any bonds against or as a lien upon any contract for consolidation or merger. Whenever it shall happen that any railroad corporation shall own or operate its lines in both districts it shall, under this section, apply to the commission of the second district. Whenever it shall happen that any street railroad corporation shall own or operate its lines in both districts, it shall, under this section, apply to the commission of the first district. Any other common carrier not operating exclusively in the first district shall apply to the commission of the second district.

Provisions of the New York Railroad Law relative to the consolidation, lease, sale and reorganization of corporations,-see N. Y. R. R. L., §§ 70-84.

Provisions of the New York Rapid Transit Act as to increase or reduction of capital stock,- see N. Y. Rap. Tr. Act, § 20, post, Appendix A.

Issue of bonds to complete or operate railroads,- see N. Y. Rap. Tr. Act, § 24, subd. 6, post, Appendix A.

Provisions as to bonds for construction of rapid transit railroads,— see N. Y. Rap. Tr. Act, § 34, § 34a-e, post, Appendix A. Territorial jurisdiction of Commissions generally,- see ante, § 5. Power of Commission upon investigations generally,- see ante, §§ 19, 20, 45, 48.

Approval by Commission of issues of stock, bonds, etc., of gas and electrical corporations, see post, § 69.

General rules of statutory construction, see ante, § 1, notes [23]-[40]. Who are common carriers,— see ante, § 2, notes [2]-[7].

Compelling production of books and papers,- see ante, § 19, notes

[3]-[6].

Punishment of witnesses for contempt,- see ante, § 19, notes [7] -[12].

Commission not bound by technical rules of procedure,- see ante,

§ 20, note [1].

Immunity of witnesses, see ante, § 20, notes [2]-[9].

[1] Legislative control.

General power of the state to regulate property devoted to public use, see ante, § 1, notes [1]-[22].

Exemptions from public control,- see ante, § 1, notes [16]-[21]. Effect of receivership on power to regulate,- see ante, § 2, note [15]. Effect of vacancies on power of Commission,- see ante, § 4, note [5]. Validity of commission plan of regulation,- see ante, § 4, note [14]. Whether power to regulate issuance of stock can be delegated to a Commission,- see ante, § 4, note [17].

A provision of a state constitution prohibiting the issuing of stocks or bonds except for money or property actually received or labor done and forbidding the fictitious increase of stock or indebtedness is intended to protect stockholders against spoliation and to guard the public against securities which are absolutely worthless.- Memphis & L. R. R. Co. v. Dow, 120 U. S. 287, 7 Sup. Ct. R. (U. S.) 482.

In the exercise of its undoubted right to enact statutes regulating the increase and disposition of the capital stock of railway corporations, the legislature may pass a statute providing generally for what purposes and upon what terms, conditions and limitations an increase of capital stock may be made, and confer upon a commission the administrative duty of supervising any proposed increase of stock. It may also delegate to the commission the duty of finding the facts in each particular case, and authorize and require it, if it find the existence of facts that bring the case within the statute, to allow the proposed increase; otherwise to refuse it. Any statute, however, which attempts to authorize the commission in its judgment and discretion to allow an increase of the capital stock of a corporation for such purpose and on such terms or conditions as it may deem advisable, is a delegation of legislative power, and void.— State v. Gt. Northern R. Co., 100 Minn. 445, 111 N. W. 289.

[2] Distinction between franchises to be a corporation, and to operate a railroad.

Franchises as property,- see ante, § 1, note [8].

Franchises of gas corporations,- see post, § 68, note [5].

A distinction is to be drawn between a franchise to be a corporation and a franchise, as a corporation, to operate a public utility.- Vicksburg v. Waterworks Co., 202 U. S. 453, 26 Sup. Ct. R. (U. S.) 660; Commonwealth v. Smith, 10 Allen (Mass.), 448.

