Mobile & Ohio Railroad v. Nicholas

COLEMAN, J. The Mobile & Ohio Railroad Company having made default in the payment of coupons attached to its several bonds, secured by mortgages, proceedings were instituted in the Federal Court for the Southern District of Alabama and other courts, which resulted in debrees of foreclosure, and orders of sale of the property conveyed by the several mortgages or deeds of trust. ' ■ In addition to the bonded indebtedness of the railroad company, secured by mortgage, upon which the foreclosure decrees were rendered, there was a large unsecured indebtedness. The total indebtedness largely exceeded the value of the entire railroad property. The railroad company at this time was in the hands of a receiver. Under these conditions an agreement was entered into, dated October 1st, 1876, “between the Mobile & Ohio Railroad Company of the first part, and the various other parties whose names are — 101 — subscribed hereto, being creditors of said company, some holding security as hereinafter specified, and others unsecured, each subscriber for himself, and neither for the other, parties of the second part, Wm. H. Hays of the city of New York, and William S. Pierson of Windsor, State of Connecticut, and T. Haskins Dupuy of Philadelphia, parties of the third part.” The agreement which is made exhibit “A” to the bill, after stating the embarrassed condition of the railroad company, and referring to the bonded creditors of the same, secured by mortgages, the decrees of foreclosure and judgments, and all other creditors, proceeds as follows: “And the undersigned, holders of claims of the various classes against said company, as well as these specified in the said schedule hereto annexed, as judgment creditors and unsecured creditors, have agreed to compromise and compound with said company, upon the said company’s issuing new securities for all the said indebtedness, in the manner hereinafter agreed upon, to the end, that if practicable, said foreclosure suits may be discontinued, and the property affected thereby restored to the custody and control of the said company, under the conditions ©f this agreement, and the stipulations accompanying the same.” The agreement then provides for the issue of seven millions of first mortgage bonds, and then for the issue of eight millions six hundred and fifty thousand of debentures of the first, second, third, and fourth series. The main questions involved in the present litigation to be first considered are in respect to the debentures. This plan of adjustment and reorganization was made to depend upon the action of the stockholders, and the bill shows, and it is admitted in argument, that of the fifty-three thousand and two hundred and six shares of the capital stock of the railroad company, forty-five thousand and four hundred and fifty-four shares of the capital stock, assented to the compromise and adjustment, and executed an irrevocable power of attorney, by which their stock should be voted, until the payment or extinguishment of the debentures, as expressed on their face and in the mortgage to secure them, and provision for their payment. All the stockholders who acceded to the terms of compromise and adjustment are denominated “assenting stockholders.” Complainants belong to this class. The agreement for the compromise and readjustment is divided into sections and stated in full as exhibit “A” to the bill. We will here state such sections as are most pertinent to the issues presented by the pleadings. — 102 — Sec. 14. Tbe said assignees and attorneys sball not be authorized to cancel or surrender any of the existing obligations or evidences of debt of the said corporation, transferred to them under this agreement, unless all the present holders of the mortgage securities of said company shall have become parties to this instrument, and transferred the securities held by them on or before the first day of March, 1877, or at or before such time as the said assignees and attorneys shall have fixed,-as in their discretion they may, by successive extensions of not more than sixty days each, nor until said corporation or its stockholders, through legal and proper action of its stockholders, if such action be necessary, or otherwise according to law, shall have entered into an adequate and sufficient 'arrangement or agreement with said assignment or agreement with said assignees and attorneys, and with the holders of said debentures, enabling the holders of such debentures, or the trustees under said trust deed, to vote at elections for directors of the said company, and irrevocably represent such stock, or a majority thereof, at all stockholders’ meetings until Such debentures shall be extinguished; and upon that privilege of representation being acquired and vested in or secured to the trustees in said trust deed, or to the holders of the said debentures by the proper and legal action of such corporation or its stockholders, and upon all the new mortgages and securities above called for being issued, then such cancellation and surrender may be fully completed and consummated (except in the contingency provided in paragraph 13 of this agreement), and the property and management of the corporation may be restored to it and said foreclosure suits may be discontinued.” ' Sec. 20. The trust deed hereinabove provided for, whether executed in pursuance of the compromise agreed upon, or by a new corporation or corporations to be created after a foreclosure, shall contain provision for the creation of a sinking fund for the benefit of the holders of'the said debentures in the order in which the interest on such debentures is as above described payable. Such sinking fund is to consist of the proceeds of all lands owned, and which may hereafter be owned by said company, with the exception of such as are covered by the above mentioned first mortgage, and with the exception of the railway, rails, bridges, fences, warehouses and other fixtures, rights, privileges and real estate belonging to the above mentioned branches, but including all lands not so covered, but conveyed