Commentaries on the Law of Private Corporations

portion of its road, giving a private individual the right to run freight cars over the unused portion of its road, was held void as against public policy. A lease of a part of a road which it was understood should be abandoned by both parties was of course unauthorized by the law that provided that all the duties of the lessor should be undertaken by the lessee.2 A lease for four hundred and seventy-five years of the railroad of a company chartered for a hundred years only, is not void when there is a statute prescribing a method whereby the corporate existence may be perpetuated if desired by the stockholders. A contract by the lessee company to pay as rent the interest on certain mortgage bonds of the lessor company during the continuance of the lease, and the principal at the termination of the same, is not ultra vires. The New York laws grant to telegraph companies the most comprehensive powers in reference to the conduct of their business. The right of one company to lease the lines of another exists under the act, and a New York court will not interfere with such a transaction by injunction on the ground of its illegality in another State where part of the property of one of the companies is situated. Under the act of 1870, however, such a lease must be ratified by a three-fifths vote of its stockholders at a general meeting duly called for the purpose.5

§ 370. What is carried by a lease. The lessee of a railroad is entitled to all the privileges of the lessor, to the free use of the railway comprised therein, and to the enjoyment of the powers and privileges granted to the lessor. A road leasing another likewise becomes subject to all the statutory duties, obligations and restrictions imposed upon the lessor. The

regarded as agent of the lessor, which Co., 49 N. Y. Super. Ct. Rep. 441; was liable for the injury. New York Laws 1870, ch. 568.

1 Fanning v. Osborne, 102 N. Y.

441.

6 Fisher v. New York &c. R. Co., 46 N. Y. 644. And it may charge

2 Troy &c. R. Co. v. Boston &c. R. any rates the company owning the Co., 86 N. Y. 107.

3 Gere v. New York &c. R. Co., (1885) 19 Abb. N. C. 202; N. Y. Laws of 1866, ch. 697, § 5.

4 Gere v. New York &c. R. Co., (1885) 19 Abb. N. C. 192.

leased line might make.

7 Chicago v. Evans, 24 Ill. 52; London &c. Ry. Co. v. South Eastern Ry. Co., 8 Ex. 584; 8 Vic. ch. 20, § 113. 8 E. g. in the matter of rates. McGregor v. Erie R. Co., 36 N. J.

Reiff v. Western Union Telegraph Eq. 89; Chicago v. Evans, 24 IlI. 52;

lessee of a railroad takes all the interest of the lessor company in lands or easements subject to its control, together with the power to condemn additional lands necessary for its proper use. When the lessor company is itself the lessee of a road connecting with its own, a lease of its own original road, together with the road so held under lease by it, with the appurtenances and incidents, will pass to the lessee the control of both roads. So a lease of a line of railway entitles the company becoming lessee, to the benefit of an agreement entered into by the lessor for the use of a part of a third company's line.' Where a railroad company leased its road and properties for nine hundred and ninety-nine years to another corporation, which agreed to pay all judg ment liens against the lessor, and to complete its road, and the two companies executed a deed of trust to secure bonds of the lessor, the proceeds of which are received by the lessee, and partly used for its own benefit, the lessee was held liable for debts which existed against the lessor before the lease, though they were not reduced to judgment. The obligation imposed upon the company to pay one per cent. of its gross earnings being a charter obligation, and the consideration for its franchise, a subsequent lessee of the road is bound to discharge the obligation by paying the percentage, though the lease is silent in regard to it, and though there is no statutory provision for such liability. Charter rights can not be acquired by acts in pais without the assumption at the same time of the charter duties. But a lease of a railroad for ninety-nine years, the assumption of its debts and purchase of its rolling stock, is not such an assignment as will place the

London &c. Ry. Co. v. South Eastern Ry. Co., 8 Ex. 584; 8 Vic. ch. 20, § 113.

1 And therefore, if a portion thereof be taken and condemned for the use of another road, the condemnation money is payable to the lessee, to be used by it during the term of the lease. Matter of New York Cent. R. Co., 49 N. Y. 414.

3 London &c. Ry. Co. v. South Eastern Ry. Co., 8 Ex. 584.

4 Chicago &c. Ry. Co. v. Third Nat. Bank, (1890) 134 U. S. 276. This liability is not affected by the subsequent expenditure by the lessee, on the lessor's road, of an amount greater than the amount so misappropriated.

