.

ALIENATION OF FRANCHISE.

THE SECRETARY read:

SEC. 10. The Legislature shall not pass any laws permitting the leasing or alienation of any franchise, so as to relieve the franchise, or property held thereunder, from liabilities of the lessor or grantor, lessee or grantee, contracted or incurred in the operation, use, or enjoyment of such franchise, or any of its privileges.

THE CHAIRMAN. If there are no amendments to section ten, the Secretary will read section eleven.

STOCK OF CORPORATIONS.

THE SECRETARY read:

called-for constructing a certain road that never was and never will be built. Now, sir, what your committee intended to do here, was to enforce the rule of common honesty with corporations as with individuals. They intended to do nothing more. It was the object of the committee not to impose any penalty upon a corporation that the law did not already impose upon individuals.

MR. ROLFE. Mr. Chairman: I am laboring under the same ignorance that the gentleman over there is. I will ask if you mean that it shall be void as against the company? Either against the company, or any stockholder, or

MR. ESTEE.

anybody else.

REMARKS OF MR. BARNES.

SEC. 11. No corporation shall issue stock or bonds, except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void. The stock and bonded indebted-sold them in Europe upon a projected road that never was built at all, ness of corporations 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 first obtained, at a meeting called for that purpose, first giving sixty days' public notice, as may be provided by law. MR. MCFARLAND. Mr. Chairman: I would like to inquire what the meaning of that is? It seems to me, sir, that this is a very loose provision to put in the Constitution. These matters are regulated by law, so far as they are necessary to be regulated, and it seems to me that that clause would give rise to a great deal of doubt. I move to strike out gentleman

section eleven.

THE CHAIRMAN. The question is on the motion of the from Sacramento to strike out the section.

MR. BARNES. Mr. Chairman: We understand then that when the directors inside the ring create an indebtedness and pay money to themselves, that that indebtedness upon which they have collected and received money is void. Is that it? Take the case of a railroad--the California Pacific Railroad extension. They did issue, not merely a million dollars of bonds, but two million and a quarter of bonds, and and for which the company received nothing but this Napa branch; a few miles of railroad, for two million and a quarter of bonds. Now, in whose hands shall they be void? Suppose the fraudulent directorsfor we are wont to consider all directors fraudulent-shall determine to raise money for their own account upon the company paper, and in accordance with law, the directors authorize the President and Secretary of the company to make and execute a corporate note for ten thousand dollars, and to borrow money upon it, and they take that ten thousand dollars and put them in their pockets. Now, then, the indebtedness is held or owned by some person who discounts the company's note put out in that way. The directors have robbed the company, they have robbed the stockholders, and now it is proposed to rob the bona fide holder of the note, the innocent discounter. That is what it amounts to, if it amounts to anything at all. Now, there is nothing better understood than that the bona fide holder of commercial paper is protected in the holding of it. You cannot have commercial law, or commercial transactions, except upon that basis. Is it meant by this to say that if the directors of a company shall misappropriate money and rob the company, that the man who has loaned the money is responsible? If so, we have a new element in commercial law in this great reform State of California; that a man who loans money to a corporation or associisation has got to be certain before he loans it that everything is all right on the inside, and has got to know as much and more than the directors themselves. He has to inform himself as to what becomes of the money; and after he has loaned his money he has got to follow that money and see it invested in the land or applied to the purposes of the corporation.

MR. ESTEE. Mr. Chairman: I hope it will not be done. "No corporation shall issue stock or bonds, except for money paid, labor done, or property actually received."

REMARKS OF MR. BARNES.

MR. BARNES. Mr. Chairman: I would like to ask the Chairman of the Committee on Corporations what he means by a fictitious increase of indebtedness? I understand that a fictitious increase of Stock means the watering of stock without the addition of any more property or value. That we all understand. It has become too common, and very much to be deplored, and ought to be stopped. That is to say, the increase of the capital stock is almost always made for the purpose of enabling them to divide profits that are utterly disproportionate to the amount of capital. Take the case of a gas company that has invested in its property ten thousand dollars. It charges such a rate for gas that the return from the investment would amount to twenty, thirty, forty, or perhaps fifty per cent. per annum. Then, without the addition of a particle of property, they declare an increase of capital stock, and the burden upon the consumers, upon those who are compelled to take this commodity, whatever it is, is kept up at that unjust rate. It is proper enough that that should be stopped, but when you talk of a fictitious increase of indebtedness, I do not know what it means. Fictitious indebtedness, I take it, is always void, and I cannot understand that a corporation would create a fictitious indebtedness. What I want to get at is, what is a fictitious increase of indebtedness? I do not know. MR. HOWARD. May not a lot of fraudulent directors create a fictitious debt?

