a lease for a deed of conveyance.' Consolidation generally implies "a surrender of the old charters by the companies, the acceptance thereof by the legislature, and the new formation of a new corporation, out of such portions of the old as enter into the new.2

$327. What amounts to consolidation.-A lease may amount to a consolidation, and consolidations have frequently taken the form of purchases by one corporation of the shares of another. In Indiana, a railroad company, having power to consolidate with connecting or intersecting lines, may, under the statute, with a view thereto and to carrying out the object for which it was created, purchase the stock of such other road. There is moreover nothing fraudulent in railroad companies combining to purchase another road which must go to sale. Where the consolidation has taken the form of a sale and purchase, like any other sale, it can not be rescinded without restoring the consideration or purchase price. A mere voluntary union, without the authorization of the legislature, does not constitute an amalgamation; neither does a mere alliance with respect to traffic amount to an amalgamation.' Accordingly, traffic arrangements without legislative authority are nevertheless legal. A temporary co-operation under one management is not a consolidation." And a traffic agreement involving a joint management has been enforced. 12 And,

10

1 State v. Atchison &c. R. Co., (1888) 24 Neb. 143; s. c. 4 Ry. & Corp. L. J. 86, 91.

2State v. Bailey, 16 Ind. 46, 51; s. c. 79 Am. Dec. 405, citing Lauman v. Lebanon Valley R. Co., 30 Pa. St. 742; s. c. 72 Am. Dec. 685. Cf. McMahan v. Morrison, 16 Ind. 172; s. c. 79 Am. Dec. 418. See Clearwater v. Meredith, 1 Wall. 25, 40.

3 State v. Atchison &c. R. Co., (1888) 24 Neb. 143; s. c. 4 Ry. & Corp. L. J. 86, 91.

4 Central &c. R. Co. v. Georgia, (1875) 92 U. S. 665; Hill v. Nisbet, 100 Ind. 341; Eaton &c. R. Co. v. Hunt, 20 Ind. 457, 462.

5 Hill v. Nisbet, 100 Ind. 341.

256; Williamson v. New Jersey Southern R. Co., 26 N. J. Eq. 398

7 Buford v. Keokuk &c. Co., 69 Mo. 611, affirming s. c. 3 Mo. App. 159.

8 Shrewsbury &c. R. Co. v. Stour Valley Co., 2 De Gex, M. & G. 866; s. c. 21 Eng. Law & Eq. 628.

9 Shrewsbury &c. Ry. Co. v. Stour Valley Ry. Co., 2 De Gex, M. & G. 866; Midland Great Western Ry. Co. v. Leech, 3 H. L. Cas. 872.

10 Hart v. Renselaer &c. R. Co., 8 N. Y. 37; Straton v. New York &c. R. Co., 2 E. D. Smith, 184.

11 Archer v. Terre Haute &c. R. Co., 102 Ill. 503; s. c. 7 Am. & Eng. R. R. Cas. 249.

12 In a recent case the plaintiff, a

St. Louis &c. R. Co., 69 Mo. 224, New Hampshire corporation operat

generally, a railway company allying itself with another does not thereby become equitably amalgamated with it. An agreement to amalgamate, as from time past, may possibly, in equity, amount to amalgamation; but an agreement to do so at a future period will not, until that time arrives.1

§ 328. Manner of effecting. The steps necessary to effect a consolidation must of course be prescribed by statute; and the statutes generally prescribe: 1. An agreement between the corporations intending to consolidate. 2. Ratification by a certain majority, generally two-thirds, of the stockholders of the corporation, at a duly notified meeting for that purpose. 3. The articles of consolidation thus ratified, properly authenticated, are filed with the Secretary of State, which are thereafter evidence of the consolidation in all courts.2 The essential steps prescribed by the statute to effect the consolidation are conditions precedent, and must be performed, or the new company does not exist. The New York statute,

ing a railroad from N. to L., and the defendant, a Massachusetts corporation operating a road from L. to B., in the latter State, entered into a joint traffic agreement providing that the two roads were to be operated as a single road, under a joint management; that the property of each party should be kept in the same relative condition as at the time of the making of the agreement, at their joint expense; that, plaintiff should erect, at his own expense, a freight depot at L., and defendant, at its own expense, a passenger depot at B.; that buildings destroyed by fire should be restored by the owner at his own cost; and that the interest upon the debts contracted by either party should be paid out of his own share of the net income; and it was decided that a passenger depot at B., in addition to the one provided for in the agreement, having become necessary to retain the increased business of the joint management, the directors of

But

plaintiff had power to agree that the interest on expenditures made by defendant in the erection of the additional depot should be charged as a part of the operating expenses of the joint management. defendant, without authority from the stockholders or directors of plaintiff, could not charge, as a part of such operating expenses, interest on expenditures made by defendant in purchasing a controlling interest in the stock of the branch roads which it had leased, and which were being operated by the joint management. Nashua &c. R. Co. v. Boston R. Co., (1890) 10 Sup. Ct. Rep. 1004, reversing s. c. 8 Fed. Rep. 458.