to the Mobile & Ohio Railroad Company by any State — 103 — or by tbe United States. Tbe trustees under said trust deeds are to have power of sale over said lands from time to time, and suclr trust deeds shall contain clauses properly framed conveying to trustees under such deed tlie same powers of sale in respect to tbe lands conveyed thereby as are possessed by tbe trustees under tbe now existing first mortgage, and tbe first mortgage to be created under this agreement is not to apply to or cover such lands, and tbe proceeds of sales of such lands are to be free from tbe lien of said new first mortgage, and are to constitute a fund for tbe exclusive benefit of the holders of said debentures. But such new trust deed shall also contain provision by way of covenant, declaration, grant or otherwise, as said assignees and attorneys may direct, in substance and effect that the amount of the principal and interest payable upon said debentures shall constitute a lien upon tbe railway property of said existing corporation or of said new corporation or corporations, as tbe case njay require, to such an extent that in case of a foreclosure of said new first mortgage and a sale thereunder, tbe trustees in said trust deed, for tbe benefit of holders of said debentures according to their order and priority, shall be entitled to tbe surplus proceeds of such sale next after payment of said new first mortgage, to tbe amount of tbe aggregate principal sum due on such debentures, and so that in case any lien upon said railway property, or any part thereof, shall arise, subsequent to tbe making of said trust deed, by tbe act or sufferance of such existing or new corporation and such subsequent lien shall be enforced to tbe extent of depriving said existing or new corporation of tbe possession of such railway property and sell tbe same, clear of all subsequent liens for tbe benefit of holders of said debentures according to their order and priority, or may exact redemption and payment in full of tbe principal amount of such debentures before surrendering such property to such subsequent lienors, and said trust deed shall also contain proper covenants and securities for tbe ascertainment and application of tbe income of tbe property of said existing or new corporation and its successors, as tbe case may require, according to tbe provisions of this agreement, and there shall also be paid into tbe sinking fund all tbe interest accruing on debentures bought for tbe sinking fund, until all of tbe debentures shall have been bought, satisfied or extinguished, and there shall also be paid into tbe sinking fund a further amount equal to tbe dividend which may hereafter be declared upon the capital stock now existing or hereafter to be created of such company, which — 104 — dividend shall not be declared or paid except an amount equal thereto is also paid in at the same time out of the net revenue into the sinking fund. The trustees making sales of said lands are to deposit the proceeds thereof in the bank of the State of New York, in the City of New York, or such other depository as the trustees in said trust deed may select in the said City of New York, and each six months, that is, on the first days of May and November, the trustees shall advertise in the cities of Mobile and New York, stating the amount so deposited and at the disposition of the sinking fund and asking for tenders thereof in the first series of said debentures then outstanding awarding the amount so deposited to the holders of debentures, tendered at the lowest grades of price, in succession. In default of any bids or tenders therefor at less than par, the trustees shall thereupon draw by lot a sufficient number of debentures of the first series then outstanding, to absorb such deposits, and shall apply such deposits to the purchase of the debentures so drawn by lot at par. After purchase of the said debentures of the first series, the said sinking fund shall be applied in like manner, and by the same means, to the purchase of each other of the said several series of debentures in succession. Sec. 26. The assignees and attorneys acting under this instrument are hereby invested with full power and authority to execute the provisions of this plant; to supply any and every defect in any and every case which is unprovided for in its terms, and to do anything and everything that is proper in their judgment to carry out its provisions. In pursuance of the agreement thus entered into, the debentures were issued, and provision for their payment and security made, as shown in exhibit C, to the bill. The form of the debenture is as follows: “This is to certify that--, is entitled to the sum of-dollars, out of the sinking fund created by the Mobile & Ohio Eailroad Company for the benefit of the holders of the several series of preferred income and sinking fund debentures issued by it, which sinking fund is created by and described in the deed of trust made by the said Eailroad Company to the Farmers Loan and Trust Company, bearing date the first day of May, 1879. The said sinking fund consists of the proceeds of the lands described in the said trust deed, and of the surplus income so far as directed by said deed of trust, which proceeds and surplus income are to be applied to the purchase of the said preferred income and — 105 — sinking fund debentures in tbe order of tbeir priority and in tbe manner directed by tbe said deed of trust. “This debenture issued pursuant to tbe terms of certain agreements heretofore made by tbe said Bailroad Company for tbe compromise, extension and forbearance of its former indebtedness, and it does not bear interest at any fixed an-mial rate; but whenever it shall be ascertained that tbe net earnings or income of any one year amount to one per cent, or a multiple of one per cent, upon tbe principal amount of debentures embraced in any one series of debentures, after providing for prior charges on tbe gross earnings, such net earnings or net income for that year are to be applied, pursuant to tbe terms of said trust deed, to tbe payment of interest on such