Fictitious indebtedness is always void. But there may be a fictitious indebtedness that is good in the hands of a bona fide holder. There is not a gentleman on the floor of average capacity, which we lawyers claim to be, as well as truly good, that can understand what is meant by that phrase "in their." It is like some of these other ill-considered phrases, like one adopted yesterday. It is vicious. It opens the door to more litigation, and overthrows well settled principles, if it amounts to anything at all. Therefore it is, that before we put this into the Constitution of this State, that is going to stand for fifty years or so, I wished that we could all understand it, so that we would be able to explain it.

himself.

MR. ESTEE. Mr. Chairman: My friend asks me a very leading MR. BARNES. That would be void at common law. It is a contra-question, and then he answered it in a very elaborate manner, for diction in itself. Indebtedness implies an obligation arising upon value received. I merely asked for information, because everybody else will be asking some of these days what it means, and I want to be able to The watering of stock certainly ought to be stopped, but I cannot conceive of a man putting a fictitious indebtedness, upon

answer.

himself.

MR. ESTEE. "No corporation shall issue stock or bonds, except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void." "Fictitious" is a well-known word. Its definition can be found out.

MR. CASSERLY. Allow me to suggest-I think that the word "fictitious" should be inserted again before the word "indebtedness," so as to read "or fictitious indebtedness."

MR. BARNES. Mr. Chairman: The reason I did that, was that when I asked it before, the Chairman of the Committee on Corporations did not appear to understand me. He came up to the scratch and looked at it and then walked away.

REMARKS OF MR. ESTEE.

MR. ESTEE. Mr. Chairman: If the gentleman wishes to ask any more questions, all right. And if he wants to answer them himself, that is all right; but the proposition here is whether this section eleven is so worded as to convey correctly the ideas intended to be conveyed; and secondly, whether these ideas will meet the evil complained of. Now I am not unaware, sir, that it is impossible to draw any section but what MR. ESTEE. That is all right. There is no objection to putting that is subject to criticism by all persons, and especially by very bright intelword in there. But the point is, that there is an evil there to be reme-lects. I am very well aware that my friend has the capacity of making died. Everywhere throughout the country fictitious indebtednessblack seem white and white seem black, and I know that if there is anyMR. BARNES. What I inquired was, not whether fictitious indebted-body here that can put the language into any peculiar shape I know he ness was an evil, but what is meant here by fictitious indebtedness? What can be covered by it?

MR. ESTEE. It is void because

MR. BARNES. How can it be any more void than it is? Is it void as against the creditor who holds the fictitious indebtedness, or is it void against the fictitious debtor? I wanted to have it explained, that is all, if the Chairman of the committee will explain it.

REMARKS OF MR. ESTEE.

MR. ESTEE. I will try to explain, if the gentleman will give me an opportunity. It is well known that mining companies, for instance, in this State, have been organized, that a few men control the mine, and a good many men pay for working it. It is almost a uniform rule, or it very frequently occurs, that these men make up a fictitious indebtedness, and draw money from the treasury, and thereby make it appear that the moneys of the corporation have been properly expended, when they have not been properly expended. There are some corporations that have issued stock, and issued bonds on fictitious indebtedness. There is one in this State that I might name. It is well known that it

can do it. Now if the gentleman will propose an amendment to section eleven that will meet the evil which he condemns, and which we say exists, this committee will be most glad to accept of his eminent services in that line.

MR. BARNES. I will undertake the job.

MR. ESTEE. The amendment proposed by the gentleman from San Francisco, Mr. Casserly, I think is a good one, that all fictitious indebtedness shall be void. Why shouldn't it be?

MR. BARNES. But against whom?

MR. ESTEE. Why shouldn't it be? There is no reason in the world. Now, my friend says that this fictitious indebtedness may come into the hands of innocent holders. That is possibly true; but this will not relate back to anything in the past, and it will make people who buy bonds-I do not mean railroad bonds, but any bonds issued pursuant to this Constitution--see where their money does go. And it is right enough that they should. In other words, that they shall not do as has been done heretofore by companies, issue bonds for fictitious indebtedness, and sell those bonds at twenty or thirty cents on the dollar, and then hold the stockholders responsible for the payment of the interest on them. I

REMARKS OF MR. DUDLEY, OF SOLANO.

