it is not competent for the legislature to diminish them. The lien of a mortgage upon the road-way of one of the precedent companies is therefore enforcible by a sale of such road-way, although it may operate to sell a portion of a continuous line of railway. Where the consolidation has assumed the form of a purchase by the absorbing company of the line of the absorbed railway, which line is covered by a mortgage, the purchasing company will be estopped from setting up the defense that the effect of such a sale will be to sever their line.2 § 323. Jurisdiction not Parted with or Transferred. Where, in such a case, the State, the railway of whose corporation is absorbed, under the permission granted by its statute, by the foreign corporation, — grants, by the terms of such statute, to the foreign State, no jurisdiction over the property which it thus allows to be absorbed by the foreign corporation, an action cannot be maintained in such foreign State to foreclose a mortgage existing prior to the consolidation, upon the property thus ceded to the foreign corporation. It follows that the existence in the foreign State, of a foreclosure suit, in respect of such domestic property, is no bar to the bringing and prosecution of such an action in the State which has authorized the absorption. This ruling proceeds upon the principle that a State will not be considered to have parted with jurisdictional power without the clearest expression of the fact.3 § 324. Selling out to a Foreign Corporation and Taking its Shares in Payment. Consolidations have often taken the form of a purchase and sale,—that is, a purchase by one corporation of all the shares of stock of another corporation, payment being made in the shares of the purchasing corporation. Of course, 1 Eaton &c. R. Co. v. Hunt, 20 Ind. 457, 464, per Perkins, J.; Gantly v. Ewing, 3 How. (U. S.) 707; Scobey v. Gibson, 17 Ind. 572. 2 For "it will not do for the company to say that six miles of road could not be sold separately, they having purchased it after it had been mortgaged separately, subject to the mortgage." Eaton &c. R. Co. v. Hunt, 20 Ind. 457, 464. 3 Eaton &c. R. Co. v. Hunt, 20 Ind. 457, 466; citing to the principle just stated, Newcastle &c. R. Co. v. Peru &c. R. Co., 3 Ind. 464; Johns v. State, 19 Ind. 421. 4 Such was the scheme in the case of Lauman v. Lebanon Valley R. Co., 30 Pa. St. 46. it is competent for the legislature to authorize one corporation to become consolidated with a foreign corporation, in such a manner as to place the control of the consolidated stock in the board of directors of the foreign company. But this cannot be done without legislative authorization; and the statute authorizing it ought to be express. Such a power will not be allowed to arise upon a doubtful implication.2 § 325. Illustrations.-Accordingly, it has been held that a corporation organized under the laws of New York has no power to transfer all its property to a foreign corporation carrying on the same business, taking in payment the stock of the foreign company, and thus terminating its own existence. Nor can a majority of the stockholders bind a dissenting minority by a scheme of this kind, which operates to dissolve the domestic corporation and to transfer its property to the foreign one, so as to escape that scrutiny into its affairs which is enjoined by the laws of New York. In such a case a dissenting stockholder may maintain a suit in equity to have the transaction enjoined and to have the corporation wound up. Said the court: "He became a stockholder under the security of the New York law, and, when that is taken from him, at least he should have the property of his corporation applied to the payment of its debts, and the surplus, if any, divided among the stockholders." 3 Of course, what a majority of the stockholders cannot do, the trustees cannot do. Accordingly, on the dissolution of a joint-stock corporation, it is the duty of the trustees to convert the assets into money, and to distribute the proceeds, first to the creditors, and then to the stockholders. They have no right to exchange the assets, or any portion of them, for the stock of any other corporation, without the consent of all the stockholders; and a stockholder, not consenting to such exchange, may recover of the trustees the value of his stock thus wrongfully disposed of, on the theory of a conversion.1 1 Racine &c. R. Co. v. Farmers' &c. Co., 49 Ill. 331. 2 Thus, where a statute authorizes railroad companies to lease their properties, but does not in terms authorize such a company to lease its properties to a railroad company created by the legislature of another State, such a power will be held not to exist, on the settled rule of construction, in respect of legislative grants to corporations, that what is not clearly granted is withheld, and that any ambiguity in the terms of the grant must operate against the corporation and in favor of the public. Or, as it has been expressed, that to be in doubt is to be resolved, and every resolution which springs from doubt is against the corporation. Black v. Delaware &c. R. Co., 24 N. J. Eq. 456. Taylor v. Earle, 8 Hun (N. Y), 1. Frothingham v. Barney, 6 Hun (N. Y.), 366. That a shareholder has 4 § 326. Power to Consolidate a Contract Right and Inviolable. The power given to a railroad company, by the statute of its creation, to form a union by consolidation with other companies, has been said to be a right in the nature of a contract, when the statute is accepted and acted upon by the corporation, which cannot be subsequently withdrawn or substantially impaired by the State, in consequence of the prohibition of the constitution of the United States.1 66 § 327. What Steps Necessary to Effect a Consolidation.