A railroad company authorized to purchase, sell, lease, join stocks, unite, or consolidate with any connecting railroad company has no power to purchase a road which does not connect with that which the company is authorized to construct, though it may have built or purchased a line connecting therewith. A railroad, by its relations to other roads, may be a competing line with a road with which it is not parallel, and does not connect, within the meaning of an act forbidding it to consolidate with a competing road. With respect to connecting or intersecting railways, however, so located as not to be natural competitors for the business of the same district of country, there is generally no principle of public policy rendering their consolidation invalid.2 332. Power of the legislature to authorize.- The power of the legislature to confer authority upon existing companies to consolidate or amalgamate is unquestioned. A State may 1 East Line &c. R. Co. v. State, (1889) 75 Tex. 434; s. c. 7 Ry. & Corp. L. J. 308. In that case it was further decided that under Const. Tex. art. 10, sec. 8, providing that no railroad company in existence at its adoption, "shall have the benefit of any future legislation, except on condition of complete acceptance of all the provisions of this constitution," an admission by a company in pleading, that it is subject to the general laws and constitution now in force, is an admission of the acceptance of the benefits of subsequent legislation, such as subjects it to the provisions (article 10, § 6) forbidding a sale to a railroad company organized in another State. As Rev. Stat. Tex. art. 2805, makes it the duty of the attorney-general, unless otherwise expressly directed by law, to seek the forfeiture of the charter of a corporation which has, by any act or omission, misuser or non-user, forfeited the same, the right of the State to demand a forfeiture of the charter of a railroad company which has sold its road and franchise to a foreign company in violation of the constitution, failed to keep up its organization, and allowed its road to become unsafe, is not waived by the provisions of Sayles' Civil Stat. Tex. art. 4247a, § 2, which provides for quo warranto against a corporation carrying on business in violation of Const. Tex. art. 10, SS 5, 6, (forbidding sale to or consolidation with a competing or foreign company,) to enforce the penalties therefor, and an injunction against future violation, and appointment of a receiver. 2 Woodruff v. Erie &c. Ry. Co., 93 N. Y. 615; State v. Vanderbilt, 37 Ohio St. 590; State v. Atchison &c. R. Co., (1888) 24 Neb. 143; s. c. 4 Ry. & Corp. L. J. 86; Hill v. Nisbet, 100 Ind. 341. 3 Clearwater v. Meredith, 1 Wall. 39; Black v. Delaware &c. Co., 22 N. J. Eq. 130; s. c. 24 N. J. Eq. 455; Clinch v. Financial Co., L. R. 5 Eq. 450. authorize two or more existing corporations to organize themselves into a new corporation just as it may authorize individuals to incorporate themselves. But corporations are not such "persons" as are themselves authorized to form other corporations. And a corporation manufacturing a lot of desks for another corporation is not so connected in interest with it as to be an employee thereof. The legislature may incorporate a new and distinct corporation out of two or more previously existing corporations and its powers may be designated by reference to the charters of other companies as well as by special enumeration. While the legislature can not ordinarily compel the consolidation of private corporations, it may do so under a statute giving it power to alter, revoke or annul charters. Furthermore, the legislature has power to validate defective consolidations, where it could have authorized them in the first instance. Therefore defective consolidations may be validated by legislative recognition of the new corporation. Conversely, the legislature may prohibit consolidation where the right at pleasure to alter, amend, or repeal the charter of a company has been reserved. The power to consolidate, given by a charter, however, is in the nature of a franchise or privilege, and is a contract between the corporation and the State, which can not be withdrawn by subsequent legislation, in the absence of a reservation of power to withdraw it, either in the particular charter or in the constitution or a general law.1o 1 State Treasurer v. Auditor-General, 46 Mich. 224, 233. 2 Factors' &c. Ins. Co. v. New Harbor Protection Co., 37 La. Ann. 233. 