Legislative History.

The original section provided for the borrowing of money and issuance of bonds, and the limitation of the amount of such bonds, and the mortgaging of the corporate property and franchise. The amendment of 1880 provided for the making of deeds of trusts and for trustees. The amendment of 1897 enlarged the purposes for which money might be borrowed by the insertion of the words "with its equipment, and for the purchase of all necessary rolling stock, and all else relative thereto," after the words "their railroad" in the first clause. The amendment of 1899 omitted the words "in denominations of not less than five hundred dollars," which were in the section prior to that time. This amendment makes possible the issuance of bonds of any denomination.

Section Cited.

Market St. Ry. Co. v. Hellman, 109 Cal. 595, 42 Pac. 225; Bishop v. McKillican, 124 Cal. 328, 329, 71 Am. St. Rep. 68, 57 Pac. 76.

Annotation.

Bonded Indebtedness.-A corporation may create a bonded indebtedness not in excess of its capital stock, and a proposition to issue seventeen million five hundred thousand dollars in bonds of a consolidated company whose capital stock is eighteen million seven hundred and fifty thousand dollars, is not in violation of the statute, where there are strictly no other outstanding bonds of the constituent companies; but where the consolidated corporation has agreed with the constituent corporations to assume and pay all of their bonded indebtedness, it may treat the outstanding bonded indebtedness as its own, and provide for the payment and retirement thereof out of the issuance of its bonds. (Market St. Ry Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

This section does not prescribe the mode of execution of mortgages upon the property of the corporation, but the mode and manner of the execution of mortgages of real and personal property by such corporations is that prescribed by the Civil Code for the execution of such mortgages in general, without exception in favor of any person or corporation. (Bishop v. McKillican, 124 Cal. 321, 71 Am. St. Rep. 68, 57 Pac. 76.)

The renewal of a note given by a corporation under this section to secure an overdraft does not create a new indebtedness or extend the term of the statute of limitations against a stockholder's liability therefor. (Santa Rosa Nat. Bank v. Barnett, 125 Cal. 407, 58 Pac. 85.)

This section is to be construed in connection with the general provisions of section 359 of the Civil Code, requiring all corporations to give the stockholders a voice in saying whether or not a

bonded indebtedness shall be created or increased. Section 359 provides the method by which the bonded indebtedness of all corporations is to be created or increased, while section 456 confers upon railroad corporations the power to create such indebtedness. (Boyd v. Heron, 125 Cal. 453, 58 Pac. 64. To same effect: Market Street Ry. Co. v. Hellman, 109 Cal. 594, 42 Pac. 225.)

Held, accordingly, that bonds issued by a street railroad corporation in part payment for the construction of its railroad are for the creation of a bonded indebtedness, within the provisions of section 359, Civil Code, requiring the creation of the bonded indebtedness of any corporation to be approved by the vote of two-thirds of the entire capital stock, and, in default of such approval, no liability is created upon such bonds against the stockholders. (Boyd v. Heron, 125 Cal. 453, 58 Pac. 64.)

The right of a corporation to pledge its bonds as collateral security is included in the right to sell them; and a constitutional provision that no railroad corporation shall issue stock or bonds except for money, labor, or other property actually received by the corporation does not prevent such pledge, where money or other property is actually received by the corporation in consequence of such use of them. (Illinois etc. Co. v. Pacific Ry. Co., 117 Cal. 332, 49 Pac. 197.)

And bonds are not rendered ultra vires or invalid, by reason of its being ultra vires for the company issuing them to mortgage the property of another company to secure them, it being within its power to borrow money and issue evidences of indebtedness, and its bonds are not affected by want of power to make the mortgage by which they were in terms secured. (Illinois etc. Co. v. Pacific Ry. Co., 117 Cal. 332, 49 Pac. 197.)

For there is nothing criminal nor against good morals in an attempt ultra vires by one railway company to acquire the property and franchises of another, which is forbidden by public policy, and the vice of illegality affects only the contract between the corporations, and does not affect the validity of bonds issued to third persons by the grantee company. Such bonds constitute a series of transactions, resting on a new consideration; and connected only indirectly with the contract between the corporations. (Illinois etc. Co. v. Pacific Ry. Co., 117 Cal. 332, 49 Pac. 197.)

Engraved bonds, substituted for lithographic bonds of corresponding numbers, are to be regarded as mere duplicates or reissues of the lithographic bonds for which they were exchanged. (Illinois etc. Co. v. Pacific Ry. Co., 117 Cal. 332, 49 Pac. 197.)