series of debentures, no one payment of interest to exceed seven per cent, on the principal amount of such debentures ; and tbe Board of Directors of said Bail-road Company, in whose election tbe debenture holders participate, as provided in said trust deed, are to determine the amount of such net earnings or income so applicable to tbe payment of interest. “The registered bolder of tbis debenture is entitled at tbe meetings of tbe holders of said debentures to be held pursuant to tbe terms and provisions of said trust deed, to cast one vote for each one hundred dollars of principal money herein expressed upon tbe question of instructing tbe trustee named in said trust deed and its successors, bow to vote for directors of tbe Mobile & Ohio Bailroad Company, and tbe bolder of tbis debenture is also entitled to cast a like vote at all other meetings of said debenture holders called pursuant to tbe terms of tbe said trust deed, for any purpose of which said debenture holders may properly and lawfully be convened. Tbis debenture is transferable only upon tbe books" of tbe said Tbe Mobile & Ohio Bailroad Company at tbe City of New York, in person or by attorney, upon tbe surrender of tbis certificate, or lipón a simultaneous endorsement hereon and under such regulations as tbe Board of Directors of said Bailroad Company may, from time to time prescribe. “In witness whereof, tbe said Tbe Mobile & Ohio Bail-road Company has hereunto set its corporate seal and caused these presents to bé attested by its officers thereunto duly authorized, tbis day of-18 — . (L. S.) President. Secretary. Countersigned and registered. Trustee.” — 106 — And to further carry out said agreement, and to secure the payment of the debentures, among other provisions it was agreed, that, Whereas, The said William H. Hays and T. Haskins Du Puy have, pursuant to the terms of the agreement of October 1, 1876, designated the Farmers Loan and Trust Company of the City of New York, to be the trustee in this Trust deed : Now this indenture witnessetk that the said The Mobile and Ohio Railroad Company, in consideration of the premises and of the sum of one dollar to it in hand paid by the said party to the fourth part, at or before the sealing and delivery of these presents, the receipt whereof is hereby acknowledged, and for the purpose of carrying into effect the said compromises and agreements, as well as for the purpose of securing the payment of the amounts of money expressed in or payable upon the said debentures, and by and with the consent of said parties of the second and third parts, testified by their execution of these presents, hath granted, bargained and sold, assigned, transferred, conveyed and set over, and by these presents, doth grant, bargain and sell, assign, transfer, convey, and set over, unto the said, The Farmer’s Loan & Trust Company, party of the fourth part to these presents. To Have and To Hold the same, and the appurtenances, to the said party of the fourth part to these presents, and its successors in the said trusts, to, for and upon the uses, trusts and purposes hereinafter declared of and concerning the same, that is to say, in trust for the purpose of securing the performance of the conditions of said agreement of October 1,1876, and the performance of the covenants therein contained for the benefit and security of the holders of the said debentures, and for the purpose of securing the payment of such sums of money as are expressed in or shall become payable upon the said debentures. And it is hereby agreed that there shall be, and there is hereby created, pursuant to the terms of said agreement of October 1, 1876, a sinking fund for 'the benefit of the holders of the said debentures, that is to say, the said party of the fourth part and its successors, in the said trusts are hereby authorized from time to time to sell and convey the lands and premises hereby granted and conveyed and good and sufficient deeds therefor in fee simple to execute and deliver and to receive the proceeds of such sales; and said .party of the fourth part and its successors in said trust shall deposit the proceeds of the sales of said lands in the Bank of the State of — 107 — New York, in the city of New York, or such other depository as the party of the fourth part or its successors in said trust may select in the City of New York, each six months ; and when ever and in case that the sums so deposited shall amount in the aggregate to ten thousand dollars or more, they shall advertise in the Cities of Mobile and New York, stating the amount so deposited at the disposal of the sinking fund, and asking for tenders of the debentures of the first series herein mentioned, then outstanding, awarding the amount so deposited to the holders of the debentures tendered at the lowest prices. In default of any bids or tenders of such debentures, the trustees shall thereupon draw, by lot, a sufficient number of the debentures of the first series then outstanding to absorb such deposits and shall apply the proceeds to the purchase of the debentures so drawn by lot, at par ; and after purchase of such debentures of the first series, the proceeds of the sales of said lands, and the interest received by said trustees, shall be applied in like manner, and by the same means, to the purchase of each of the said series of debentures in succession. All debentures purchased by said party of the fourth part and its successors in the said trusts under this instrument, shall be transferred to the name of the trustee, and shall be stamped “Not negotiable,” and shall not be reissued. And the said sinking fund is to consist of the proceeds of said lands, and of interest upon the debentures so purchased by the said party of the fourth part and its successors in said trust, until all the debentures shall have been bought, satisfied or extinguished; and there shall also be paid into the said sinking fund by the said the Mobile & Ohio Bail-road Company a further amount equal to the amount of each dividend which may be hereafter declared upon the capital stock now existing or which may