pointed out by law. It is held that where a State bank has, under the provisions of an enabling act of the State and of section 44 of the national banking act,2 reorganized as a national bank, the identity of the corporation is not changed, and its obligations are not impaired. It remains substantially the same institution under another name and under a new jurisdiction. The change is a transition, and not a new creation. And where the term of existence of a national banking association, which would otherwise have expired in 1883, was by act of Congress prior to that time extended twenty years longer, the identity of the old corporation is in no wise affected. It simply has a new lease of life.1

§ 257. Franchise to be a Corporation not the Subject of Judicial Sale. The franchise to be a corporation is not the subject of sale and transfer, unless made so by a statute, which provides a mode for exercising it.5 A franchise to be a corporation is distinct from a franchise, as a corporation, to

1 Goulding v. Clark, 34 N. H. 148. Acts reincorporating municipal corporations do not have the effect of creating new corporations, but merely that of continuing the old ones. They do not, therefore, extinguish the duties or obligations of the precedent corporation. Smith v. Morse, 2 Cal. 524. See Hopkins v. Swansea, 4 Mees. & W. 621. The same principle applies in respect of other public corporations. Thus, as already stated (ante, § 25), the University of Alabama was early held to be a public corporation and subject to the control of the legislature of the State. More recently it was held that this corporation had not been dissolved, or a new corporation created in its stead, by force of subsequent legislation or of the constitution of 1868, but that its corporate rights and powers continued unimpaired. Trustees v. Moody, 62 Ala. 389. An act enabling a railroad company to take a new name and extend its road, is not an act renewing

or extending its charter, or creating a new corporation. Attorney-General v. Joy, 55 Mich. 94.

2 U. S. Stat. at Large, ch. 106, p. 112, § 44.

3 Coffey v. National Bank, 46 Mo. 140; Grocers Nat. Bank v. Clark 48 Barb. (N. Y.) 26; Thorp v. Wegeforth, 56 Pa. St. 82.

4 Nat. Exch. Bank v. Gay, 57 Conn. 224; s. c. 17 Atl. Rep. 555. See also Day v. Insurance Co., 75 Iowa, 694. Recent Michigan statutes relating to renewal of articles of association construed: Attorney-General v. Perkins, 73 Mich. 303; s. c. 41 N. W. Rep. 426.

5 Post, Ch. 116. "The franchise to be a corporation clearly cannot be transferred by any corporate body of its own will. Such a franchise is not, in its own nature, transmissible." Hoar, J., in Com. v. Smith, 10 Allen (Mass.), 448, 455. See also Hall v. Sullivan R. Co., 21 Law Rep. 138; s. c. 2 Redf. Am. Railw. Cas. 621; 1 Brun. Coll. Cas. 613.

carry on a certain business, e.g., to maintain and operate a railway. The one is frequently designated as a primary, and the other as a secondary franchise. The latter is in the nature of private property, is vendible on execution, is the subject of a mortgage, and may pass to a purchaser at a foreclosure sale. But a mortgage of the franchises of a corporation, made in the exercise of a power given by statute, confers no rights upon the purchasers at a foreclosure sale to exist as the same corporation. The extent of the right which it confers upon them is to reorganize as a corporation, subject to the constitution and laws of the State existing at the time of the reorganization.1 A cogent and practical reason in support of this conclusion is that, if the foreclosure sale had the effect of transferring the vitality of the old corporation to the new purchasers, it would necessarily dissolve the old corporation, which might have an injurious effect upon its creditors; or, if it should not operate to create such a dissolution, there would then be the anomalous instance of two corporations existing at the same time under the same charter; for," after an act of disposition which separates the franchise to maintain a railroad and make profit from its use, from the franchise of being a corporation, though a judgment of dissolution may be authorized, yet until there be such judgment, the rights of the corporators and of third persons may require that the corporation be considered as still existing."

