facilities in Toledo then owned or thereafter acquired, is clear. That the railroad company also understood that it owned and was giving a prior lien upon such terminals is evident from. the fact that in the year 1879 it executed a mortgage for $1,204,000, and negotiated $630,000 of the bonds secured thereby, which bonds and mortgages were taken up and satisfied out of the proceeds of the mortgage of January 17, 1880; and in the prospectus, issued for the purpose of inviting investors to purchase those bonds, was this statement: "Terminal advantages. The Toledo, Delphos and Burlington Railroad has the right of way through and down the very center of the city of Toledo. It enters the city near the Miami and Erie canal, and substantially follows the canal to Washington street; thence down Washington street to Swan Creek and to Lake Navigation, within three squares of the post-office. This franchise is very valuable and of very great importance to the business of the road, and adds greatly to the pecuniary value of the property of the corporation. No other road entering the city approaches so near to its center; none whose freight and passenger business is transacted so near to the business of the city. This franchise is considered valuable to the road, not only from the fact that it affords unusual business facilities, but because it becomes independent of other corporations, and renders its business secure, without submitting to a heavy tax on its traffic." Not only this, but when the mortgage of January 17, 1880, was in contemplation, and on December 12, 1879, when its execution was ordered, the resolution of the directors declared "that for the purpose of borrowing money for the use of the company to enable it to carry out the purposes for which it is organized and was consolidated, * * and build, complete, equip, pay for right of way and depot grounds, and operate its railroad, it is expedient to prepare, issue, and negotiate a series of first mortgage bonds, amounting in the aggregate to $1,250,000;' and "that, in order to rescue the payment of said issue of first mortgage bonds and the interest thereon, president shall also forthwith cause to be prepared a mortgage or deed of trust conveying * ** all this company's present and future to be acquired line of railroad, appurtenances, and equipment and income thereof, betweed said city of Toledo, in the state of Ohio, and the town of Kokomo, in the state of Indiana." No one can misunderstand these declarations. They expressed to every purchaser of a bond secured by this first mortgage a purpose to vest in him a prior lien on all the property of the railroad company, including its. terminal facilities,-a lien superior to every incumbrance thereon. They unite, therefore, with the clear language of

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the mortgage, the expressed intent of the mortgagor. To thwart this purpose, so obvious and expressed, there should be a clear disclosure of higher equity, and to the suggestions of that we pass.

Effect of terminal

trust mort

gage.

The second-the terminal trust-mortgage was executed on June 21, 1880. On September 4, 1880, more than two months thereafter, the Toledo & Grand Rapids Railroad Company executed its mortgage to the Central Trust Company to secure, not its own indebtedness, but the bonds secured by the terminal trust mortgage, above referred to. This mortgage, in terms, conveyed the grantor's right of way within the city of Toledo,-property which is, in fact, a part of the right of way and terminal facilities of the Toledo, Delphos & Burlington Railroad Company. On November 29, 1880, George W. Ballou and wife executed a mortgage to the same trust company, conveying certain properties similarly situated and also as security for those terminal trust bonds. On April 12, 1881, the Toledo & Grand Rapids Railroad Company conveyed to the Toledo, Delphos & Burlington Railroad Company all its properties. The consideration of such transfer was $265,477.86 cash, an amount supposed to be sufficient, and provided to pay all the indebtedness of the Toledo & Grand Rapids Railroad Company. So far as the property standing in the name of Ballou is concerned, he was the financial agent of the mortgagor, the Toledo, Delphos & Burlington Railroad Company; and while he took the title to some properties in his own name, the purchase was with moneys of the mortgagor. Hence, while he held the legal title, the full equitable title was in the railroad company, and that property became, therefore, in equity, subject to the lien of the first mortgage. Further, the mortgage from Ballou to the Central Trust Company, of date November 29, 1880, was really a tripartite agreement between Ballou, the Toledo, Delphos & Burlington Railroad Company, and the Central Trust Company, and recited that the mortgage to the trust company was in consideration of $40,000 of these terminal trust bonds received by Ballou. So, not only was this purchase by Ballou made with the funds of the Toledo, Delphos & Burlington Railroad Company, but he received also $40,000 of the terminal trust bonds. Further than that, as we read the record,-and there are 70 to 80 deeds and relinquishments of right of way contained in it,-apparently the title to the bulk of the right of way passed directly to the Toledo, Delphos & Burlington Railroad Company, and not to Ballou, nor to the Toledo & Grand Rapids Railroad Company, so that we have these facts before us: First. The title 46 A. & E. R. Cas.-18

to the larger portion of the terminal facilities passed directly to the mortgagor, the Toledo, Delphos & Burlington Railroad Company. Second. All that part whose title was taken in the name of Ballou was paid for by the funds of the Toledo, Delphos & Burlington Railroad Company, and therefore it had the full equitable title, and he had only the naked legal title in trust for its benefit. Third. The incumbrance which he placed upon it in the tripartite agreement was not security for an independent lien, but simply additional security for the terminal trust bonds issued by the Toledo, Delphos & Burlington Railroad Company. Fourth. The mortgage given by the Toledo & Grand Rapids Railroad Company, which was generally of its right of way and terminal facilities, was not to secure an independent debt, but the already issued terminal trust bonds of the Toledo, Delphos & Burlington Railroad Company. Fifth. All the indebtedness of the Toledo & Grand Rapids Railroad Company was assumed and paid by the Toledo, Delphos & Burlington Railroad Company, as a consideration of the appropriation by the latter of all the franchises and property of the former. Whatever, therefore, may be said as to the scheme and plan of the parties who in the spring of 1880 were in control of the Toledo, Delphos & Burlington Railroad Company, the fact remains undisputed that its mortgage of January 17, 1880, covered, in terms, all subsequently acquired terminal facilities in the city of Toledo; that purchasers of bonds secured thereby were invited to invest, on the strength of representations by the company that it covered the terminal facilities; that the title to the larger portion of these terminal facilities passed directly and unincumbered by any one to the Toledo, Delphos & Burlington Railroad Company; that, as to those portions whose title passed to Ballou and the Toledo & Grand Rapids Railroad Company, the purchase price was paid by the ToJedo, Delphos & Burlington Railroad Company; and that the mortgages which they respectively executed to the Central Trust Company were not given to secure independent debts, but simply as collateral to the terminal trust bonds.

