Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/696

 § 679.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. Invalid provisions in corpo- rate secu- rities. § 677. Terms in securities issued by a railroad or other corporation repugnant to the legislative provisions authorizing the security are void. Thus, a railroad corporation issued its bonds, and mortgaged its prop- erty to secure the payment of them, and of the semi-annual instalments of interest thereon, as the same should successively fall due. The statute authorizing the mortgage declared that the bonds should not mature at an earlier period than thirty years. In consequence, a provision in the bonds that, upon a failure to pay any coupon, when presented at the place of payment, and a continued default for six months, the whole sum mentioned in the bond should become due and pay- able, was held void. 1 § 678. But, although the securities may contain forbidden or unauthorized provisions, courts will refrain from vacate the holding void the securities themselves. 2 Thus, a securities, corporation cannot refuse to pay its bonds on the ground that they contain an unauthorized provision to the effect that they may be converted into stock at the option of the holder. 3 § 679. Bonds of a corporation issued payable to order or to bearer are negotiable. 4 And the negotiable quality Corporate ° ■ ; ° ^. . J bonds ne- of such a bond is not impaired by a provision go ia e. contained in the bond, that it may be " registered be a part of the realty, so as to pass by a conveyance or mortgage of the road. Michigan Cent. R. R. Co. v. Chicago and M. Lake Shore R. R. Co., 1 111. App. 399; Palmer v. Forbes, 23 111. 301; Hunt v. Bullock, ib. 320; Titus v. Mabee, 25 111. 257; Titus v. Ginheimer, 27 111. 462. This is not the doctrine of other states. William- son v. N. J. Southern R. R. Co., 29 N. J. Eq. 311, reversing S. C, 28 N. J. Eq. 277; Hoyle v. Pitts- burgh, etc., R. R. Co., 54 N. Y. 314; Coe v. Columbus, etc., R. R. Co., 10 Ohio St. 237; see Boston, Concord, etc., R. R. Co. v. Gilmore, 37 N. H. 410. 1 Howell v. Western R. R. Co., 94 U. S. 463. 676 2 See Howell v. Western R. R. Co., supra ; Carpenter «. Black Hawk Gold Mg. Co., 65 N. Y. 43. That some invalid bouds have been issued, does not affect the validity of the mortgage as a security for the other bonds. Graham v. Boston, etc., R. R. Co., 118 U. S. 162; cf. International Trust Co. v. Davis & Farnum Co., 70 N. H. 118. A Wisconsin statute expressly makes void bonds of cor- porations issued for less than seventy- five per cent, of the face value. See Pfister v. Milwaukee Electric R. Co., 83 Wis. 86; Hinckley v. Pfister, ib. 64. 8 Wood v. Wheelen, 93 111. 153. Compare Sturges v. Stetson, 1 Biss. 246. 4 Kneelaud v. Lawrence, 140 U. S.