corporations not to be assignable, except by consent of the legislature, rest is mainly the same as that upon which it has been held in this country, that such franchises are beyond the legislative control; namely, that the charter constitutes a contract between the sovereignty and the corporation, on the one part, for the grant of certain privileges and immunities, and upon the other, for the performance of certain duties and functions which are deemed an equivalent or consideration. * The state confers upon railways some of its most essential powers of sovereignty, that of eminent domain, and of a virtual monopoly, in the transportation of freight and passengers, and in return therefor stipulates for the performance of those duties by the corporation. The corporation have no more right in equity and justice to transfer their obligations to other companies, or to natural persons, than the state has to withdraw them altogether." Redfield on Railways, 422, note 14.

The doctrine, according to Judge Redfield, rests upon the ground that the corporation is under an obligation to the state to build and operate its road. Such was formerly the rule in England, even as to a railway corporation that had not made any express undertaking to that effect, and to which no exclusive privileges had been granted. Redfield on Railways, section 192. But concerning that class of cases, the doctrine seems to have been overruled in England, and has never prevailed in America. Redfield on Railways, section 192, and notes. The appellant did not expressly undertake to build the road authorized by its charter; nor did its charter expressly declare that it should do so; nor was any exclusive right to do so conferred upon it. In our opinion, the appellant was not bound to commence the road, nor to complete it after commencing, nor to put it in operation after completion, nor to continue it in operation. It might have forfeited its charter by non-user, but was not bound to use it. So long as it shall avail itself of the privileges conferred by its charter, it will be liable to the burdens thereby imposed. But, in our opinion, neither the public nor any individual not connected with it can compel it to exercise its corporate franchises, or make it pay damages for failing to do so. The doctrine under consideration has, therefore, no foundation in this case, if the ground on which it rests is earnestly stated by Judge Redfield. Nor do we perceive any other solid ground on which to place it.

We do not suppose that the appellant could mortgage its corporate existence, or any prerogative franchise conferred upon it. But the right to build and use a railroad is not a prerogative franchise. It has, indeed, been said that "both currency and internal communication between different portions of the state are exclusively the prerogatives of sovereignty"; Redfield on Railways, 23; and that "the right to build and use a railroad, and take tolls or fares, is a franchise of the prerogative character, which no person can legally exercise without some special grant of the legislature"; Redfield on Railways, 23, note 1. Possibly these passages were not designed to

mean more than this: A road can not be made over the lands of un

willing proprietors except under authority from the state; and the state, in order to encourage internal improvements, may grant to a corporation or individual the exclusive right to build a road between two points. In the absence of any positive law upon the subject, our opinion is that an individual has as much right to build a railroad over his own land, or the land of others with their consent, as he has to build a stage or a wagon; and as much right to use the former as the latter in carrying freight and passengers for pay.

The denial of the right of a railroad corporation to transfer its road has sometimes been based upon considerations of general convenience and public interest, and upon the ground that the corporation, having been chosen by the legislature as the fit depositary of the right to construct and operate the road, should not be permitted to transfer it to irresponsible parties. To this argument several objections present themselves. The appellant's directors, in authorizing this mortgage to Metcalfe, declared themselves "satisfied that to furnish and complete the road they will require the sum of thirty thousand dollars in addition to the means at their command." suming, as we must do, that the loan was necessary to complete the road, and assuming it to be probable, as we may do, that the loan could not have been effected without a mortgage, considerations of general convenience seem to be on the side of the power to make the mortgage rather than against it.

As

The public had an interest in seeing the road constructed and operated according to the terms of the charter. But whether it shall be thus operated by A or B, by an individual or corporation, does not seem to be a matter of any interest whatever to the public. Under the charter of the appellant, its road, while held by it, is under the control of its stockholders. A single person, by purchasing all the stock, can control the road as completely as if he owned it individually. A purchaser, under its mortgage, would take the road subject to the terms of the charter designed to protect the public, and would be bound thereby as fully as the corporation is.