5 City of New York v. Twenty

2 Philadelphia &c. R. Co. v. Cata- Third St. Ry. Co., (N. Y. 1889) 113

transaction in the light of a trust with preferences for the benefit of creditors. Where a proposed "joint lease" between four railroad companies is executed by three, and the fourth company refuses to execute it, whereupon two of the others retract, equity will not compel the fourth company, at the suit of its stockholders, to execute the lease. While the lessee may not, perhaps, be liable for the amount agreed upon in a contract of leasing, void because unauthorized, it may be required to pay a just compensation for the use of the property. And the lessee and its assigns are estopped from pleading the want of statutory authority in an action to recover rent for the use of the road. But the fact that the lessee company has retained possession of and continued to operate the road under a voidable lease does not amount to a ratification, nor prevent it from making the defense of invalidity, in a suit by a stockholder of the lessor company to compel payment of the rent."

§ 371. Law governing leased roads.- A foreign railway leasing a domestic one is subject to the laws of the residence of the lessor, so far as they affect the property leased.' A receiver of a railroad, appointed by the governor, can not, by leasing the road, vest the lessees with such an interest in the road and its franchises that it can not be divested by an act of the legislature. When a railroad company leases the road of another, its charges for transportation thereon, are subject only to the restrictions imposed upon the lessor and not to those imposed upon itself with respect to transportation upon

1 Gratz v. Pennsylvania R. Co., 41 essary for the public good, and that Pa. St. 447. hence rent is not recoverable.

2 Ives v. Smith, (1890) 55 Hun, 606.

3 Farmers' Loan & Trust Co. v. St. Joseph &c. R. Co., 2 Fed. Rep. 117. But see Union Bridge Co. v. Troy &c. R. Co., 7 Lans. 240, where it was held that in setting aside an ultra vires lease, the court will not relieve the parties more than is nec

4 Woodruff v. Erie Ry. Co., 93 N. Y. 609.

5 Barr v. New York &c. R. Co., (1889) 52 Hun, 555.

6 McGregor v. Erie R. Co., 30 N. J. Eq. 115.

7 Stone v. Illinois Central R. Co., 116 U. S. 347.

8 McMinnville &c. R. Co. v. Huggins, 59 Tenn. 177.

its own line. Lessees must conform to the charter requirements of the company whose road they occupy or use.2 So also when the power to take a lease of a railroad, built under the general railroad law, is derived solely from this law, the rights and liabilities under the lease are governed by it and not by the charter of the company which becomes lessee.'

1 Rodgers v. Wheeler, 43 N. Y. 598; Pearson v. Wheeler, 55 N. H. 41; Taylor on Corporations, § 417. Cf. Stratton v. European &c. Ry. 74 Me. 422; Beeson v. Lang, 85 Pa. St. 197.

52.

City of Chicago v. Evans, 24 Ill.

3 McMillan v. Michigan &c. R. Co., 16 Mich. 79.

transaction in the light of a trust with preferences for the benefit of creditors.' Where a proposed "joint lease" between four railroad companies is executed by three, and the fourth company refuses to execute it, whereupon two of the others retract, equity will not compel the fourth company, at the suit of its stockholders, to execute the lease. While the lessee may not, perhaps, be liable for the amount agreed upon in a contract of leasing, void because unauthorized, it may be required to pay a just compensation for the use of the property. And the lessee and its assigns are estopped from pleading the want of statutory authority in an action to recover rent for the use of the road. But the fact that the lessee company has retained possession of and continued to operate the road under a voidable lease does not amount to a ratification, nor prevent it from making the defense of invalidity, in a suit by a stockholder of the lessor company to compel payment of the rent."

§ 371. Law governing leased roads.- A foreign railway leasing a domestic one is subject to the laws of the residence of the lessor, so far as they affect the property leased." A receiver of a railroad, appointed by the governor, can not, by leasing the road, vest the lessees with such an interest in the road and its franchises that it can not be divested by an act of the legislature. When a railroad company leases the road of another, its charges for transportation thereon, are subject only to the restrictions imposed upon the lessor and not to those imposed upon itself with respect to transportation upon