cannot, for the life of me, see, with this in view, with a full knowledge that this section exists, how many persons can be deceived. It is possi- MR. DUDLEY, of Solano. It was admitted by the gentleman from ble that there might be instances where there might be a wrong; but it San Francisco, Mr. Barnes, that the matter of watering stocks, or crestrikes me that it will meet and remedy a great evil. Mark the lan-ating fictitious stocks, was an evil that ought to be corrected. And yet, guage: "No corporation shall issue stock or bonds, except for money suppose, in the instance given by him, that this gas company should paid, labor done, or property actually received." Now, they know increase its stock in order to make it appear that there was an increased whether they pay money for them or not, "and all fictitious increase capital in the organization upon which a dividend should be declared; of stock or indebtedness shall be void." Then it goes on further and and suppose this fictitious stock should get into the hands of third parsays: "The stock and bonded indebtedness of corporations shall not be ties. Would that stock become void? I understand that in common increased, except in pursuance of general law, nor without the consent law such parties would have acquired rights of which they could not be of the persons holding the larger amount in value of the stock first divested. Now, let us take the other proposition here, of fictitious obtained at a meeting called for that purpose, first giving sixty days' indebtedness. Suppose you have engrafted in the Constitution a clause public notice, as may be provided by law." forbidding fictitious stock, and this supposed corporation or gas company, instead of issuing fictitious stock, should issue bonds to the stockholders, in order to create a fictitious liability upon which it was necessary to pay interest. Now, then, so long as those bonds were in the hands of those who had created them, it would be very proper to declare them void; but when subsequent purchasers, in good faith and for a valuable consideration, get possession of them, I do not know how you are going to divest them of their rights. There is no doubt but that these are evils that ought to be remedied; and I am willing to vote for this section for the purpose of making an effort in that direction. It has been admitted by the gentleman that fictitious stocks can be prevented by this section. I see no difference between the fictitious indebtedness and the fictitious stock operation; nor are innocent parties any more liable to be injured in the one case than in the other.

I hope the motion of the gentleman from Sacramento to strike that section out will not prevail.

REMARKS OF MR. MCFARLAND.

MR. MCFARLAND. Mr. Chairman: I have no desire to criticise the work of the committee. I think the greatest error of the committee is in giving us too much on the subject of corporations. The old Constitution contained five or six sections on the subject. In this report we have twenty-three. I think there is a great deal put here that belongs properly to the Legislature. I think if the Legislature passes a law, and the words are found to be ambiguous, it can be amended, but it cannot be done so easily when it is in the Constitution. Now, the very first proposition here is: "No corporation shall issue stock or bonds except for money paid." How much money? I do not suppose the gentleman undertakes to say that they cannot sell stock or bonds unless for its par value paid in money. If that is what is meant it should be inserted, and then we must go on with a regular Code to carry out that idea. Now, look how this would work. Suppose a corporation is formed up here in Grass Valley by laboring men, miners, men who were working by the day in the Idaho mine at this moment, but members of a corporation for the purpose of finding and mining some other mine for themselves. If you mean that, in that case, they must get the par value of the stock, I do not think the Convention would desire to adopt a proposition of that kind. They procure the land. They have no property at all to start with except the place to prospect. But they imagine that the chances are that a mine will be found in a certain hill. They form a corporation. The first thing they do is to determine their nominal capital stock, and it does not matter much to the community at what figures they place it. The members take a certain amount of stock, as much as they are able to pay for at the time. After they have expended a certain amount of money, they sell a portion of the stock for the purpose of carrying on the prospecting enterprise. They sell it for less than par. Should they not have a right to do that? It seems to me they should. If this was adopted men would be afraid to assist such enterprises. They would be afraid to buy stock under such circumstances as that.

Again: "And all fictitious increase of stock or indebtedness shall be void." I am opposed to the idea. It would be a Herculean task to determine in all cases what was a fictitious increase of stock. Suppose a mining company has a capital stock of twenty thousand dollars, and they increase their stock. They have a perfect right to do it. They increase it two or three hundred per cent., and they issue and sell that stock. Now, is the title of the man who buys the stock to stand upon the condition of showing that it was not a fictitious increase? Suppose they increase it one hundred thousand dollars, and it is not worth that, is that a fictitious increase?

Now, gentlemen have in their minds two or three corporations that have watered their stock to a greater or less extent, and in order to get at their particular cases, they want to put into the Constitution a proposition most doubtful, that would tend to cripple all the ordinary corporations which are made by the people, for the people, and for the benefit of the people. It seems to me that this is a very doubtful provision"except for money paid." If it means any money at all, it amounts to nothing.