2

§ 258. Statutory Provisions under which the Reorganized Company Succeed to the Franchises of the Old.- Statutes exist in many of the States, by force of which, where the property and franchises of a corporation are sold to foreclose a mortgage, or otherwise for the purpose of paying the debts of the corporation, the purchaser is authorized or required to organize a new corporation to perform the public duties required of the oid, which new corporation succeeds to

1 Memphis &c. R. Co. v. Railroad Commissioners, 112 U. S. 609. Compare Acres v. Moyne, 59 Tex. 623; Stephenson v. Texas &c. R. Co., 42 Tex. 163. It was so held, where the governing statute empowered the company to borrow money "on the credit of the company and on the mortgage of its charter and works,"

and the mortgage in question undertook to pass both its charter and works. Memphis &c. R. Co. v. Railroad Commissioners, supra.

2 Coe v. Columbus &c. R. Co., 10 Ohio St. 372, 386, per Gholson, J.; quoted with approval in Memphis &c. R. Co. v. Railroad Commissioners, 112 U. S. 609, 620.

the corporate rights and franchises of the old.1 An example of such a statute is given in a recent work 2 from the statute books of the State of New York, as follows: "In case the railroad and property connected therewith, and the rights, privileges and franchises of any corporation, except a street railroad company, created under the general railroad law of this State, or existing under any special or general act or acts of the legislature thereof, shall be sold under or pursuant to the judgment or decree of any court of competent jurisdiction, made or given to execute the provisions or enforce the lien of any deed or deeds of trust or mortgage theretofore executed by any such company, the purchasers of such railroad property, or franchises, and such persons as they may associate with themselves, their grantees or assignees, or a majority of them, may become a body politic or corporate, and as such may take, hold and possess the title included in said sale, and shall have all the franchises, rights, powers, privileges and immunities which were possessed before such sale by the corporation whose property shall have been sold as aforesaid, by and upon filing in the office of the Secretary of State a certificate duly executed under their hands and seals, and acknowledged before an officer anthorized to take the aknowledgment of deeds; in which certificate the said persons shall describe, by name and reference to the act or acts of the legislature of this State under which it was organized, the corporation whose property and franchises they shall have acquired as aforesaid, and also the court by authority of which such sale shall have been made, giving the date of the judgment or decree thereof, authorizing or directing the same, together with a brief description of the property sold; and shall also set forth," the name of the corporation, the capital stock, the number of directors, and the plans and agreements of reorganization.3 "Every stockholder in any company, the franchises and property whereof shall have been sold as aforesaid, shall have the right to assent to the plan of readjustment and reoganization of interests, pursuant to which such franchises and property shall have been purchased as aforesaid, at any time within six months after the reorganization of said new company, and by complying with the terms and conditions of such plans, become entitled to his pro rata of the benefits therein, according to its terms."

1 For cases arising under such statutes, see Pittsburgh &c. R. Co. v. Fierst, 96 Pa. St. 144; Com. v. Central Passenger R. Co., 52 Pa. St. 506. Compare Wellsborough &c. Plank Road Co. v. Griffin, 57 Pa. St. 417.

2 2 Beach Railw., § 767.

3 New York Laws of 1850, ch. 140,

§ 5, as amended by New York Laws of 1854, ch. 282, and by New York Laws of 1873, ch. 710; New York Laws of 1874, ch. 430.

4 New York Laws of 1874, ch. 430, 3. See Pratt v. Munson, 84 N. Y. 582, as to the effect of the act of 1854 in repealing the prior statute of this

Referring to this statute, the Court of Appeals of New York say: "The first section provides that in case a railroad and the property, rights, privileges and franchises connected therewith shall be sold under a mortgage foreclosure, the purchasers, and such persons as they may associate with themselves, their grantees or assigns, may become a corporation, and as such may take, hold and possess the property and franchises sold, by executing and filing the certificate provided in the section. Under that section any number of persons may, at a foreclosure sale of a railroad and its franchises, purchase the property for themselves, and organize a new company, which will possess all the powers, rights, privileges and franchises of the prior corporation, and be subject to the provisions of the general railroad laws of the State. In such case the rights of all the stockholders of the prior corporation will be absolutely barred and cut off by the foreclosure and sale. But purchasers at such a foreclosure sale, instead of buying absolutely for themselves, may buy the property in pursuance of a plan, as mentioned in the second section of the act, for the readjustment of the respective interests therein of the mortgage creditors and stockholders of the company. Notwithstanding the formation of the plan, however, the foreclosure becomes absolute against the corporation, and all its rights and all the proprietary interests of the stockholders are absolutely barred and cut off. The entire property of the corporation passes under the sale as absolutely as

