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signed upon it, the secretary may, by direction of the president, add the omitted name.

McDonald v. Chisholm, 131 Ill. 275 (279). Option contracts, "puts" and "calls," discussed. Collection of note given for losses on option contract.

Pearce v. Foote, 113 Ill. 228. Note signed by the president, entered in the corporate books and in the yearly statement of liability, is valid by ratification, though the president had no authority to sign same.

Reichwald v. Commercial Hotel Co., 106 I11. 439. A note signed by trustees of a church by their own names, but described as trustees, holds them individually. Evidence to prove the note was a church note is not good.

Scanlan v. Keith, 102 Ill. 634. The word "we" in a note does not show it to be corporate or individual.

Scanlan v. Keith, 102 III. 634. One suing on a corporate note and recovering judgment against the company is estopped from subsequently holding the officer executing the same.

Scanlan v. Keith, 102 III. 634. Rule as to determining whether the corporation or the officer signing commercial paper as agent, cashier, etc., is liable for the debt, considered. Evidence as to.

Scanlan v. Keith, 102 111. 634. Corporations are not authorized to act as guarantors of the commercial paper of other corporations.

Reed v. Grindele, 2 Ill. C. C. R. 531. A company receiving payment for signing as guarantor of another corporation must refund such payment-such guarantee being unlawful.

Reed v. Grindele, 2 III. C. C. R. 531.

Bonds.

For what purposes.—Bond may be issued by a corporation to advance any purpose within the scope of the corporate powers as outlined by the charter or necessarily incident thereto.

Different kinds.—Bonds may be of two kinds: (1) Those made a lien upon all or part of the corporate property and assets; and (2) bonds secured by endorsement or guaranty but not a lien on property. Bonds secured by liens on the corporate property are of several kinds, as: A general mortgage bond on all corporate property; a real estate bond secured by the corporate realty only; a blanket mortgage bond is secured by certain named properties upon which mortgages already exist. It is a second lien. Consolidated mortgage bond takes the place of several old mortgages or bonds, and is for the purpose of uniting the different bonds in one bond for more convenient handling; the older liens being paid off. An cquipment bond is secured by personal property, and is usually issued to secure funds to purchase machinery and is practically a chattel mortgage on the personalty so purchased; a collateral trust bond is secured by other bonds and mortgages placed in the hands of a trustee, who may sell the collateral securities in case of default in paying the bond and satisfy the bond; debenture bonds are secured by other bonds and mortgages, and, as their name implies, are usually issued to pay off old debts. They are usually a second lien. Income bonds are second liens secured by mortgage on the corporate property and are payable out of the net income. An assessment bond is one secured by the property of a subsidiary corporation, the parent company holding the stock and property by which the bond is secured.

Other bonds issued for different purposes are known as participating bonds, joint bonds, extended bonds, refunding bonds, prior lien bonds, coupon bonds, convertible bonds, redeemable bonds.

How bonds are issued.—Bonds are authorized by the board of directors at any regular or special meeting. A resolution is usually passed that a committee be appointed to have bonds prepared, or the attorney for the company is instructed by the board to prepare and submit a form of bond. The resolu

tion should, as far as possible, state the details of the bond so as to prevent delay. It is ordinarily advisable to have the resolution prepared by the attorney as the bonds must follow it. (For form of resolution see Form No. —.) If the form of bond has been prepared beforehand no preliminary resolution is necessary, but the matter may be concluded by a resolution authorizing the issue. (Form No. 60.)

All money received from the sale of bonds is payable to the treasurer to be used for corporate purposes, or for the purpose named in the bond where a purpose is so stated.

Three methods by which bonds may be sold and funds realized therefrom are generally recognized:

1. By the corporate officers directly to the public.

2. By underwriting agreements whereby one company or person buys all the bonds and re-sells them at a profit. (Form No. 37.)

3. Through a bank or broker; the bonds being placed with the bank or broker whose compensation is a commission on sales made. This is the usual method for the unlisted bonds of small companies.