TO PROVIDE A SINKING FUND TO PAY BONDS.

Sec. 457, C. C. The directors must provide a sinking fund, to be specially applied to the redemption of such bonds on or

before their maturity, and may also confer on any holder of any bond or note so issued, for money borrowed or in payment of any debt or contract for the construction and equipment of such road, the right to convert the principal due or owing thereon into the stock of such corporation, at any time within eight years from the date of such bonds, under such regulations as the directors may adopt. En. March 21, 1872.

Annotation.

Construction of Section.-This section is applicable to street railroad corporations, and should be construed in connection with sections 359 and 456 of the Civil Code. (Boyd v. Heron, 125 Cal. 454, 58 Pac. 64.)

CAPITAL STOCK TO BE FIXED.

Sec. 458, C. C. When, at any time after filing the articles of incorporation, it is ascertained that the capital stock therein set out is either more or less than actually required for constructing, equipping, operating, and maintaining the road, by a two-third vote of the stockholders, the capital stock must be fixed, and a certificate thereof, and of the proceedings had to fix the same, must be made out and filed in the office of the Secretary of State. En. March 21, 1872.

Section Cited.

Santa Cruz R. R. Co. v. Spreckels, 65 Cal. 209, 3 Pac. 661, 802, in dissenting opinion of Thornton, J., in statement of case.

CERTIFICATE OF PAYMENT OF FIXED CAPITAL STOCK.

Sec. 459, C. C. Within thirty days after the payment of the last installment of the fixed capital stock of any railroad corporation organized under this title and part, the president and secretary, and a majority of the directors thereof, must make, subscribe, and file in the office of the Secretary of State a certificate stating the amount of the fixed capital stock, and that the whole thereof has been paid in. The certificate must be verified by the affidavit of the president and secretary. En. March 21, 1872.

CHAPTER II.

ENUMERATION OF POWERS.

$465. Enumeration of powers.

1. To survey road.

2. May accept real estate.

3. May acquire real estate.

4. Lay out road, how wide.

5. Where nray construct road.

6. May cross or connect roads.

7. May purchase land, timber, stone, gravel, etc.

8. Carry persons and freight.

9. Erect necessary buildings.

10. Regulate time and freights, subject to legislation.

11. Regulate force and speed.

12. Purchasing or acquiring franchises of other railroads.

§ 466. Map and profile to be filed.

$ 467. May change line of road.

$468. Forfeiture of franchise.

$469. Crossings and intersections-Condemnation.

$470. Not to use streets, alleys, or water in cities or towns, except by a two-thirds vote of the city or town authorities.

471. Railroads through cities not to charge fare to and from

points therein. (Repealed.)

§ 472. When crossing railroads or highways, how other lands are

acquired.

§ 473. Corporations may consolidate-Publication of notice-Cony

$474.

§ 475.

to be filed.

State lands granted for use of corporations.

Grant not to embrace town lots.

476. Wood, stone, and earth may be taken from state lands.

§ 477. Lands to revert to state, when.

$ 478. Selections made, how proved and certified to.

ENUMERATION OF POWERS.

Sec. 465, C. C. Every railroad corporation has power:

To Survey Road.

1. To cause such examination and surveys to be made as may be necessary to the selection of the most advantageous route for the railroad; and for such purposes their officers, agents and employees may enter upon the lands or waters of any person subject to liability for all damages which they may do thereto;

May Accept Real Estate.

2. To receive, hold, take and convey, by deed or otherwise, as a natural person, such voluntary grants and donations of real estate and other property which may be made to it to aid and encourage the construction, maintenance and accommodation of such railroad;

May Acquire Real Estate.

3. To purchase, or by voluntary grants or donations to receive, enter, take possession of, hold and use all such real estate and other property as may be absolutely necessary for the construction and maintenance of such railroad, and for all stations, depots and other purposes necessary to successfully work and conduct the business of the road;

Lay Out Road, How Wide.

4. To lay out its road, not exceeding nine rods wide, and to construct and maintain the same, with a single or double track, and with such appendages and adjuncts as may be necessary for the convenient use of the same;

Where May Construct Road.

5. To construct their roads across, along or upon any stream of water, watercourse, roadstead, bay, navigable stream, street, avenue or highway, or across any railway, canal, ditch or flume which the route of its road intersects, crosses or runs along, in such manner as to afford security for life and property; but the corporation shall restore the stream or watercourse, road, street, avenue, highway, railroad, canal, ditch or flume thus intersected to its former state of usefulness as near as may be, Corporation Laws-22