We perceive no reason to suppose that a purchaser of all the property of appellant would be less responsible in a pecuniary point of view than the appellant. Nor do we perceive any other reason to suppose that the individual responsibility of the purchaser would not be quite as beneficial to the public as the corporate responsibility of the appellant. General convenience requires that the appellant shall in some manner be compelled to pay the money it borrowed. But it is contended that this should be done by merely subjecting the accruing profits. To do that effectually it might be necessary to appoint a receiver to take charge of the road, because under the management of the directors it is possible that no profits might accrue, while under a different management the road might be profitable. Yet every argument against allowing the appellant to mortgage its road applies with equal force against the appointment of a receiver to control it, with perhaps the additional argument that a receiver would not be personally liable, like a purchaser, as a common carrier.

§310

That a mortgage by a railway company to secure money borrowed for the construction of its road is not opposed to the public policy of this state is indicated by the general course of legislation upon the subject. We believe that all the railroads in the state, except that of the appellant, were constructed under charters authorizing such mortgages; and mortgages made by the Covington and Lexington Company and by the Lexington and Big Sandy Company, without express authority either to make a mortgage or to borrow money, were afterward ratified by the legislature. And we are not aware of an instance in which the legislature, when applied to, has refused to confer such power or to ratify the exercise of it.

upon

his

The facts that the appellant voluntarily mortgaged its property to secure the money which it was expressly authorized to borrow, and that the bondholders invested their money upon the faith of the mortgage, furnish, in our opinion, a sufficient distinction to relieve this case from the operation of the distinction in the case of Winchester and Lexington Turnpike Co. v. Vimont, 5 B. Monroe 1, in which it was held that a turnpike road could not be sold for a general debt of the corporation. If the decision in that case could be regarded as denying that property or franchises, in the use of which the public have an interest, can be assigned, we might perhaps hesitate to follow it, in view of several other decisions of this court. In Jouitt v. Lewis, 4 Litt. 160, the vendee of a turnpike road was held liable covenant to keep it in repair without any question being made as to In Trustees of Maysville v. Boon, 2 J. J. the validity of the sale. Marsh. 227, a ferry franchise was held to be alienable. And in McCauley v. Givens, 1 Dana 261, a lease of a ferry under an order of court was held to be valid. Our decision rests upon the ground that the appellant, having been authorized to borrow this money, had implied power to execute a mortgage to secure its payment. The American decisions cited in Pierce on Railroad Law, chapter 20, and Redfield on Railways, section 235, note 19, present such a conflict of opinion that we have felt free to consider the question as an open one, and have not deemed it advisable to attempt to sustain our opinion by referring to cases which are perhaps counterbalanced by opposing authorities.

Reversed on another ground.

Compare, 1869, Miners' Ditch Co. v. Zellerbach, 37 Cal. 543, 99 Am. Dec. 300; 1888, State v. Western, etc., Co., 40 Kan. 96, 10 Am. St. Rep. 166; 1899, Michigan Telephone Co. v. St. Joseph, 121 Mich. 502, 80 Am. St. Rep. 520, 80 N. W. 383.

Sec. 311. (e) Power to mortgage.

JONES v. GUARANTY AND INDEMNITY COMPANY.1

1879. IN THE SUPREME COURT OF THE UNITED STATES. ΙΟΙ U. S. Rep. 622-633.

[Appeal from United States Circuit Court, E. D. New York. The New York Kerosene Oil Co., and the New York Guaranty and Indemnity Company were both New York corporations. In 1867, Cozzens, president of the oil company, applied to the guaranty company for a loan for $100,000; this was agreed to, and $50,000 advanced; and to secure the same, by agreement with Cozzens, a bond and mortgage were directed to be executed, after the written consent of the holders of more than two-thirds of the stock of the oil company had been obtained. The mortgage was duly executed to secure a loan of $100,000, and was stated to be given to cover any advances then made, or thereafter to be made by the guaranty company, to Cozzens to the amount of $100,000, on condition that whenever any sum was so advanced the amount and date should be indorsed and signed by Cozzens on the bond-and whenever he made any payment such sum should also be indorsed on the bond. No dishonesty was alleged or shown in the transactions, and the company had express authority to secure its debts "contracted by it in the business for which it was incorporated, by mortgaging any or all of its real estate." The unsecured creditors, after the corporation became insolvent, attacked the validity of the mortgage. The circuit court sustained it, and this decision is brought here for review. ]

