commonly practised by way of bonds and mortgages and preferred stock, which indeed amounts to much the same thing as a mortgage under a different name. In this country these mortgages have usually been so framed as to create successive liens, in the order of their being issued, as first, second, and third mortgage bonds. These are issued in large general sums, subdivided to suit the wants of purchasers in the market, and when sold at par and above, are perhaps the most unobjectionable mode of completing an enterprise that otherwise must stop in medio. But when sold, as they commonly are, at reduced prices, in proportion to the waning fortunes of the company, they must of course destroy at once the credit of the stock and operate harshly upon its holders.

This is not the place, nor are we disposed, to read a homily upon the wisdom of legislative grants, or the moralities of moneyed speculations in stocks on the exchange or elsewhere. But it would seem that legislation upon this subject should be conducted with sufficient deliberation and firmness so as not to invest such incorporations with such unlimited powers as to operate as a net to catch the unwary, or as a gulf in which to bury out of sight the most disastrous results to private fortunes, which has justly rendered American investments, taken as a whole, a reproach wherever the name has travelled. Experience will perhaps show that desperate enterprises require desperate means for their accomplishment, and will always find men for their management whose characters will conform more or less. to the necessities of their position. And if by legislative restrictions they are precluded from the more obvious devices and expedients for the relief of their straitened fortunes, they will only be forced to the adoption of such as are more complex, less superficial, and consequently the more likely to seduce inexperienced capitalists into their investments.

*

5. But even this is no apology for such unrestricted powers as are often given to these companies. And the mode in which such things are here carried through the legislature, by means of agents who have, where there are no rival interests, very much their own way, without even the necessity of subjecting their plans to any permanent board of supervision who shall have

such matters under control, and devote such time to their study as not to be misled by the devices of the interested; this mode of accomplishing such things sufficiently explains why, in this country, no restrictions are placed upon such companies.

6. If some reliable estimate of the cost of such undertakings were obtained, by means of a board of trade or railway commissioners, and no work allowed to go forward until a large proportion or the whole of the requisite capital were obtained by stock subscriptions, it would afford great security. And if all mortgages, at whatever time given, were placed upon the same footing, as to priority, it would give far less temptation to speculation in mere bubble investments, which is too much the case in this country. But there is perhaps no remedy for this incautious legislation in this country but the severe and hard discipline of that most painful but surest teacher, experience. It is, we think, rather creditable to the promoters of railways in this country, that with such unlimited powers as their charters confer they have been so little abused, and this in the main not often by design or for private ends, but through inexperience and want of skill.

7. We have deemed it not improper to allude to this subject, in this connection, chiefly because of the far greater severity and extent to which such losses are felt throughout society in this country than in older states. Here we have no national funded stock in convenient sums for small investment, and which being sure is really a great blessing to the mass of those who wish to invest moderate sums, as a protection against age or calamity. In those countries where such opportunities exist, it removes all temptation to invest small sums in these enterprises, which, *however necessary for the public, such small owners can but poorly afford to aid in carrying forward, and which consequently should in justice either be guarantied or owned by the state, or at all events aided by state credit, when they become indispensable for the public convenience, but are so extensive or so

7 Both these requisites are contained in the English Railway Acts, and the standing orders of parliament. Hodges on Railways, 16-44. Companies' Clauses Consolidation Act, 8 and 9 Vict. ch. 16, § 42, 44; Hodges on Railways, App. 73, 74.

little remunerative at first as to be an unsafe undertaking for private enterprise.8

8. There is a class of questions, somewhat analogous to some of the foregoing, which has arisen extensively in this country, in regard to a few companies, which is denominated the overissue of stock. By this is understood an express fraud by managing directors, or agents, in issuing stock without any authority, and in many instances mere fictitious stock, after all the shares created by the charter had been issued and sold. There was a strong disposition manifested at first, among the legal profession and business men, to hold such fictitious shares, entitled to the same claim upon the funds of the company as the genuine shares, and that the only effect of the over-issue would be to diminish, in the same proportion, the amount and value of the genuine shares.

9. This opinion was based upon the view, that the company, having intrusted their agents with the means of putting such spurious stock in circulation, should be bound by their acts. This was a plausible view certainly, and the courts before which the questions first came very generally adopted it.9

8 We are conscious of the very serious objections which exist practically against state management of public works. They are not likely to be as productive or as efficient under such control, and are liable, in popular governments, to serious abuse, as a medium of favoritism, nepotism, and every species of partiality, in the way of state patronage. But there should be some mode of equalizing public burdens for such works, and in practice none perhaps has operated better than the loaning of state credit, which creates a reliable stock for capitalists, small or great, and affords some security that the management will be as good as public servants can be found ready to secure, and that legislation will be more carefully watched than where the public have no interest.

• Mechanics' Bank of the City of New York v. N. Y. & N. H. Railw., 4 Duer, 480. The case in this court was put mainly upon the ground of the authority of the transfer agent of the company, he having certified to the genuineness of the stock, and that this being an act within the acknowledged scope of his employment, would bind the company.

And even if the company had not power to issue stock beyond the amount limited in their charter, in regard to which the court were not agreed, still the promise to issue it will bind them, and render them liable in damages, which will produce the same result as if the shares were to be held genuine.