hereafter be created by said Bailroad Company, which dividend shall not be declared or paid except an amount equal thereto is also paid at the same time of the net revenue into the sinking fund. And, whereas, the said Hays and DuPuy, as holders of a number of shares of the capital stock of the said Bailroad Company, have, by an instrument bearing even date herewith, made for the further security of the holders of said debentures, conveyed to and vested in the said party of the fourth part, and its successors in the said trust, power and authority, irrevocable while any of said debentures remain outstanding to represent and vote upon said shares of stock at all meetings of the stockholders of said Bailroad Com — 108 — pany for tlie election of directors, or for any other purpose, for which said stockholders may be lawfully convened. Now, therefore,. And the said party of the fourth part and its successors in the said trust, as holders of said power and authority may and shall vote in person or by proxy, at stockholders’ meetings of said Railroad Company, as instructed and directed by a majority of the votes cast at such annual meetings of said debenture holders, and for the purpose of identifying and registering the names of the debenture holders entitled to vote at said meetings, the transfer books for such debentures may and shall be closed at the same time and for the same period at and for which the stock transfer books of said Railro.ad Company shall be, pursuant to its by-laws, closed, so that no transfer of any of said debentures, nor of any of said stock shall be permitted within a period of not less than twenty days next preceding any meeting of said stockholders. In further pursuance of said agreement, the committee of reorganization, executed to the Farmers’ Loan & Trust Co., a power of attorney, a copy of rvliich is made Exhibit “I)” to the bill, and which after setting out the authority under which the power is executed, proceeds as follows: “Now, know ye, that we, the said William H. Hays and T. Haskins DuPuy, as survivors aforesaid, for and in consideration of the premises and of the sum of one dollar to us in hand paid by the said the Farmers’ Loan & Trust Company, the receipt whereof is hereby acknowledged, and for the better security of the holders of the said debentures, and in pursuance ánd in consummation of said agreements, while retaining for ourselves and our assigns, holders of the said shares of stock and the respective parcels into which the same may hereafter be subdivided, all other rights and privileges which pertain to the ownership of said stock, have nominated, constituted and appointed, and in our place and stead, put and deputed, and by these presents do nominate, constitute and appoint, and in our place and stead put and depute- the said the Farmers’ Loan & Trust Company, and its successors in the trust created by the said trust, and for us and in our names, and in the name of our assigns, holders of said shares, or of any of the several parcels into which they may be hereafter subdivided, or lawfully otherwise (irrevocable while any of the said debentures are outstanding) to vote, pursuant to the charter and by-laws of the said company and lawfully otherwise and as fully to all intents and purposes as we ourselves or our assigns while holders — 109 — of said, shares or any of them, could vote at any meeting of tbe stockholders of said corporation which may hereafter be called; and that as fully to all intents and purposes as the holders of said shares and the respective particles thereof could do if these presents had not been executed with full power of appointing substitutes and proxies and revoking such appointments and making new ones. And we hereby covenant and agree for ourselves and our assigns, holders of the said shares of stock or-any thereof that so long as any of the said debentures be outstanding neither we nor our successors, nor any of our assigns, holders of the said shares of stock, shall or will withdraw the power and authority. hereby given, nor undertake to exercise the privilege of) voting upon said shares of stock, or any or either thereof, without the consent of our said attorneys, hereby constituted, and we hereby ratify and confirm-all that our said attorneys and their substitute or substitutes, proxy or' proxies, lawfully appointed, shall lawfully do by virtue thereof. .The form of assignment of the stock by the stockholder to the committee of reorganization, and the form of the certificate of stock issued to the stockholder, after the execution of the power of attorney to the Trust Company, are not made exhibits to the original bill, but are referred to in it. Both were before the chancellor and were proper matters for consideration. We here give both; first, the form of the assignment by the stockholder, and then the certificate of stock issued to him by the committee of reorganization. “Mobile & Ohio Bailroad Company. No. .. .Shares. This is to certify that-has assigned to the Committee of Beorganization of the Mobile & Ohio Bailroad Company as created under the Memorandum of Agreement and Transfer, made the first day of October, 1876, between the said Mobile & Ohio Bailroad Company, and the creditors of said corporation subscribing thereto, their successors and assigns-shares in the capital stock of said “Mobile & Ohio Bailroad Company” of the nominal par value of One Hundred Dollars to each share, hereto standing in his name.” This assignment is made and received to enable the said “Committee of Beorganization” and its successors, to carry, into effect the reorganization of said corporation, set out in. said “Memorandum of Agreement and Transfer” and particularly stated in the 14th item thereof, so that said assignees,! their successors and assigns, may vote said stock at all; meetings of said corporations, as the agents and proxies — 110 — irrevocable of tbe said assignors, as fully as if the same were still belcl by him but for the uses and purposes declared in said memorandum and until the same are fully accomplished, but with this trust: that as to any