*

MR. JUSTICE SWAYNE. questions to be determined are:

The central and controlling

Whether the oil company had the power to give a mortgage for future advances; and,

Whether the mortgage here in question is, in the view of a court of equity, for the debt of the oil company or for the debt of Abraham M. Cozzens.

The oral arguments of the eminent counsel who appeared before us were addressed principally to these subjects. Numerous other points are made by the counsel for the appellant in his brief, and have been fully discussed in the printed arguments upon both sides. They are minor in their character, and we think involve no proposition that admits of doubt as to its proper solution. We are satisfied with the disposition made of them by the circuit court, and shall pass them by without further remark.

At the common law, every corporation had, as incident to its existence, the power to acquire, hold and convey real estate, except so far as it was restrained by its charter or by act of parliament. This comprehensive capacity included also personal effects of every kind. 1 Statement abridged. Part of opinion omitted.

The jus disponendi was without limit or qualification. It extended to mortgages given to secure the payment of debts. 1 Kyd Corp., 69, 76, 78, 108; Angell & Ames, § 145; 2 Kent Com., 282; Reynolds v. Commissioners of Stark County, 5 Ohio 204; Whitewater Valley Canal Co. v. Valette, 21 How. 414.

A mortgage for future advances was recognized as valid by the common law. Gardner v. Graham, 7 Vin. Abr. 22, pl. 3. See also, Brinkerhoff v. Marvin, 5 Johns. (N. Y.) Ch. 320; Lawrence v. Tucker, 23 How. 14.

It is believed that they are held valid throughout the United States, except where forbidden by the local law.

The statute under which the oil company came into existence made it "capable in law of purchasing, holding and conveying any real and personal estate, whenever necessary to enable" it to carry on its business: but it was forbidden to "mortgage the same, or give any lien thereon." This disability was removed by the later act of 1864, which expressly conferred the power before withheld. This change was remedial, and the clause which gave it is, therefore, to be construed liberally with reference to the ends in view.

The learned counsel for the appellant insisted that a mortgage could be competently given by the oil company only to secure a debt incurred in its business and already subsisting. This, we think, is too narrow a construction of the language of the law. A thing may be within a statute but not within its letter, or within the letter and yet not within the statute. The intent of the lawmaker is the law. The People v. Utica Insurance Co., 15 Johns. (N. Y.) 358; United States v. Babbit, I Black 55.

The view of the court in Thompson v. New York and Hudson River Railroad Co., 3 Sandf. (N. Y.) Ch. 625, was sounder and better law. There the charter authorized the corporation to build a bridge. It found one already built that answered every purpose, and bought it. The purchase was held to be intra vires and valid. Here the object of the authorization is to enable the company to procure the means to carry on its business. Why should it be required to go into debt, and then borrow, if it could, instead of borrowing in advance and shaping its affairs accordingly? No sensible reason to the contrary can be given. If it may borrow and give a mortgage for a debt antecedently or contemporaneously created, why may it not thus provide for future advances as it may need them? This may be more economical and more beneficial than any other arrangement involving the security authorized to be given. In both these latter cases the ultimate result with respect to the security would be just the same as if the mortgage were given for a pre-existing debt in literal compliance with the statute. No one could be wronged or injured, while the corporation, whom it was the purpose of the law to aid, might be materially benefited. Is not such a departure within the meaning, if not the letter, of the statute? There would be no more danger of the abuse of the power conferred than if it were exercised in the manner insisted upon. The safeguard provided in the required assent of