In N. Y. & N. H. Railw. v. Schuyler, 38 Barb. 534, it was held, that where the capital stock of a corporation was limited by its charter to a certain number

10. But subsequent investigation of the subject before the * courts of final resort led to a different conclusion, especially in regard to cases of stock issued beyond the limit of the charter, and where consequently there was a defect of power in the corporation itself, to issue the stock, and also where the stock was originally transferred to one, aware of the mode in which of shares, it is not in the power of the directors, by any resolution or act, to increase the number beyond that amount. Nor can they, directly or indirectly, delegate to their agent authority to make such increase. Nor will any act of negligence or misconduct of the agent effect indirectly what the corporation could not do directly. And the doctrine of estoppel cannot be applied to give validity to what would be an illegal act, or to prevent the company from setting up, in answer to a claim to stock, that the same is void, as having been issued in excess of their capital. But the court also lay down that a corporation is liable for the acts of its transfer agent in issuing false certificates of stock and allowing false transfers, and for negligence on the part of the corporation and its officers in permitting transfers of spurious stock to be made on the books of the company to persons desirous of becoming stockholders therein. And a corporation is liable to respond in damages for any loss sustained either by the fraud or negligence of its agents in discharging the particular duty assigned to them; as where a company is bound to keep transfer books for the purpose of transferring stock, and on being applied to by persons about to purchase stock in the company, to know whether shares have been transferred to them, the officers and clerks give the information that shares have been so transferred, and also give the certificate thereof, on the faith of which statements money is paid; when in fact no money had been paid, and the party making the transfer had no stock to his credit to dispose of. N. Y. & N. H. Railw. v. Schuyler, supra. And see Shotwell v. Mali, 38 Barb. 445. It was here held that the officers of a corporation authorized to issue certificates of stock to the shareholders as evidence of the title of stock, are liable not only to the immediate purchaser from them of spurious stock, falsely and fraudulently certified by them, but to any subsequent purchaser, buying upon the faith of the false certificate, and sustaining damage thereby. And although the purchaser of spurious stock has a remedy against his vendor, for a breach of the implied warranty of title, that right of action does not constitute a bar to an action against one who has induced the purchase by a fraudulent representation that the vendor had title to the stock, whereby damage has resulted. The purchaser's right of action against the officers of a corporation concerned in the issue of spurious stock is complete from the purchase. And that right will not be affected by any subsequent action of the directors of the corporation, in turning out other property to him to an amount exceeding the cost of the false certificates. Any one furnishing to another a false and fraudulent document, purporting to show title in the latter to any property, is liable to any one sustaining damage therein. Per Grover, J., Shotwell v. Mali, supra. And see Cazeaux v. Mali, 25 Barb. 578.

it was created, although subsequently coming into the hands of a bona fide purchaser. It was held that where the act, if done by the corporation, would have been ultra vires, the transaction, when done by the directors, could have no force, and even when the corporation had power, and the manner of employing the agent enabled him to bind the company in a contract with one ignorant of his bad faith, yet if such person was aware of the bad faith of the agent, he not only acquired no title to the stock, but a bona fide purchaser of him would stand in no better situation.10

10 Mechanics' Bank v. N. Y. & N. H. Railw., 3 Kernan, 599. The case is here put by the court upon the following grounds: "By the act creating a corporaration, its capital stock was limited to $3,000,000, and divided into shares of $100 each, transferable in such manner as the company should direct; the entire stock was taken, and certificates issued therefor to the owners; and the bylaws of the company prescribed that transfers of stock should be made on the transfer books of the company, and required the certificate of ownership to be surrendered prior to the making of such transfer and the issue of a new certificate. The company established a transfer agency, and appointed their president transfer agent, who was authorized and accustomed, on the transfer of stock on the books in his charge, and the surrender of the certificate therefor, to execute and deliver to the transferee the usual certificate, stating that he was entitled to the number of shares of stock specified therein, transferable on the books of the company by him or his attorney on the surrender of the certificate; the agent fraudulently gave to one Kyle a certificate in the usual form for eightyfive shares of stock, when, in fact, the latter owned no stock, none stood on the books in his name, and no certificate for such stock had been surrendered; the plaintiffs, in good faith, and relying upon the certificate as regularly issued and valid, made a loan to Kyle, receiving from him the certificate, with an assignment of the stock and a power of attorney to transfer the same. In an action by the plaintiffs against the corporation for refusing to permit the stock represented by the certificate to be transferred on its books, or to pay its value, Held, that the certificate was void, and that the plaintiffs did not thereby acquire a right, legal or equitable, to any stock; and held, further, that the corporation was not responsible to the plaintiffs for damage sustained by dealing upon the faith of the certificate.

“Such a certificate does not partake of the character of negotiable instruments; and the bonâ fide assignee, with the power to transfer the stock, takes the certificate, subject to the equities which existed against his assignor.

“Also held, that, on the facts of the case, the doctrine of estoppel in pais was not applicable.”

At a special term of the Supreme Court in New York, it was recently decided that a bill to enjoin the holders of railway bonds and other securities, which had