and ail income, dividend and profit-to which said shares may become entitled, from the earnings and business of said corporation, the same shall belong to and be paid to the said-, the assignor or the holder of this certificate, which is by agreement declared to be transferable and deliverable to any holder by endorsement thereon, without entry in any booh, and shall be taken to represent the shares of capital stock herein described. Witness our hands at-this-day of-, 18 — . Copy of certificate of stock received by the shareholder. “Be it known that- — entitled to-shares of the capital stock of the Mobile & Ohio Railroad Company, One HuMred Dollars per share having been paid on the same, said shares being transferable on the books of the company only by the above named-in person or by attorney upon the surrender of this certificate and subject to the power of attorney herein referred to. It is understood and declared that the ownership by the said-and his assigns of the said shares of stock entitles them to all the rights and privileges which pertain to the ownership of the said shares, including the right to such dividends and profits as shall be ascertained and declared upon the capital stock of the said company, saving and excepting that such ownership is subject to a power and authority heretofore granted by the owners of said shares to the Farmers’ Loan & Trust Company in trust for the benefit and security of the preferred Income and Sinking Fund Debentures issued by said Railroad Company, by virtue of which power and authority the said the Farmers’ Loan & Trust Company is and its successors will be entitled, in person or by proxy, to vote upon the said shares of stock at all meetings of the stockholders of the said company which may be hereafter for any purpose convened during the continuance of said trust, and so to vote in the name of either the present or future holders of said shares, or in the name of the said the Farmers’ Loan & Trust Company, or its successors or proxies. In witness whereof the signature of the president and the counter signature of the secretary and the seal of said company are herewith affixed this-day of —•— 18 — . Under the foregoing compromise and adjustment, all the creditors except those secured by the first mortgage bonds, — 111 — accepted tlie debentures provided for, in lieu of their former evidence of debt, and the claims and the foreclosure decrees, were assigned to the Farmers Trust Company, 'the receiver under the orders of the court, turned the property over to the railroad company, and the corporation resumed its control, and management of its property and business. A complete compromise and adjustment was effected. Everything seems to have been satisfactorily conducted to all parties under the adjustment plan until some time during the year 1887. The railroad company needed funds, and the debenture holders became dissatisfied and desired other arrangements in regard to their holdings. The result was the appointment of a committee, the submission of a plan — and the adoption of another agreement, which provided for the issue of ten millions five hundred thousand dollars of four per cent, bonds, secured by a general mortgage. These bonds are denominated general mortgage bonds. The agreement for the issue of the four per cent, bonds, among others, contains the following provisions : “EXHIBIT F.” III. The said general mortgage in conformity with the plan approved and adopted by the debenture holders, to provide: 1st. That in cases the earnings of the company or the amounts applicable to the payment of interest upon the general mortgage bonds, by virtue of the deed of trust creating said mortgage, shall for any period during the first three years or prior to the first day of September, 1891, be insufficient to pay in cash the interest due on the bonds issued thereunder, then, that the said interest may, at the option of the company, be paid in script, convertible in sums of five hundred dollars into the new general mortgage bonds and providing further that, after the expiration of. the said three years, the mortgage shall not be enforced by reason of a failure to pay interest until there shall- be four successive coupons, or payments in default: 2nd. That the lien • of the debentures deposited with the trustees of the new mortgage shall be maintained for the security and benefit of the bonds issued under said new mortgage. 3rd. That the sinking fund under the debenture deed of trust shall be continued and maintained until all of the debentures not held in the sinking fund shall be deposited with the trustees of the general mortgage, when and in which event the debentures held by the sinking fund shall upon the order of the company, be cancelled, and the funds deposited with the trustees of said sinking fund shall, in — 112 — that case, thereafter and. in like manner, be applied to the purchase of the new four per cent, bonds, the same as so purchased to be cancelled. 4th. That in case the holders of the new bonds issued under the general mortgage shall desire to dispose of their holdings to the trustees of the sinking fund who may ask for tenders of debentures as provided in the debenture deed of trust, such holder may for that purpose obtain from the trustee of the general mortgage in exchange for the new bonds, dollar for dollar, the debentures called, for the purpose of delivering same to the trustees of the sinking fund, and in such an event, the trustee of the general mortgage shall cancel the bonds so exchanged for debentures. The general mortgage bond has the following provisions : “This bond is one of a series of this date, numbered from one consecutively upwards, amounting in the aggregate to ten million five hundred thousand dollars, the payment of the principal and interest of which is equally secured by a certain mortgage or deed of trust dated May loth, eighteen hundred and eightj^-eight, duly executed and delivered by the said Mobile <fc Ohio Railroad Company to the Farmers Loan and Trust Company, of New York, as trustee and subject to the terms and conditions of which