Samuel Nelson

“ The money obtained from the stockholders belongs to the corporation itself; the stock to the shareholders. [8]
Railroad shares are not an interest in lands. Whether they are goods within the statute of frauds or not, the cases do not agree. They resemble choses in action; have been held to be choses in action. They are in truth, merely, the evidence of a right to have a share of the profits of the business of the corporation. [9]
The city, then, by a mere pledge of these shares of the stock of this company, obtains no lien upon the railroad. ”

“ If there exists a lien on the road in this case, it is one of a new kind; a lien not by statute, nor by common law, but 'a lien by argument.' And though the bar generally would admit, if 'liens by argument' can exist at all, that Mr. Stanbery is as able to create a good one as any man living, we must deny even to him the privilege of creating for them that which the parties had no design of creating for themselves.
The act of March 20, 1850, authorizes the city to contract with the railroad companies to which it may make loans, in reference to the character of the security to be given for them ”

“ The clause does not apply merely to precedence over the thing pledged; for those creditors had only a right to look to so much of the property as was not pledged, or if to property incumbered, subject to the incumbrance.
There are other reasons why this construction cannot be allowed.
Let us first consider the subject-matter. It is a loan of the credit of the city in the form of bonds, payable as to principal at a distant day, and as to interest semi-annually. No money is lent. No debt arises in favor of the city and against the company in the beginning. ”

“ We all know that it is not an unusual thing to find in the legislation of this country unnecessary provisions and useless repetitions. And while the general principle of construction relied upon in this case may be admitted to be correct when there is a proper occasion for its application, the court-in order to avoid the conclusion that the General Assembly of Ohio has enacted that a lien shall have priority over subsequent liens-will not decide that nothing was meant by the expressed provision vesting the City Council with an absolute discretion ”

“ A large portion of the modern codes is but declatory of the common law as expounded by the courts. We prefer this interpretation to the one that gives a lien against the stipulations of the parties, and where both were free to enter into them as authorized by a previous clause of the same section. Under this liberty, given to the City Council and the company, the former rejected the lien upon the road by mortgage, preferring the personal security by a pledge or hypothecation of the stock. ”

“ But whenever the liability should accrue, and the city be obliged to advance money upon the default of the company to meet an instalment of interest, a debt would arise for which the city would require prompt payment, or the means of enforcing prompt payment. Eventual indemnity, by the slow process of judicial proceedings, would not meet the emergency. It was, therefore, natural and proper that, in addition to eventual indemnity, provision should be made in some other form for prompt protection.
Now, consider in this light the various provisions made in this seventh section. ”

“ The law provides that the City Council may stipulate for such security as it pleases; and it then, perhaps unnecessarily enacts that whatever security it does take shall have priority over all other subsequent claims. It certainly does not provide that any security, by personal indorsement, or by pledge of stock, shall operate as a mortgage upon a railroad. ”

“ The City Council, it must be remembered, were exercising a strict statutory authority. They could dispense with nothing required by the statute, and exercise no discretion except that conferred by it. They could do nothing without the popular vote and do nothing contrary to it. But the popular vote authorized a loan with security by mortgage of the road. ”

“ We assert that, under the circumstances of this pledge, that is its scope and effect, aside from the further provisions contained in the 7th section giving full indemnity; or that such is the effect of the pledge, as a pledge, according to all the provisions of this section, which, quoad hoc, give it that effect.
Finally. What is the stock of a road or of a bank but the effects and property of the road or bank? If the road or bank is prosperous, and makes great profits, those profits pass to the holders of the stock; they are accretions to or on their property. ”

“ The question in the case is, what are the rights acquired by the city, on the one hand, and obligations assumed by the railroad company, on the other, by this arrangement?
If we look simply to the contract between the parties, it is impossible to entertain any doubt about them. The city holds $1,000,000 in the stock of the company, as a security for the loan of $600,000 in city bonds, with a power of sale of the stock upon the terms mentioned. The whole transaction consists in a loan of bonds and a pledge of stock. ”

“ The properly constituted authorities of a municipal corporation, as well as the managers of any other corporate body, may bind the corporation by acts in contravention of their plain duty, and even in direct violation of law, whenever they have any power to act at all in the premises. ”

“ But when acts to be done are within the power and duty of the directors and are neglected, and thereby third parties are damaged, neither a court of law nor of equity, will allow the company to take advantage of that neglect. ”

“ In the first place, there was no necessity for such a provision, for either form of security taken under the first clause would necessarily have precedence over a subsequent security upon the same subject-matter. ”

“ The Ohio and Mississippi was one of these roads. A vote was obtained in favor of this railroad company, agreeing to the issue of bonds to the amount of $600,000 of the city, to be secured by a mortgage upon such property of the company as the City Council should require. ”

“ In the next place, that construction does not cover all the terms of the last clause, for the priority is not confined to other liens, whether like or unlike the security taken, but extends as well to all claims or obligations, without lien, subsequently contracted. ”