3 Dukes v. Love, (1884) 97 Ind. 341. 4 McMahan v. Morrison, (1861) 16 Ind. 120; s. c. 79 Am. Dec. 418; Railroad Co. v. Maine, 96 U. S. 499; State v. Maine Cent. R. Co., 66 Me. 500. 5 Mason v. Finch, 28 Mich. 282. Cf. Pennsylvania College Cases, 13 Wall. 190, 212. Ind. 407, 413; Racine &c. R. Co. v. 8 Meade v. New York &c. R. Co., 45 Conn. 199; McCauley v. Columbus &c. R. Co., 83 Ill. 348. 9 The company's consent to a supplementary act prohibiting it from entering into any consolidation, combination, or contract with any other company in the same business is not necessary, and, if consent were necessary, the subsequent exercise of 6 Pennsylvania College Cases, 13 corporate functions is sufficient eviWall. 190. 7 Mitchell v. Deeds, 49 Ill. 416, 419; Fisher v. Evansville &c. R. Co., 17 dence of acceptance. Gibbs v. Consolidated Gas Co., (1889) 130 U. S. 396. 10 Zimmer v. State, 30 Ark. 677. § 333. Legislative authority requisite. As a corporation can not be created except by the legislature, so it can not, without the authority of the legislature, merge its existence in that of another. And railway companies, being chartered to perform public duties, can not evade their obligations to the public by a transfer of their franchises, either by lease, sale or consolidation, without express legislative sanction. Therefore, where 1 "Consolidation of Corporations," by S. D. Thompson, (1890) 31 Cent. L. J. 4; Hoadley v. County Commissioners, 105 Mass. 526; Stowe v. Flagg, 72 Ill. 397; New York &c. Canal Co. v. Fulton Bank, 7 Wend. 412; Pearce v. Madison &c. R. Co., 20 How. 441; Clearwater v. Meredith, 1 Wall. 25, 39; State v. Bailey, 16 Ind. 46; In re Era Insurance Society, 9 Week. Rep. 67; s. c. 30 L. J. (N. S.) 137; Winch v. Birkenhead &c. R. Co., 16 Jur. 1035, 1037. Mr. Taylor says the reasons why legislative authority is requisite are twofold: In the first place, since a consolidation ordinarily brings a new corporation into existence, the authority of the legislature is as necessary for the incorporation of a company out of pre-existing corporations as it is under other circumstances. And in the second place, the rights of dissenting shareholders would be impaired; for the implied agreement made by every one subscribing for shares, that the corporate affairs shall be subject to the will of the majority and of the corporate management, does not extend beyond the doing of acts contemplated in the original constitution. Taylor on Corporations, § 419. 2 Thomas v. The Railroad Co., 101 U. S. 71; Pearce v. Madison &c. R. Co., 21 How. 441; Pullan v. Cincinnati &c. R. Co., 4 Biss. 35; Mowrey v. Indianapolis &c. R. Co., 4 Biss. 78; American Union Tel. Co. v. Union Pacific Ry. Co., 1 McCrary, 188; Troy &c. R. Co. v. Boston &c. R. It fol Co., 86 N. Y. 107; Abbott v. Johnstown &c. Horse R. Co., 80 N. Y. 27; s. c. 36 Am. Rep. 572, where it is said that like a special charter the right conferred under the general law is in the nature of a contract. lows that upon principles of public policy and the ordinary rules of law applicable to contracts that the corporation can not, without the consent of the other party, change its terms or absolve itself from its obligations to any conventional arrangement made with third persons as to the control and management of its road; Middlesex &c. R. Co. v. Boston &c. R. Co., 115 Mass. 347; Richardson v. Sibley, 11 Allen, 65; s. c. 87 Am. Dec. 700; Commonwealth v. Smith, 10 Allen, 448; s. c. 87 Am. Dec. 672; State v. Sherman, 22 Ohio St. 411, 428; Black v. Delaware &c. Canal Co., 24 N. J. Eq. 456; Stewart's Appeal, 56 Pa. St. 413; Wood v. Bedford &c. R. Co., 8 Phila. 94; Tippecanoe County v. Lafayette &c. R. Co., 50 Ind. 85. It is bound by reciprocal obligations to the State and on reciprocal duties to the public.” Peoria &c. Ry. Co. v. Coal Valley Manuf. Co., 68 Ill. 489, according to which case, when roads accept their charters, it is with the implied understanding that they will perform these duties to the public as common carriers of both persons and property, under the responsibility which that relation imposes. parte Williamson, L. R. 5 Ch. 309; East Anglian Ry. Co. v. Eastern Ex two separate corporations are created to build railroads they have no right, without authority, to unite and conduct their business under one management; nor have they the right to establish a steam-boat line to run in connection with them.' In the absence of authority clearly conferred, the amalgamation of companies is an act beyond the scope of the powers, not only of the directors but of the company. Where power is given by statute to one railroad company to consolidate with any other, whatever other corporation it selects for a union, has power to unite with it, although it be not named in the statute. And after a consolidation is effected, the new company enjoys the same presumptions as to the rightfulness of its legal existence as an original company. § 334. How legislative sanction may be expressed.