mortgage this bond is issued and held. The registered holder of this bond is entitled, in accordance with the provisions of the said mortgage or deed of trust, to cast one vote for each five hundred dollars of principal herein expressed at all meetings of the holders hereof held pursuant to the deed of trust to instruct the trustee, or its successors, how to exercise the voting power therein conferred.” The mortgage, to secure the four per cent, bonds, and the agreement in reference thereto, after providing for the re-exchange of the general mortgage bonds for the debentures, in the seventh paragraph has the following provision : “7th. It is further mutually agreed that the preferred income and sinking fund debentures which may be deposited with the trustee hereof for exchange for the bonds secured by this indenture, upon the terms and in accordance with the plan adopted by the holders of the several classes of preferred income and sinking fund debentures at the meeting of February 24th, 1888, shall be held by the trustee hereunder for the security and benefit of the bonds, secured by this indenture, and that all the right, title and interest of the holders of those debentures so deposited shall be transferred and vested in the trustee of this indenture, by whom the same — 113 — stall thereafter be held for the security of the bonds issued hereunder. And it is expressly understood and agreed that the amount of interest collected by the trustee hereunder, upon the debentures so deposited with it for the purpose of exchange for bonds of the present issue, which shall amount to more than the sum necessary to pay the interest then due upon the bonds hereby represented, shall, after the payment of said interest, be delivered by the said trustee hereunder to the company. It is hereby further provided and expressly agreed that if at any time all of the debentures issued and outstanding under the deed of trust, dated May 1st, 1879, which are not held in the sinking fund provided for in the said deed of trust, shall at any time become or be deposited with the trustee of this mortgage, then and in that event the trustee hereunder shall be considered to have become subrogated to the rights, privileges and position of the holders of all of the said debentures, and the debentures held by the sinking fund shall, in that event, upon the order of the company, be cancelled, and the funds deposited with the trustees of the sinking fund provided for in the trust deed of May 1st, 1879, shall thereafter, in that case and in' like manner as is provided for in said trust deed, he appropriated to the purchase of the bonds hereby secured, and in case of the purchase of any of said last mentioned bonds in the manner last provided for, the same shall thereupon be cancelled. At any time however, prior to the time when all of the preferred income and sinking fund debentures shall have been deposited with the trustees of this mortgage for exchange for the bonds secured hereby, as herein and in said plan adopted February 24, 1888, provided, it is hereby expressly understood and agreed that the holders of any of the bonds issued under this mortgage shall have the right, if they so desire, to dispose of their holdings to the trustees of the sinking-fund provided for in the trust deed of May 1st, 1879, who may ask for tenders of debentures as provided in said deed, and in that case each such holder may for that purpose obtain from the trustees hereof, in exchange for the bonds secured hereby, dollar for dollar, the debentures called for, for the purpose of delivering the same to the trustees of the sinking fund, and in such event the trustee hereof shall cancel the bonds so exchanged for debentures. It is hereby further expressly agreed that there shall be a meeting of the holders of the bonds secured hereby, immediately prior to every meeting of the holders of the preferred income and sinking fund debentures, which may be — 114 — called under and in accordance witb the terms of said deed of trust of May 1st, 1879, and tbat such meetings shall be called by the company in the same manner and upon like notice as the meetings called of the debenture holders provided for in the said deed of trust of May 1st, 1879, that such meetings shall be regulated in procedure by the bylaws of the company, and shall be for the purpose of directing the trustee of this mortgage how to vote upon all of the debentures which have been deposited with it in exchange for bonds secured hereby, at the meetings of the debenture holders called in accordance with the provisions of the deed of trust of May 1st, 1879. At all meetings of the holders of the bonds secured hereby, each bond shall entitle the person or persons whose name appears upon the “Noting Eegister” as hereinafter provided to one vote for each $500 of principal money secured hereby. Under this latter arrangement, reported on 24thEebruary, 1888, and fully consummated in May, 1888, all the debentures issued under the agreement of 1876, which had not been absorbed or taken up by the sinking fund, except sixty-four thousand dollars of debentures, were surrendered to the trustee, and the holders thereof received in lieu four per cent, bonds, as provided in the adjustment of 1888. So far as we are informed by the pleadings, there seems to have been no objection to the execution of the general mortgage, and the issue of the four per cent, bonds, until February, 1892, when complainants denied the authority of the Trust Company, under the power of attorney held by it to vote their stock, and claimed for themselves the right to vote their own stock. Complainants to further fortify themselves in the right thus set up, tendered to -the railroad company, and also to the Trust Company, sixty-four thousand dollars, with instructions to pay off the sixty-four thousand outstanding debentures, which had not been surrendered for the four per cent, bond issue under the agreement of May, . 