— It follows from what has just been said that a corporation, e.g., a railway company, by "associating, allying and connecting itself" with another, does not thereby become equitably amalgamated" with it; 2 though two such companies may form, by agreement, such traffic arrangements as to operate their roads as a continuous line, and render either company liable to a passenger for the loss of his baggage, or such as to render them jointly liable to shippers. As in the case of the creation of a corporation under a general law,5 where two or more companies undertake to consolidate, the essential steps pointed out by the statute, in so far as they constitute conditions precedent, must be taken before the consolidation is effectual and the new company comes into existence. Thus, if the governing statute requires a certificate of consolidation to be filed with the Secretary of State, until this is done the new company does not exist. On the -- a right to have the contract, embodied in the articles of association, performed by the trustees according to its terms, and that he has a right to the aid of a court of equity to compel them to perform it, as for instance to compel them to wind up the company, dispose of its property and distribute its proceeds, as provided in the articles, although some different scheme might be more profitable and more beneficial to all the shareholders, was held in Manne. Butler, 2 Barb. Ch (N. Y.) 362. That stockholders cannot be forced into relations with new corporations against their consent, see Blatchford v. Ross, 54 Barb. (N. Y.) 42. And compare Hartford &c. R. Co. v. Crosswell, 5 Hill (N. Y.), 383; ante, § 74; post, § 343. 1 Zimmer v. State, 30 Ark. 677, 680, per Harrison, J. 2 Shrewsbury &c. R. Co. v. Stour Valley Co., 21 Eng. L. & Eq. 628; 2 De Gex, M. & G. 866. 3 Hart v. Rensselaer &c. R. Co., 8 N. Y. 37; Stratton v. New York &c. R. Co., 2 E. D. Smith (N. Y.) 184; Lee Lin v. Terre Haute &c. R. Co., 10 Mo. App. 125, and cases there cited. 4 Wyman v. Railroad Co., 4 Mo. App. 95. 5 Ante, § 226. 6 Commonwealth v. Atlantic &c. R. Co., 53 Pa. St. 9. Peninsular R. Co. v. Tharp, 28 Mich. 506. 3 other hand, as in the case of an original incorporation,' the filing of such an instrument is usually sufficient to constitute the consolidated company a legal corporation within the state.❜ But when it is proved that a certificate of consolidation was deposited with the Secretary of State, as provided by law, the presumption is that the secretary filed the same of record and that it remains of record, and a mandamus will, if necessary, issue to the Secretary of State to add the date of filing, or to do any other ministerial act in the premises required by the governing statute. Moreover, as in the case of an original incorporation, unless the certificate in its recitals complies in substance with the statute, there will be no incorporation. It was so held under a statute of Ohio, where the certificate failed to state the residence of the directors of the new company.5 Outside of the making and filing of the certificate, the statute may impose conditions precedent to the existence of the consolidated company, as, under one statute, the condition of the election of a board of directors of the new company, until which the new company does not acquire the rights and franchises of the precedent companies." Again, while in the case of an original incorporation," the filing of a duplicate, or copy of the certificate of incorporation, with the Secretary of State, is generally not regarded as a condition precedent to the existence of the corporation, — yet, under a statute of Michigan, it has been held such in respect of the filing of a duplicate of the agreement of consolidation between railway companies.' § 328. Distinction between Consolidation and Agreement to Consolidate. Two things are of course necessary to the consolidation of two or more corporations: agreement between the consolidating 1 Ante, § 220, et seq. 2 Commonwealth v. Atlantic &c. R. Co., 53 Pa. St. 9. 3 Com. v. Atlantic &c. R. Co., 53 Pa. St. 9. 4 Ante, § 221. 5 State v. Vanderbilt, 37 Ohio St. 590, 645. The court cited: Atlantic &c. R. Co. v. Sullivant, 5 Oh. St. 276; 1. An enabling statute. 2. An companies that they will consoli State v. Lee, 21 Oh. St. 662; State v. 6 Comp. Laws Mich. 1857, § 1996. 30 Mich. 124. 8 Ante, § 240. • Mansfield &c. R. Co. v. Drinker, supra. date. In addition to this, there must follow the other steps pointed out by the statute to make the consolidation effectual. An agreement to consolidate at a future time is, of course, no consolidation, and will not amalgamate the two companies under any circumstances until the time arrives.1 § 329. Agreements which do not Amount to a Consolidation. - A mere alliance, or association, or traffic connection between two railroad companies, does not have the effect of consolidating them, even in the view of a court of equity. But where, under such an agreement, one of the companies has acquired rights against the other in respect to the use of its properties, as the right to the joint use of one of its stations, & court of equity will interfere in its behalf to protect these rights, provided the occasion is grave and the complaining company is otherwise without remedy. In such a case, the court may direct a partition of the station, and appoint a receiver, if necessary. But where provisions exist for the settlement of disputes on such subjects by arbitration, the court will withhold its interposition until the remedy thus provided for has been resorted to.3 § 330. By One Company Purchasing the Capital Stock of the Other Company. - Statutes authorizing the consolidation of railway companies have sometimes taken the form of empowering one company to purchase the capital stock of the other company. Such was held to be the effect of certain special statutes of New Jersey. One of these authorized certain railroad companies to consolidate their capital stock. Another authorized one of the companies, which had then mortgaged its after-acquired property, to purchase the stock of the other company, in lieu of a consolidation of its own stock with the capital stock of the latter. The purchase and delivery of the stock were actually made, for the purpose of consolidation. An actual consolidation took place, and was completely recognized by the parties in interest; and the company whose stock had been sold, thereafter ceased to exist, except as a mere matter of form, and 1 Shrewsbury &c. R. Co. v. Stour Valley R. Co., 21 Eng. L. & Eq. 628; 2 De Gex, M. & G. 866. * Shrewsbury &c. R. Co. v. Stour Valley R. Co., 21 Eng. L. & Eq. 628; 2 De Gex, M. & G. 866. 3 Ibid. That contracts between different companies for an amalgamation are in England recognized and enforced in equity, see Mozley v. Alston, 1 Phil. Ch. 790. |