1 holders or bondholders. The object of the present act appears to be to dispense with a special application to parliament of the kind I have described, and to give a parliamentary sanction to a scheme filed in a court of chancery, and confirmed by the court, and assented to by certain majorities of shareholders and holders of debentures and securities ejusdem generis." It is said that the practice still prevails in England of passing special "arrangement acts," whenever the provisions of the general act above referred to by Lord Cairns are not such as are needed to meet the wants of a particular company. In Canada, as late as 1883, there was no general statute on this subject like that in England, but the practice of passing special acts prevailed; and it was said in one case in Canada: "Our statute books are full " of legislation of this kind. The authority of parliament to pass such laws seems never to have been doubted, either in England or in Canada. Many cases are reported in which such statutes were under consideration, but in no one of them has it been intimated that the power was even questionable." The Supreme Court of the United States, after an investigation of this matter, has held that the parliament of Canada has authority to grant to an embarrassed railway corporation, within that Dominion, the power to make an arrangement with its mortgage creditors for the substitution of a new security in the place of the one which they hold, and to provide that the arrangement shall be binding on all the holders of obligations secured by the same mortgage, when it shall have received the assent of the majority, provision being made for the protection of the minority in the enjoyment of rights and privileges in the new security identical with those of the majority. It was further held, that such an arrangement is binding upon citizens of the United States, who are bondholders in the Canadian corporation, where it gives them the same rights to participate in the reorganization which are 1 Re Cambrian Railways Company's Scheme, L. R. 3 Ch. 294. Waite, C. J., in Canada Southern R. Co. v. Gebhard, 109 U. S. 534; citing London Financial Asso. v. Wrexham &c. R. Co., L. R. 18 Eq. 566. 6 8 Jones v. Canada Central R. Co., 46 Up. Can. Q. B. 250. Waite, C. J., in Canada South. R. Co. v. Gebhard, supra. 5 Canada South. R. Co. v. Gebhard, 109 U. S. 527. Mr. Justice Harlan dissenting. accorded to Canadian citizens, or other British subjects.1 The case is an apt and forcible illustration of the principle that rights in a corporation are governed by the law of the place of the domicile of the corporation. § 275. Compromise Arrangement must be Substantially Complied with. It is scarcely necessary to say that where a compromise arrangement is entered into by different classes of corporate creditors, whereby they surrender up their various securities and accept bonds under a new mortgage, unless the arrangement is substantially complied with, it will relieve any dissenting signer of the contract, and he will be entitled to stand upon his original rights.2 On the other hand, to entitle the stockholder to the benefits of the scheme, he must comply substantially with its terms. Thus, where, by the terms of the scheme as supplemented by an act of the legislature, the stockholders were to have its benefits, provided they should pay ten per cent. on the amount of their stock within a time specified, otherwise forfeit all rights under it, a stockholder who paid the ten per cent. after the specified time, could not maintain an action to enforce any rights under the scheme. So, where it was a part of the scheme that the subscribers should surrender their bonds, with all the coupons thereon, whenever they should be required to do so, and should receive in lieu thereof the new bonds provided for by the scheme, a bondholder, signing the agreement, who received notice to surrender his bonds, but failed to do so until after the purchase of the road at forclosure sale and the formation of the new company, could not claim any benefits under the scheme, or insist on the delivery of the new bonds, not having complied with its terms.* 1 Ibid. 2 Miller v. Rutland &c. R. Co., 49 Vt. 399; s. c. 94 Am. Dec. 414. 3 Van Alstyne v. Houston &c. R. Co., 56 Tex. 373. 4 Carpenter v. Catlin, 44 Barb. (N. Y.) 75. Equities of particular bondholders or stockholders under arrangements for the reorganization of insolvent corporations: Ex parte White, 2 S. C. 469. 3 Agreements which have been held void as against public policy. Munson v. Syracuse &c. R. Co., 29 Hun (N. Y.), 76; Bliss v. Matteson, 45 N. Y. 22. Compare Harts v. Brown, 77 Ill. 226; Twin Lick Oil Co. v. Marbury, 91 U. S. 587; Kitchen v. St. Louis &c. R. Co., 69 Mo. 224; Carter v. Ford Plate Glass Co., 85 Ind. 180; Jackson v. Ludeling, 21 Wall. (U. S.) 616. As § 276. Bondholder may Lose his Rights by Laches. already suggested, the holder of a corporate security, whether shares of stock or mortgage bonds, may lose his rights to object to a scheme of foreclosure and arrangement, by standing by until the rights of third parties have intervened in such a manner that the arrangement could not be broken up so as to place the parties in statu quo. Thus, a bondholder of a former corporation has no standing in chancery to dissolve the present organization of a railway company, for which his agent had voted his bonds, in excess of his authority, and to enforce a different plan, where it appears that he knew of what his agent was doing, did not dissent from it, but accepted his share of the bonds of the new organization, had offered to buy and sell them, and had brought suit for them. Such conduct was justly deemed to be a ratification of the act. It was also regarded as conduct inducing others to believe that he