888. The tender was refused, and the right of complainants to vote at the stockholders meeting, denied. Thereupon the complainants filed the present bill. The pleadings are very voluminous, and we have stated the main facts at considerable length. We deemed this necessary for a proper understanding of the material questions to be decided, and the application of legal principles. The prayer of the bill is as follows : “Orator prays your honor, that the -said Mobile and Ohio Bailroad Company, the said Farmers’ Loan and Trust Company, and the said William B. Duncan, may be made parties defendant hereto — 115 — by proper subpoenas, or by other proper process, requiring them to answer, plead or demur to this bill of complaint, as provided by law. Orator further prays your honor to grant a preliminary injunction enjoining and restraining the said Mobile and Ohio Railroad Company, its officers and inspectors of election from refusing to accept the votes of orator and the other stockholders hereinbefore named in paragraph four of this bill, at the election to be held at said stockholders meeting, on the 17th day of February,-1892. And that they be further enjoined and restrained from suffering or permitting the said Farmers’ Loan and Trust Company to vote the said stock which the said company claims to represent, under the said powers of attorney executed to it from the 9th day of September, 1889, to the 10th day of November, 188Í, both inclusive, by the said Hays and HuPuy; and further, that the said Farmers’ Loan and Trust Company, its agents and attorneys, be enjoined from casting the vote of said stock, and upon the hearing orator prays your honor to decree that all of said debenture holders who have not heretofore exchanged their debentures for such four per cent, bonds, or who have not been heretofore paid their said debentures, be required, within a period to be fixed by your honor, to file the same in the registry of this court, for payment; orator hereby offers to pay into the registry of this court, upon the order of your honor, an amount sufficient to pay and discharge the said debentures which have not been exchanged or paid as aforesaid, in full. Orator further prays your honor, that the said debentures • may be cancelled and annulled, and the deed of trust made to secure the same delivered up and cancelled. Orator further prays your honor upon such hearing, to make said injunction perpetual, and should orator be mistaken in the relief to which he is entitled, he prays your honor for all such other and further relief as may seem to your honor meet and equitable in the premises, and in duty bound he will ever pray.” The bill was marked filed by the register of the Chancery Court, on the 12th of February, the order for an injunction was granted by the judge of the City Court of Montgomery, without notice to the other side, on the 13th of February, and the writ issued by the register on the 15th day of February, 1892, and executed on some of the defendants the same day, two days before the day appointed for the meeting of the stockholders, for the purpose of an election of directors. On -the 16th of February, the judge who granted — 116 — tbe injunction, modified bis order. Tbe original writ of injunction issued in accordance with tbe prayer of tbe bill, by wliicli tbe defendants were enjoined from refusing to accept tbe votes of tbe complainant, John S. Nicholas, and other named stockholders, and enjoined them not to permit tbe Trust Company from voting tbe stock under tbe power of attorney held by it. The order modifying tbe original writ of injunction in effect, simply postponed tbe election appointed for tbe 17th. of February, 1892, and prohibited tbe meeting of tbe stockholders called to meet on that day, and until the further orders of tbe Chancery Court of Mobile county. Tbe point is raised by complainants, that the city judge bad no authority to modify the order granting tbe injunction. Tbe respondents moved to dismiss tbe bill for want of equity, to dissolve tbe injunction; and demurred to tbe bill, assigning various grounds of demurrer. They also filed a cross-bill. Tbe chancellor overruled tbe motions in regard to the original bill, and dismissed tbe cross-bill. Erom these decrees the appeal is prosecuted to this court, f:3?he facts stated in tbe bill show, that by tbe re-organizatian and (compromise of 1876, perfected in 1879, tbe voting power was severed from tbe stockholder, and until tbe payment of tbe debentures, irrevocably vested in tbe Farmers’ Trust Company and the debenture holders. It is contended for complainants that tbe agreement was, and “is void per se,” because 1st: “It contravenes tbe language of tbe charter of tbe railroad company; and 2nd, because it is against public policy.” Tbe charter expressly provides, “Each share shall entitle tbe bolder thereof to one vote, which vote may be given by said stockholder in person, or by lawful proxy.” So far, then, as tbe right to vote by proxy is questioned, tbe charter expressly grants tbe power, and the legislature lias thus declared that it is not unlawful, par sc, to separate tbe voting power from tbe stockholder, so far as- tbe appointment of a proxy may be considered a severance of tbe voting power. Where a proxy is duly constituted, and tbe power of tbe appointment is without limitation, a vote cast by the proxy binds tbe stockholder, whether exercised in behalf of bis interest or not, to tbe same extent as if tbe vote bad been cast by tbe stockholder in person. We do not bold that a power of attorney, absolute in its terms, will authorize tbe agent or proxy, to effect contracts, or legalize acts, outside of tbe scope of bis authority, or contrary to law or public policy, neither could tbe stockholder in per — 117 — son by bis vote effectuate sucb a result. Tbe invalidity of acts of tbis character by a proxy, rightly understood, is not made to rest upon tbe ground, that there has been a separation of tbe voting power from the stockholders, but because of tbe unlawful purpose for which the proxy was appointed, or the unlawful end, attempted to be effected by the exercise of the voting power. The distinction should be kept in view. Take the case of the Richmond & Danville Extension Company