The first method of distribution is less popular year by year. It has come to be recognized that commissions must be paid to bankers. In return the bankers loan their credit to the bonds, placing them with their own public following. The commission is, to all intents, the price of the bankers' credit. The commission, therefore, varies. If the company is weak and the banker strong, the commission is very heavy. If the company is strong and the banker weak, the latter is glad to take the bonds at a very slight profit.

The second general method is to sell the bonds in a block to one of the great underwriters. Pennsylvania, Baltimore & Ohio, Union Pacific and many others sell directly to Kuhn, Loeb & Co., get the money, and thereafter take only an indirect interest in the bonds. The price at which bonds are sold to the underwriters is not generally known. It is taken to be a private matter. (For Underwriting Contract, see Form No. 37.)

The third method, not uncommon, is to sell the bonds to the big retail bond houses, who distribute them through advertising and correspondence. Each of these houses has its clientele. Some are strong in New York, others in Canada, others in the South, etc. They are more or less specialists, and get to be known for a particular grade of bonds or stocks.

These last two methods, of course, overlap greatly. Harvey Fisk & Sons, for instance, known for years as a big retail bond house of wide clientele, frequently underwrite whole issues of new securities, as in the case of the Electrical Securities collaterals, recently brought out. Similarly, Fisk & Robinson took the whole issue of the new Buffalo & Susquehanna Railway 41/25. J. P. Morgan & Co., Kuhn, Loeb & Co. and Speyer & Co. generally participate to a greater or less extent in any extensive new bond issue, because their clientele demands it, even though these firms may not be the original underwriter.

Another phase of the underwriting industry is the “underwriters option.” (See Form No. —-) An underwriting firm takes a block of bonds at, say, 97, payable only as resold. The firm then offers the bonds at any price above 97, and pays over to the company 97 for the amount of bonds sold. In this class of underwriting the company generally co-operates strongly with the bond house. A great deal of this class of business is carried on. Bond salesmen for big houses generally carry to outlying cities a commission to sell, at stated price, the bonds of a dozen or more railroads, none of whose bonds are actually owned by the house at the time. The bonds may be called at a given figure within a certain time.

It is a question how much of this business is done by the big underwriters. Doubtless, if the truth were known, a great many of the sales of big blocks of bonds are of this nature, but they are not generally published as such.

The reputation of the underwriters is a thing very jealously guarded. A foreign clientele is one of the most valuable assets possible, and a clear record in respect to coupons is a matter of high pride. When a house can say that none of

the bonds it has sold to the public has ever defaulted it can make a boast to be proud of.

Again, some houses have a reputation among the retail dealers for floating bonds at the top price, while others are considered more liberal. Bonds brought out by one house are considered bargains when issued, while bonds brought out by a near neighbor are generally expected to be better bargains in six months or so. This is a matter of local reputation. The bond dealers in the street know all these little things, but the savings banks, the country at large and the foreigners are not so keen.

Law as to bonds.-Authority, by resolution of the directors, given the president and secretary to execute and deliver corporate bonds for a certain purpose, gives them power to deliver same and to sell the excess bonds and use the funds to pay debts.

McCormick v. Unity Company, 239 Ill. 306. Bonds issued subject to the redemption of a certain proportion of them each year, to be determined by lot, are none the less negotiable.

McCormick v. Unity Company, 239 Ill. 306. On foreclosure of trust deed securing bonds, burden is on defendant to show bad faith in selling the bonds.

McCormick v. Unity Company, 239 Ill. 306. Payments made to a corporation for bonds is not a payment for stock issued as a bonus for subscribing for the bonds; and where said stock is mentioned in the written agreement signed by persons subscribing for the bonds, the bondholders will be put on inquiry as to whether the stock is what it purports on its face to be, “fully paid and nonassessable."

Gillett v. Chicago T. & T. Co., 230 I11. 373. Interest will not be allowed on claims against a corporation being dissolved under Section 25 of the Corporation Act. All interest on bonds and other claims stops as soon as a

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