acquiesced in the organization, and hence such as worked an equitable estoppel against his disputing it. After a railroad has been sold, the sale confirmed, the new corporation organized, its stock issued and passed into the hands. of the public, original bondholders, secured by the mortgage which was foreclosed, will not be allowed to come into the case for the first time, be made parties to it, reopen it, and object to and impeach the decree of foreclosure and sale. They are represented in the litigation by the trustees, and if it is proper for them to be made parties at all, they should be made such prior to the decree of foreclosure, at least prior to the decree confirming a sale. They cannot come in at the end of a long litigation and be made parties to the suit, and be treated in the double aspect of persons who are parties to the suit, and who have all the rights of parties from the beginning and also of persons who were not parties to the suit and whose rights have not been foreclosed.2 § 277. Rights of Holders of Income Bonds. The holder of bonds of a railroad and telegraph company, which are secured upon the income to be derived from sales of the lands of the company and from the operation of its road and line, retains, 1 Matthews v. Murchison, 15 Fed. Rep. 691. * Wetmore v. St. Paul &c R. Co., 5 Dill. (U. S.) 531, per Miller, J. after the consolidation of the company with another, a specific lien upon the income derived from the property which has gone from his debtor into the hands of the new company, and he may maintain a bill in equity to enforce it after default in payment of the principal of the bonds, or of the interest according to their tenor. Nor will the new company be liable for expenses incurred in operating the property between the date of the foreclosure and the organization of the new company, unless its possession of the property is affirmatively shown. The presumption in such a case will be that the purchaser at the foreclosure sale, and not the company organized to acquire and operate the property, was in possession during this interval and down to the time of filing the certificate of reorganization. On the other hand, the old company is not liable for an obligation incurred in operating the road after the foreclosure sale, provided the purchaser has in point of fact taken possession.3 § 278. Effect of Transforming a Partnership into a Corporation. The effect of transforming a partnership into a corporation is such that, as soon as the life of the corporation commences, the property ceases to be partnership property; the partners cease to be partners and become shareholders; their lien on the partnership property ceases and their character as shareholders begins; so that those who claim through a shareholder cannot set up such a lien. A corporation, formed by and consisting of the members of a partnership for the purpose of conducting the partnership business by means of the partnership property, takes the latter freed from equities subsisting among the partners, all of which are settled and extinguished by the transfer of the assets from the partnership to the corporation. Such a transfer does not, however, divest any equities which creditors may have in respect of the partnership assets.5 1 Rutten v. Union Pacific R. Co., 17 Fed. Rep. 480. 2 Pittsburgh &c. R. Co. v. Fierst, 96 Pa. St. 144. 3 Wellsborough &c. Plank Road Co. v. Griffin, 57 Pa. St. 417. ✦ Francklyn v. Sprague, 121 U. S. 215. See Hoyt v. Sprague and Francklyn v. Sprague, 103 U. S. 613. 5 Francklyn v. Sprague, 121 U. S. 215, 229. § 279. Abortive Corporations Re-incorporated under a General Law.-A company, organized under a charter which is void because passed in violation of a constitutional inhibition, may save its rights, so far as such rights are conferred in a general statute relating to companies of the like kind, by reorganizing under such general law. In like manner, where a company has become incorporated under one statute, but has never entered upon business in the corporate character thus assumed, it may, it has been held, without taking any steps to dissolve such incorporation, afterwards proceed to incorporate anew under a different statute, and may under the latter statute acquire a valid corporate character. A statute of Minnesota declares that "any existing corporation, association or society, transacting business of life, endowment, or casualty insurance upon the cooperative or assessment plan and incorporated under the laws of this State, may re-incorporate under the provisions of this act, by filing," among other things, a prescribed declaration, executed by a majority of its board of directors, trustees or managers. This statute has been held to be applicable to associations whose attempted incorporation under prior statutes had been unauthorized and ineffectual. In line with the principle already explained in regard to the acceptance of amendments of special charters by the directors, followed by user by the corporation of the powers therein granted, it has been held that, where a majority of the directors of an association which has attempted to incorporate under a prior statute, but failed because its objects were not authorized by such statute, proceed under a new statute to effect a re-incorporation, so to speak, or rather an originally valid incorporation, and the association thereafter acts as a corporation, — it will be presumed, in proceedings of quo warranto on the part of the State to test the question of its rightful corporate existence, that such action of the directors was authorized by the other members of the association.5 1 Southern Pacific R. Co. v. Orton, 6 Sawy. C. C. (U. S.) 157. 2 * Hyde v. Doe, 4 Sawy. (U. S.) 133. 3 State v. Steele, 37 Minn. 428. State v. Steele, supra. 187 |