1 Shrewsbury &c. Ry. Co. v. Stour Valley Ry. Co., 2 De G. M. & G 866. 2 S. D. Thompson in 31 Cent. L. J. 5.

3 Com. v. Atlantic &c. R. Co., 53 Pa. St. 9; Peninsular R. Co. v. Tharp, 28 Mich. 506; Mansfield v. Drinker, 30 Mich. 124; Tuttle v. Michigan &c. R. Co., 35 Mich. 247; Mansfield

which is a codification of the law applying to business corporations, is probably the general law upon the subject. Any two or more corporations organized for the purpose of carrying on any kind of business of the same or of a peculiar nature, may consolidate such corporations into a single corporation, as follows: The respective boards of directors of such corporations may enter into and make an agreement, under their respective corporate seals, for the consolidation of such corporations, prescribing the terms and conditions thereof, the mode of carrying the same into effect, the name of the new corporation, the number of directors who shall manage its affairs, not less than five nor more than thirteen, the names and post office address of the directors for the first year, the term of its existence, not exceeding fifty years, the name of the town or towns, county or counties, in which its operations are to be carried on, the name of the town or city and county in this State in which its principal place of business is to be situated, the amount of its capital stock which shall not be larger in amount than the fair aggregate value of the property, franchises and rights of such corporations, and the number of shares into which the same is to be divided, the manner of distributing such capital stock among the holders thereof, and if such corporations or either of them shall have been organized for the purpose of carrying on any part of its business in any place out of this State, and such new corporations shall propose to carry on any part of its business out of this State, the agreement shall so state, with such other particulars as they may deem necessary. Although every consolidation must take place in consequence of two things, legislative authorization, or a contract between the corporations duly ratified by their shareholders, yet when it comes to the contract itself, a distinction must be carefully made between a consolidation and an agreement looking to a consolidation in the future. The agreement to consolidate required by the statute shall be submitted to the stockholders of each of such corporations at a meeting thereof to be called upon

&c. R. Co. v. Brown, 26 Ohio St. 223.

IN. Y. Laws 1890, c. 567, § 13.

S. D. Thompson in 31 Cent. L. J.

4: Shrewsbury &c. R. Co. v. Stour Valley R. Co., 2 De Gex, M. & G. 866; s. c. 21 Eng. Law & Eq. 628.

notice of at least thirty days, specifying the time, place and object thereof, and addressed to each at their last known post office address, and deposited in the post office, postage prepaid, and published for at least three successive weeks in one of the newspapers in each of the counties of the State in which either of such corporations shall have its place of business, and if such agreement shall be approved at each of such meetings of the respective stockholders separately, by the vote by ballot of the stockholders owning at least two-thirds of the stock, the same shall be the agreement of such corporations; and a sworn copy of the proceedings of such meetings, made by the secretaries thereof, respectively, and attached thereto, shall be presumptive evidence of the holding and action of such meetings. Such agreement and verified copy of proceedings of such meetings shall be in duplicate, one of which shall be filed in the office of the Secretary of State, and the other in the office of the clerk of the county where the principal business office of the new corporation is to be situated in this State, and thereupon such corporations shall be merged into the new corporation specified in such agreements, to be known by the corporate name therein mentioned, and the provisions of such agreement shall be carried into effect as therein provided."

§ 329. The same subject continued.- Under the Pennsylvania statute one railroad company may be formed by the consolidation of several, and constitute a legal incorporation by filing its certificate of consolidation with the Secretary of State. This certificate must contain the recitals prescribed by law or it will be ineffectual. But where a consolidation is in other respects valid, it will not be declared void simply from want of evidence, that a certified copy of a resolution, adopted by a majority of the stockholders of each company, and accepting the provisions of the act authorizing the consolidation, was filed with the Secretary of State, or that the stockholders of the several companies held a meeting, except

IN. Y. Laws 1890, c. 567, § 14.

2 N. Y. Laws 1890, c. 567, § 14.

3 Commonwealth v. Atlantic &c.

Ry. Co., 53 Pa. St. 9.

State v. Vanderbilt, 37 Ohio St. 590 (failing to state residence of directors).

as it is implied by the certified copy of the articles of agreement for consolidation filed in the secretary's office. And where railroad companies, which have consolidated under statutes providing for the consolidation of railroads which will, when connected, form a continuous line of road, have complied with all the other provisions of the act, the consolidation is valid, though they may have failed to comply with that provision requiring each company to file with the Secre tary of State a resolution accepting the provisions of the act. Such provision is merely directory. Such conditions precedent as the election of a new board of directors of the united company must be strictly complied with. A division of the stock of a new consolidated company in exchange to the stockholders of the old companies is not prohibited by the statutory prohibition to divide any part of the capital stock of corporations among stockholders. Where a corporation was chartered to make and sell gas until a certain date, and some time before the charter expired, another corporation was chartered with similar privileges after the said date, it was contemplated that the latter corporation should make preparations before that date, and it was held, that a consolidation of the two corporations on the day preceding that date could be had."

§ 330. Public policy. Where the law permits the consolidation of corporations, it is not against public policy for a

1 Leavenworth County v. Chicago, R. I. & P. Ry. Co., 25 Fed. Rep. 219. 2 Leavenworth County v. Chicago &c. Ry. Co., (1890) 10 Sup. Ct. Rep. 708; Mo. Laws, 1870, Adj. Sess. ch. 89. 3 Mansfield &c. R. Co. v. Drinker, 50 Mich. 124.

4 The stockholders of two rival mining companies agreed to form a new company, to which should be conveyed all the property of both companies, in consideration of stock in the new company, to be divided pro rata among the old stockholders. The old companies were to be equally represented in the directory of the new. Before the stock was divided all creditors of the old companies

were fully paid. A division of the stock among the stockholders was not prohibited by Civil Code Cal. § 309, providing that the directors of a corporation must not "divide, withdraw, or pay to the stockholders, or any of them, any part of the capital stock. . . There may, how ever, be a division and distribution of the capital stock of any corporation, which remains after the payment of all its debts, upon its dissolution," etc. Kohl v. Lilenthal, (1889) 81 Cal. 378.

5 New Orleans Gas Co. v. Louisiana Light Co., 115 U. S. 600, reversing s. c. 4 Woods, 90.