Page:Federal Reporter, 1st Series, Volume 7.djvu/407

 TAYLOB V. FHIIiAOELFHIA & BEADINO B. CO. 39o �only that the English precedents -were issues of ordinary stock, but also that he regards this scheme as precisely the same. The unfortunate distinction, however, between it and the precedents is, that they were authorized by statute, while it is not. The 26th and 27th Victoria, of July, 1863, known as "The Companies' Clauses Act," provides not only for the issue of ordinary stock or shares at less than the par value, by railway companies chartered in pursuance of, or conformity with it, but also for an increase of the capital by an issue of what is called debenture stock. That the defendants have no authority to issue stock for the purposes involved in the scheme under consideration, is not only clear on examination of the charter and subsequent statntes relating to the sub- ject, but is fully conceded by their counsel. The proposed mortgage for $150,000,000 being liable to the same objec- tion, as respects a part of the bonds proposed to be secured thereby, no further reference to it is necessary. �KoTE. As stated in the opinions in the foregoing ease, aucb a plan as that proposed Vy the " deferred-bond" scheme is entirely new in this country. And I baye been unable to flnd any English decisions that would shed much ligbt on the particular question— an act of Parliament ezpressly authorizing sucb a scheme. But some of the ' ' preferred-stock" cases in this country present strong points of analogy. The power of the corporation to create and issue sucb stock bas been sought to be maintained as f alling within the borrowing power of the corporation ; the plan, in fact, being Hsed for the purpose of raising money. In the case of Kent V. Quieksdwr Min. Uo., 78 N. T. 159, the Company being in need of funds, the stockholders adopted a by-law providing that stockholders who should surrender their certiacates and pay flve dollars on eacb share of stock should be entitled to the same number of shares of preferred stock, which should be entitled to 7 per cent, interest, to be paid out of the profits of the company, any surplus thereafter to be divided pro rata among common and preferred stockholders. The court held that it did not fall within the power to borrow money, and was vitra vires. Fdger, J., says : " It was not a borrowing. The idea of borrowing isnot flUed out unless there is in the agreement therefor a promise or understanding that what is borowed will be repaid or returned." Page 177. In these transactions, it is not by what name it is called, but what, in fact, the transaction is, that the courts consider. Thus, in Ohio, " pr^erred stock- Tioldera" have been held to be creditors of the corporation, the transac tion really being a' borrowing of money, rather than the creation of an additional and preferred capital stock. Burt v. BatUe, 31 Ohio St. 116. But in that case the " stockholder" had not only not the right of voting, ��� �