The plaintiff railroad corporation claimed that it had received from its predecessor, by way of mortgage and on foreclosure, all the property of the company, and all its franchises, including the franchise of becoming and being a corporation, in the sense of acquiring the right to organize as such under the act of incorporation as successor to, and substitute for, the original company, precisely as if the act had named them as corporators and had endowed them with the corporate faculty.— Held, that the franchise or right to be a corporation is to be distinguished from the franchise, as a corporation, to operate a railway. The latter may be mortgaged and sold at foreclosure, without the former, which cannot be made a subject of sale or transfer, unless explicitly made so by a statute which also provides a mode of transferring it. A mortgage of the corporate charter, even if made pursuant to a power conferred by statute, confers no right upon purchasers at a judicial sale to continue as the

same corporation, or do more than re-organize pursuant to the laws existing at the time of such re-organization.- Memphis R. Co. v. R. R. Comrs., 112 U. S. 609, 5 Sup. Ct. R. (U. S.) 299.

The attorney-general of the State of New York brought a supplemental action in the name of the people, to wind up the affairs of the Broadway Surface R. Co., which had been dissolved in an action brought by the same official. The attorney-general claimed that the dissolution of the corporation forfeited or invalidated its franchises to maintain and operate a railway in the streets of New York City.- Held, that the franchise to lay tracks and operate a railway in public streets is distinguishable and separable from the franchise, charter, or right to be a corporation and maintain a corporate existence. The latter is granted by the state, while the former can be obtained only from the local authorities. The effect of the annulling act and the dissolution of the corporation thereunder was only to terminate the corporate existence and franchise to be a corporation. The franchise to lay tracks, etc., in the streets, and operate a railway, together with the company's traffic contracts, mortgages, etc., survive the dissolution, as corporate property.— People v. O'Brien, 111 N. Y. 1, 18 N. E. 692, 2 L. R. A. 255n, revg. s. c. 45 Hun (N. Y.), 519.

The fact that a municipal franchise to a gas corporation to dig into the streets for the purpose of laying gas pipes is limited to a certain term of years in no way limits the period of corporate existence of the corporation.- Matter of Consolidated Gas Co., 56 Misc. (N. Y.) 49.

[3] Validity of issue of securities.

Issue of stock by gas or electrical corporations,- see post, § 69, notes. The trustees of mortgage bondholders of a railroad corporation which was in financial difficulty purchased the property of the corporation and the same was subsequently conveyed to a newly organized corporation in consideration of the issue of stock and bonds by the latter.. The value of the property so conveyed did not equal the par value of the stock issued and it was contended that the issue of bonds was without consideration and void under the provisions of the Illinois Constitution which prohibit the issuing of stock or bonds except for money or property actually received or work actually done.-Held, that this transaction did not fall within the prohibition of the Constitution. Memphis & L. R. R. Co. v. Dow, 120 U. S. 287, 7 Sup. Ct. R. (U. S.) 482.

Under the Constitution of Illinois, Art. 11, § 13, providing that no railroad corporation "shall issue any stock or bonds, except for money, labor or property actually received and applied to the purposes for which such corporation was organized. All stock dividends, and other fictitious increase of the capital stock or indebtedness of any such corporation, shall

be void" an issue of stock for the purpose of paying for the construction of the road is not invalid, even though the value of the work did not equal the par value of the stock.- Lake St. El. R. Co. v. Ziegler, 99 Fed. 114.

The Public Service Commission can authorize the issue of bonds by railroads only for the purposes specified in N. Y. Pub. Serv. Com. L., § 55, and cannot authorize the issue of bonds in order that a corporation may reimburse itself for money which it has previously taken from its treasury and expended for some lawful purpose.- Matter of Lehigh & H. R. R. Co. Decided by the N. Y. Public Service Commission for the Second District, May 7, 1908.