— Authority to consolidate may be conferred in the original charters of the companies concerned; or by the provisions of a general or special act of the legislature passed prior to consolidation, and after the organization of the original corporations. But general statutes authorizing the consolidation of corporations are not retroactive, and do not apply to consolidation agreements made prior to their enactment. Laws of that character are designed to apply to companies only which may effect a consolidation after their enactment. Curative acts, validating defects in corporate organization, are genally upheld where the legislature could have given the corpo Counties Ry. Co., 11 C. B. 775; 2 Charleston v. Newcastle &c. Ry. Co., 5 Jur. N. S. 1096; Blatchford v. Ross, 5 Abb. Pr. N. S. 434; s. c. 54 Barb. 42. 6 Bishop v. Brainerd, 28 Conn. 289; Black v. Delaware &c. Co., 22 N. J. Eq. 130; s. c. 24 N. J. Eq. 455; Southall v. British &c. Soc., L. R. 11 Eq. 65. 7 Hatcher v. Toledo &c. R. Co., (1872) 62 Ill. 477, 480. 8 Hatcher v. Toledo &c. R. Co., (1872) 62 Ill. 480; Garrett v. Wiggins, In re Prospect Park &c. R. Co., 67 1 Scam. 335; Thompson v. Alex N. Y. 371. ander, 11 Ill. 54; Marsh v. Chesnut, * Bell v. Pennsylvania &c. R. Co., 14 Ill. 223. ration a valid organization in the first instance. So, therefore, by the express sanction of the legislature an unauthorized agreement to consolidate may be validated. Furthermore, an invalid consolidation may be rendered valid by necessary implication from an act of legislature recognizing the existence of the consolidated company. Most of the statutes allowing consolidations, subject the new company to the general laws relating to corporations; and it acquires its new franchises subject to legislative alteration or repeal. Some parts of an executed agreement in relation to consolidation if legislative consent can be obtained, may be enforced even if assent, be withheld.5 1 Syracuse City Bank v. Davis, 16 Barb. 188; Mitchell v. Deeds, 49 Ill. 416, 419. Cf. People v. Plank Road Co., 86 N. Y. 1. 2 McAuley v. Columbus &c. R. Co., 83 Ill. 348; Mead v. New York &c. R. Co., 45 Conn. 199. fund. After this the consolidation 3 Fisher v. Evansville &c. R. Co., entering the combination. Defend7 Ind. 407. 4 Railroad Co. v. Maine, 96 U. S. 499; affirming State v. Maine Cent. R. Co., 66 Me. 488; New Jersey v. Yard, 95 U. S. 104; Tomlinson v. Jessup, 15 Wall. 454. 5 A consolidation of three railroad companies was proposed, the necessary funds to be raised by subscription of the stockholders of the several companies. It was doubtful whether one of the companies (the R. & A.) could obtain legislative consent to enter the combination, but it was arranged that the other two should combine at all events; and the subscribers were aware of this. The first call under the subscription stated that it was for the extension of one of the two roads whose consolidation was definitely arranged for, and for "other purposes." Afterwards the entire fund was paid in. A committee was appointed, after the first installment was paid, to receive and disburse the ants, a committee appointed to receive and disburse subscriptions for the purpose of effecting a consolidation of certain railroad companies, and extending the lines, may be required to account to the subscribers for the amount so received, and it is immaterial whether or not they were originally trustees or were legally appointed. Gould v. Seney, (1889) 5 N. Y. Supp. 928; s. c. 7 Ry. & Corp. L. J. 143. But on appeal of this case it was held that the loan by the committee to the R. & A. Company, for the purpose of completing its line of railroad, to be repaid in case the agreement should not become operative as to that company, was a misappropriation of the fund, for which they became liable to account to the subscribers upon the legislature refusing to consent to the company entering the combination; but that the shareholders could not, at the time of compelling such accounting, insist that the com |