It would be a very dangerous thing to say that all fictitious increase of stock shall be void. Who is to say whether the increase is fictitious or not? If the property of a corporation has advanced, it certainly would not be fictitious to increase it to the same extent. At what point would it be fictitious? It opens the door for an immense amount of litigation, and while you are attempting to benefit the people, you are putting them in a worse position than they are now. These corporations are used every day, by rich and poor, in the development of the country. I think it would be better to strike out the whole section, and leave it to the Legislature. It is true that there have been cases of watering stock, but this proposition includes everybody and every class of corporations, and, it seems to me, is dangerous. If any law is necessary to reach that particular class, it may be done much more safely by the Legislature, where the law can be changed. Gentlemen will find that when they start that it must necessarily do injury, and give rise to great doubt and much litigation. I think it is much safer to strike it out.

REMARKS OF MR. WHITE.

MR. HAGER. Mr. Chairman: I see a difficulty about the phraseology of this section, when it comes to an adjustment of the accounts of a company with the public. The public are not supposed to know what has been done by a company. It cannot be presumed that the public will go and inquire into the validity of their action, provided they act within the authority of law; and that is all that any one could doascertain whether the company had acted in pursuance of law. But, when you come to the nicer question, whether it is a fraud or not, it is hardly right to say that the public should suffer. Suppose a man performs work for the company in a certain way. If he buys the obliga tion of the company, given for work, the presumption is that it would be legally issued, if procured legally, upon its face, and it would be difficult for a man dealing with the company to ascertain whether it was or not according to the requirements of the law. The section reads: No corporation shall issue stock or bonds, except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void." I presume that the Chairman of the Committee on Corporations had in his mind that India rubber account that he spoke of the other day. That would be a fictitious indebtedness. A railroad corporation, or street railroad corporation, may come up to the Legislature, and they may employ a lobby to get certain bills through. You will find that nothing appears on the books of the company that money was spent for any such purpose. You will find charged, under the head of construction account, thirty thousand dollars. That is, without any items, without any information, it would appear that on account of money expended for construction there is a charge of thirty thousand dollars. It is a fictitious indebtedness, so far as the stockholders are concerned, but the directors have expended the money. It is a fraud on the stockholders, but it is a matter which they have done, inasmuch as they had the power to do it, to pay out and use the company's money. I see the difficulty, as my colleague has said, in regard to the public generally. Now, I would like to amend it in this way: No corporation shall issue stock or bonds, except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void; and the directors of all corporations shall be jointly and severally liable for any fictitious indebtedness created or authorized by them."

Would not that cover the point?

MR. ESTEE. Mr. Chairman: That is all right, so far as it goes. But our section says that "the stock and bonded indebtedness of corporations shall not be increased, except in pursuance of general law."

MR. HAGER. I leave the rest of the section exactly as it is, but I make the directors directly responsible for the fictitious indebtedness. MR. ESTEE. We find just exactly such a section in Pennsylvania, Missouri, and Illinois, and it strikes me that it is right.

MR. HAGER. If the gentleman will point out the section in the
Missouri Constitution.

MR. ESTEE. You will find it in section eight, article twelve, of the
Missouri Constitution of eighteen hundred and seventy-five.
MR. HAGER. It is there, sir.

MR. WEST. You will find it also in section thirteen, article eleven, of the Illinois Constitution-the same in substance.

MR. HAGER. It is in the Missouri Constitution, and refers to the Constitution of Pennsylvania and that of Illinois, I suppose. I am inclined to adhere to the Constitution of Missouri and the one in Pennsylvania, because they are drawn with reference to making the Constitution to a certain extent a code, so far as it is a limitation upon legislative power. I am rather in favor of Constitutions being drawn in that shape-that they should contain, if necessary, a code, because ConstituMR. WHITE. Mr. Chairman: I merely rise to correct one point. It tions cannot be changed and overturned so easily. Laws may be by the would appear from the gentleman's remarks that the committee put this Legislature at any time; but in a Constitution, when it is once engrafted in to cover some idea of their own. Now, it will be found in the Con-there, it is like a rock against which the surges of corruption may prestitutions of Pennsylvania and Missouri, and most of the late Constitu- | vail in vain, and I am in favor of engrafting in the Constitution every tions. The committee have compared it with these, and then saw the provision that I may think necessary for the protection of the people, application, and we all understood it; and I think there is nothing in it rather than to leave it to the Legislature. that a plain man cannot understand. It is a provision to prevent frauds of that kind, and everybody knows that there has been fraud. It is found in the other States, and they have adopted this clause. There are MR. BARNES. Mr. Chairman: I see no peculiar holiness or sanctity gentlemen here who have more brains than have, but in the commit-in the section because it has been shipped over here from Missouri. If tee it was made very plain to me that it was very necessary. it is good we ought to adopt it. If it is bad we ought to reject it. But

REMARKS OF MR. BARNES.