The N. Y. Public Service Commission should not permit a bond issue upon which it is not fairly reasonable to expect that the interest will be paid from the legitimate earnings of the enterprise. Application of Rochester, Corning, Elmira Traction Co. Decided by the N. Y. Public Service Commission for the Second District, March 30, 1908.

In order to authorize the issuance of stock, bonds or other evidences of indebtedness payable in more than twelve months, pursuant to Pub. Serv. Com. L. § 55, capital must be secured by the issue, the use of such capital must be necessary for one or more of the four purposes specified in that section and the amount sought to be authorized must be reasonably required for such purpose or purposes. Dividends must, in obedience to N. Y. Stock Corp. L., § 23, be declared only from surplus profits, which belong to the corporation and not to the stockholders until such time as the dividend is declared. By the declaration of a dividend payable at a future time no capital is secured to the corporation, and therefore the issuance of script dividends, which are interest-bearing warrants evidencing the right of stockholders to receive at a future time a dividend declared at the time of the issuance, is unwarranted and can not be authorized.-Matter of the Petition of the Erie R. Co. Decided by the N. Y. Public Service Commission of the Second District, Feb. 27, 1908.

When negotiable securities issued by a corporation without warrant of law are not void.- Peoria & S. R. Co. v. Thompson, 103 Ill. 187.

[4] Validity of plan of consolidation.

See, also, ante, § 54, note [4].

A plan of consolidation examined and held to violate the provisions of statute that the stock of the consolidated corporation shall not exceed the total stock of the corporations consolidating.- People v. Boston, H. T. & W. R. Co., 12 Abb. N. C. (N. Y.) 230.

[5] Preferred stock.

The holders of the "preferred and guaranteed stock" of the defendant corporation were entitled to preferred and guaranteed dividends, at the

rate of 10 per cent. per annum, "before any dividend was paid on the other stock of said company."- Held, that they are entitled to that sum, payable only out of the earnings of the company which are legally applicable to the payment of dividends.- Taft v. H. P. & F. R. Co., 8 R. I. 310.

When a railway corporation raises capital on preference shares, it is in fact borrowing the money, although the lender be clothed with many of the privileges of a shareholder.- Crawford v. Northeastern R. Co., 3 Jurist N. S. (Eng.) Pt. 1, 1093.

[6] Application for authority to issue bonds.

Upon an application by a railroad corporation, under New York Public Service Commission L., § 55, for authority to issue bonds secured by a mortgage, the terms of the mortgage, the rate of interest to be paid on the bonds, and the price at which it has been arranged they shall be sold should be definitely specified by the applicant who should also present a copy of the mortgage actually intended to be issued.- Application of Greenwich & Johnsonville R. Co. Decided by the New York Public Service Commission of the Second District, Feb. 18, 1908.

A railroad corporation made application to the New York Public Service Commission of the Second District for authority to issue bonds, secured by mortgage, to the extent of $1,000,000, bearing not to exceed 5 per cent. interest, with part of which it was proposed to retire its funded debt of $500,000 bearing 4 per cent. interest, and maturing in about fourteen years from the time of application.-Held, that in the absence of such definite and approved arrangements to effect the exchange as would save the company from loss in the transaction, such an arrangement did not commend itself to the Commission.- Application of Greenwich & Johnsonville R. Co. Decided by the New York Public Service Commission of the Second District, Feb. 18, 1908.

[7] Control of Commission over issues of stock and bonds. Upon an application under N. Y. Pub. Serv. Com. L., § 55, for permission to issue bonds, the Commission must always inquire what is to be done with the money to be secured by the issue of the bonds and must be satisfied that it is reasonably required for one or more of the purposes specified in the statute and that it is to be used in the future for such purpose or purposes.- Matter of Lehigh & H. R. R. Co. Decided by the N. Y. Public Service Commission for the Second District, May 7, 1908.

Upon an application by a railroad corporation under N. Y. Pub. Serv. Com. Law, § 55, to be allowed to issue stock and bonds, the Commission