Property sub

We do not question the proposition invoked by counsel for appellant, that a mortgage with an "after-acquired property" clause creates a lien upon property subsequently jected to lien. acquired only when it is acquired, and in the condition in which it is acquired, and subject to all existing liens; nor the other proposition, that the ownership by one corporation of the stock of another will not of itself prevent the creation of a new and independent lien upon the property of the latter, as adjudged in the case of Williamson 7. New Jersey S. R. Co., 28 N. J. Eq. 278, 29 N. J. Eq. 316.

Yet we think those propositions are not decisive of the case here presented. The mortgagor in the two mortgages of January and June, 1880, held the legal title to a large portion of the terminal facilities, and was the equitable owner of substantially the rest. Its first mortgage, its expressed purpose, was a lien upon those terminal facilities. No lien was ever placed by the holders of the legal title on that portion of the right of way and terminal facilities which did not stand in the name of the Toledo, Delphos & Burlington Railroad Company, to secure any new and independent obligation. These collateral and subsequent mortgages were in terms only to strengthen the security already given by the terminal trust mortgage. If they had never been executed, can there. be a doubt that on a forclosure the trustee in either the mortgage of January 17, 1880, or the terminal trust mortgage, could have subjected to its lien all property in fact a part of the right of way and terminal facilities, whether the title of the company thereto was either legal or equitable? They, therefore, only put into writing that which was already and in equity the obligations resting on the property. So, whatever may have been the secret thought and scheme of the parties controlling the management of these railroad companies, we are of opinion that the various properties included in the right of way and terminal facilities became in fact subjected to the lien of the two mortgages of January and June, 1880, executed by the Toledo, Delphos & Burlington Railroad Company. At least, that is true of all properties whose title passed to the Toledo, Delphos & Burlington Railroad Company. Certain properties whose title did not thus pass were by the decree exempted from the operation of this lien. We think there was no error in the ruling of the circuit court, and its decree is affirmed.

Construction of Railroad Mortgages Covering After-Acquired Property.See New Orleans & Pacific R. Co. v. Union Trust Co. (C. C.), 43 Am. & Eng. R. Cas. 458; Thompson v. White Water Valley R. Co. (Ú. S.), 40 Id. 373, note 379.

GLONINGER

v.

PITTSBURG & CONNELLSVILLE R. Co. et al.

(Pennsylvania Supreme Court, January 5, 1891.)

Mortgage Covering Property and Franchise-Validity.-Although a mortgage executed by a railroad company on its property and franchise is not operative as to the franchise, for want of authority to mortgage the franchise, yet it is operative as to the railroad and the specified property described therein and covered by its terms.

Express Authority to Mortgage-Power to Borrow Money and Issue Bonds. -Where a railroad company has express statutory authority to mortgage its property it need not have specific authority in order to borrow money and issue bonds. The purpose of a mortgage is to secure loans, and the power to borrow money and issue bonds is a necessary incident to the power to mortgage.

Objects of Encumbrance on Railroad--Construction of Charter.-The sup plement to the charter of the defendant company authorized it to mortgage its road and property "for the purpose of carrying out the privileges granted by the act and the several supplements thereto, incorporating the same." Held, that the power of the company to mortgage its road and property so given, was not restrained to the mere physical structure completed at the time of the passage of such supplement to the company's charter.

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Increase of Indebtedness by Corporation-Constitutional Provisions-Validity of Mortgage.-Section 7, art. 16, Pa. Const. of 1874, provides that "the stock and indebtedness of corporations shall not be increased without the consent of the persons holding the larger amount in value of the stock 串 * ** at a meeting held after 60 days' notice," etc. Held, that a railroad company having general power to mortgage its .property, and chartered before the adoption of the constitution of 1874 is not bound by its provisions. Held, also, that although such company in 1868 accepted the terms of legislation which made it subject to the act of 1855 and to the constitutional amendment of 1857 authorizing the legislature to alter or annul charters of corporations, yet this fact is not sufficient to render the company subject to the constitutional provision.

Rights of Minority Stockholders-Receiving Benefit from Transaction.Where the minority stockholders of a corporation had received no injury, but, on the contrary, benefits by the transaction complained of by them, they have no just cause of complaint, even though the majority stockholders are also benefited.

Issue of Bonds for Benefit of Another Company Owning Majority of Stock -Consideration.-The Baltimore & Ohio R. Co. owned a majority of the stock of the defendant company, and procured the latter to issue $10,000,ooo, of bonds to it in consideration of a large indebtedness to the B. & O. R. Co. for rolling stock furnished, branch lines bought, etc. No improper means were used to procure the issue, although it was shown that the B. & O. R. Co., used the bonds when procured as security to float a loan made for its exclusive benefit. Held, that the bonds so issued were valid.

APPEAL from Allegheny County Court of Common Pleas.