nature. The statute was further amended by the act of 1876, chapter 446, and the construction of the amended statute was involved in the case of Vatable v. New York &c. R. Co., 96 N. Y. 49; reversing s. c. 11 Abb. N. C. (N. Y.) 133. In another case it was said: "Before these acts were passed, such a railroad mortgage, while it certainly covered the special and peculiar franchises of the company, could with difficulty be construed to cover its corporate life, or right to be a corporation, and the subject created doubts. That right, it was argued, could scarcely be said to pass to a purchaser by virtue of his purchase, and could only be given by the authority of the State. Unless, therefore, the purchaser could find some corporate body in existence, capable of holding and exercising the franchises

purchased, he stood in the awkward predicament of owning a property which it was not certain he could either use or sell. It was to cure this difficulty that the act of 1854 and its subsequent amendments were designed. In the absence of an existing corporation, capable of taking and exercising the franchises sold, the purchaser was authorized to create a new corporation, for the purposes of the transfer, but whose corporate life came from the grant and authority of the State. It is quite evident that this authority was intended only to meet a possible emergency, and not at all to prevent a sale or transfer to a corporation already existing, and capable, under the law of its creation, of holding the property and exercising the franchises which passed to the purchaser by the mortgage sale." People v. Brooklyn &c. R. Co., 89 N. Y. 75, 84.

it did under the prior statutes, and the plan has reference only to the new corporation to be formed, and to interests therein. If the property

be purchased under the plan, then such plan must be embodied in the certificate to be filed as required by the first section, and then, as provided in section 3, every stockholder' shall have the right to assent to the plan of readjustment and reorganization of interest, pursuant to which such franchises and property shall have been purchased as aforesaid, at any time within six months after the organization of said new company, and by complying with the terms and conditions of such plan, become entitled to his pro rata benefits therein, according to its terms.' So, after the foreclosure sale, the only property interest which a stockholder of the old company has left is in the surplus, if any, after satisfying the mortgage and other preferential claims. It is entirely optional with him whether he will come in under the plan and join the new company. All the statute secures to him is the option or privilege to join the new company by a compliance with the terms of the plan. If he elects to join the new company, then he gets the proportional interest therein, which may be of great value to him. But his right to join the new company, so far as it depends upon the statute, must be exercised within the six months. If he fails within that time to exercise his right by assenting to the plans and thus becoming a party thereto, he cannot take or claim any rights under the plans. It is clearly a condition precedent that he must signify his assent to the plan within six months. If he fails to do so, he forfeits no property, as that was swept away by the foreclosure sale; he loses simply the right or privilege to join and become interested in the new company and thus to acquire an interest in property. That is a forfeiture, if it can properly be so called, which the law imposes, and against which the courts can give no relief. In such a case equity cannot relieve him from the performance of the condition precedent, and thus vest him with rights of property which he did not otherwise have. It would lead to intolerable inconvenience, confusion and difficulty, if the stockholders of the old company could, in such a case, take their own time to assent to the plan of reorganization, and to assert their right to become members of the new company, upon such facts as they would be able to establish in a court of equity."

§ 259. Further Statutory Provisions. This statute has been considerably further amended. As given in the latest edition of the General Statutes of New York,2 it permits purchasers and others asso

1 Vatable v. New York &c. R. Co., 96 N. Y. 49, 56, reversing s. c. 11 Abb. N. C. (N. Y.) 133; opinion by Earl, J.

23 Rev. Stat. N. Y. 1889 (Banks & Bros. ed.), p. 1735.