other fictitious increase of stock or indebtedness would be legal, though every stockholder concurred therein. In the contemplation of the organic law of Illinois. such "watering," as it is called, is against the public policy. The common law recognizes the right of the government to make such restrictions.

$57. Under certain conditions, for legitimate purposes and in a manner prescribed by law, a railway company may increase its capital stock. The condition requires that sixty days notice shall be given "in such manner as may be provided by law." The statute provides1 that in case the original capital shall prove insufficient for the construction and operation of the road, the same may be increased to any amount required for the purpose. This increase must be sanctioned and authorized by two-thirds in value of all the stock. The question of increase must be decided at a meeting called for that especial purpose.2

§ 58. Every railway company organized or doing business in Illinois, "under the laws and authority thereof," is compelled to maintain a public office in this state for the transaction of its business. It is there that its transfers of stock must be made. The company is required by the constitution to keep at that office, or place, books in which shall be recorded: 1. The amount of capital stock subscribed. 2. By whom subscribed. 3. The names of the present owners of the stock. 4. How much each shareholder holds. 5. The amount of stock paid in. 6. By whom paid in. 7. The amount of its assets.

1 Gross, vol. ii, R. R. chap. sec. 174.

8. The amount of its

For the method of its call, which is by the directors, see Duties of Directors.

liabilities. 9. The name and residence of the officers of the company. The statute reaffirms these requirements, adding one more, viz.: how the shares held by cach is designated. This law is only partially respected, especially by the older companies.?

1

$59. The corporation may not only increase its capital stock, but mortgage its property, if necessary, to complete or operate its road. In the nineteenth section of the statute of 1872, wherein numerous rights are specified, it is declared that the company shall have power3 "from time to time to borrow such sums of money as may be necessary for completing, finishing, improving or operating any such railway, and to issue and dispose of its bonds for any amount so borrowed, and to mortgage its corporate property and franchises to secure payment of any debt so contracted.” concurrence of a two-thirds majority of the stock must be secured as first defined in the preceding section, and the increase, or mortgage, must be made a matter of public record, as provided in the case of the articles of incorporation.

The

§ 60. This statutory permission to borrow money on a mortgage of franchises and property formed a part of the present general railway incorporation act, and did not apply originally to railroads existing under charters. A statute was passed in 1873 extending its

1 Gross, vol. ii, R. R. chap., sec. 166.

2 A very large proportion of the stock is bandied about on 'Change in New York, or held by persons living remote, and the actually ownership is often unknown. See second annual report Railroad and Warehouse Commissioners, Illinois, for abundant evidence of the partial inoperativeness of this feature of organic law.

Gross, vol. ii, R. R. chap. sec. 186.

provisions to all other railroad companies. It went into force July 1, 1873.1 Besides extending this power to other or charter railroads in the state, the law contained this safeguard: "This act shall not in any manner legalize the subscription of any township, county or city to the capital stock of any railroad company, nor authorize the issuing of any bonds by any township, city or county in payment of any subscription or donation."

§ 61. The need of this special authorization to mortgage its franchise and property rests upon the fact that a corporation, whether public or private, possesses and is empowered to exercise no other functions than those specifically conferred by the act creating it, or such as are necessary to carry into effect the purposes for which it was created. The courts are strict in limiting and preventing the abuse of corporate authority.

§ 62. The stock is defined by statutes to be personal estate, transferable in the manner prescribed by the by-laws. In the case of companies organized under the new law, "no shares shall be transferable until all previous calls thereon shall have been paid." The statute further provides that "it shall not be lawful for such corporation to use any of the funds thereof in the purchase of its own stock, or that of any other corporation, or to loan any of its funds to any director

1 Laws of Illinois, 1873, page 141.

2 Caldwell v. City of Alton, 33 Ill. 416; Newhali v. Galena and Chicago Union R. R. Co. 14 Ill. 273; Ohio and Mississippi R. R. Co. v. McClelland, 25 Ill. 140; Galena and Chicago Union R. R. Co. v. Crawford, Ibid, 529.

Gross, vol. ii, Ibid, sec. 172.

or other officer thereof, or to permit them or any of them to use the same for other than the legitimate purposes of such corporation."

63. It is worthy of note in this connection that an act of congress passed in 1848 contains a clause pertinent to such of our railroad companies as have foreign stockholders.1 It provides that "all powers of attorney executed in a foreign land for the transfer of any stock of the United States, or for the receipt. of interest thereon, shall be verified by the certificate and seal of a consul, vice-consul, or commercial agent, or vice-commercial agent, at the place of execution, if any such there be.”2

§ 64. Some Illinois railway charters expressly permit any and all consolidation, and only a very few of them explicitly restrict it. The United States supreme court, in a recent case, held that where railroad companies are consolidated by act of legislation, the presumption of law is that each of the united lines of road will be held with the privileges and burdens originally attached thereto, unless the contrary is expressed. The Illinois supreme court holds that in case of consolidation the powers vested in the companies consolidated will be conferred upon and center in the company taking the name of the consolidated company. The grant of a right to a railroad com

'The term foreign is often applied to a state; but in this connection it is used in its more familiar sense, as applying to persons living outside of the United States.

2 The careless wording of this law is noticeable. As a rule state statutes are drawn with greater precision than national statutes.

Tomlinson v. Branch, 15 Wall. 460.

* Robertson v. City of Rockford, 21 Ill. 458.

pany to extend and unite with any other railroad in the state gives a general authority to extend to any other railroad within the prescribed limits.1

§ 65. The present constitution declares that "no railroad corporation shall consolidate its stock, property, or franchises with another railroad corporation owning a parallel or competing line." It may be questioned whether such a prohibition is valid in the case of some corporations; but no decision on that point has yet been rendered, and it is believed that no issue thereon has been joined. The same clause of the constitution adds that "in no case shall any consolidation take place, except upon public notice given sixty days to all stockholders, in such manner as may be provided by law." The statute makes the same provision for notice in this case as in the case of a proposed increase of stock. 3

§ 66. The more frequent method of unifying two or more railway interests is by leasing, without the formal consolidation of stock. It will be observed that the constitution and the statute regards leasing and stock consolidation as so nearly the same as to place precisely the same restrictions upon both, using the term "consolidating its stock, property, or franchises." In a case which was adjudicated long prior to the present constitution the court held that, if a railroad company use the road of another company it must. conform to the charter of the other corporation while doing the business.4 A railroad company may lease

1 Belleville R. R. Co. v. Gregory, 15 Ill. 20

2 Illinois Constitution, art. xi, sec. 11.

3 Gross, vol. ii, R. R. chap. sec. 189.