v. The Woodstock Iron Co., 129 U. S. 643, cited by complainant. The Woodstock Iron Co. agreed to pay thirty thousand dollars, if the Georgia Pacific Railroad .was run through the town of Anniston, where the Woodstock Iron Co. owned a large plant, mines,-and other property. The contract was held void as being against public policy. No question of the separation of the voting power from the shareholder, arose in the case. It was the character of the contract, the unlawful purpose in view, to build up the Woodstock Iron Co. at the expense of the stockholders of the railroad company that was condemned. The same principle applies to many other cases cited in which, it was held, “that contracts made to influence railroad companies in selecting their routes and erecting their depots and stations by donations in land and money to some of its directors and stockholders were invalid,” citing Bestor v. Wathen, 60 Ill. 131; Linden v. Carpenter, 62 Ill. 307. Take the case of Haper v. N. Y., Lake Erie & Western R. R. Co., 14 Weekly Law Bulletin, p. 68. The case is thus stated : “A controlling interest in the stock of the Cincinnati, Hamilton and Dayton Railroad Company was bought up in 1882, and placed in the name of H. 1. Jewett, who ,was "Vice-President of the New "York, Lake' Brie and Western Railway Co., under the agreement that he should give irrevocable proxy to such persons as the Erie should appoint to vote on the stock; that his stock certificates should be left in the hands of trustees, and that they should issue to the respective owners of the stock trust, or pool certificates for amounts equal to their respective equitable interest. On all stock thus pooled, the Erie agreed to guarantee a certain dividend.” The court declared the contract void “both on the ground that the power is denied to one corporation thus to acquire control of another, and that the stockholder can not barter away the right to vote upon his stock.” True the opinion declares as an independent proposition, “that the stockholder can not barter away the right to vote upon his stock,” and yet it is shown, by the facts of the case and the opinion, that — 118 — tbe purpose to be effected by tbe barter of tbe right to vote, to-wit, tbe placing “of an Ohio corporation into tbe bands of a New York corporation,” tbe enabling “one corporation to acquire control over another” was illegal. Speaking of tbe facts of tbe case tbe opinion proceeds as follows: “It is obvious that tbe rule as to executed contracts can not be applied to tbe plaintiff for any such reason as that last mentioned, for he was noL a party to the contract. There are other cases wherein special circumstances made it imperative, as a matter of good faith, that tbe contract should not be interfered with, and others, when tbe protection of interest acquired by innocent parties caused tbe court to refrain.” There is no rule- of law which requires -contracts to be upheld which are void as against public policy, in order to preserve “good faith” or “innocent parties.” The rule of estoppel is often applied to prevent undue advantage by one person over another, but the rule does not extend to contracts which are void because contravening public policy. Considering the opinion as an entirety, we do not regard it as authority to the proposition, that an agreement which provides for a separation of the right to vote from the holder of the stock is “per se,” at all times and under all circumstances contrary to public policy and void. We have ex-s amined case after case and find generally that the agreements declared void by the courts, where the power to vote was separated from the stockholder and vested in third persons, were under/ circumstances which showed that the purpose to be accomplished was unlawful, such as the courts would not sanction if the principal had voted and not a proxy; and in cases of a mere dry trust, it is held that the stockholder might revoke a power of attorney in form irrevocable. The doctrine as to dry trust does not arise in this case. Certainly the case of Griffith v. Jewett, 15 Weekly Law Bulletin, 419, or of Moses v. Scott, 84 Ala. 608, do not sustain complainants’ contention in this respect. If there were no precedents, upon principle, we would hold that in determining the validity of an agreement, which provides for the vesting of the voting power in a person other than the stockholder, regard should be had to the condition of the parties, the purpose to be accomplished, the consideration of the undertaking, interest which have been surrendered, rights acquired, and the consequences to result. The law does not make contracts for parties, neither will it annul them except to preserve its own majesty, and to conserve the greater interest of the public. Let us examine the eon119 clitions of the parties, tbe purpose in view and effect of the agreement of 1876, consummated in 1879, the consideration' and interest surrendered and rights acquired by the re-adjustment, and issue of the debentures, the position of the * complainants thereto, and the results of holding that reorganization, per se, void. The complainants belong to the class known as “Assenting Stockholders.” They surrendered their stock to the committee of reorganization in order that the power of attorney, executed to the trust company by the committee of reorganization, might be executed, and that the debentures should be issued to the creditors of the railroad corporation. The certificates of stock held by them show, upon their face, that they are subject to the power of attorney and to the rights of the debenture-holders. At the time the plan of adjustment was agreed upon the railroad company was in the hands of a receiver. Decrees of foreclosure rendered against the company. The indebtedness far exceeded the value of the railroad company’s property. The execution of the decrees of foreclosure, by a sale of the property, and the prosecutions of the admitted claims against the railroad company, would necessarily have transferred the property to other parties and wiped out every vestige of present available interest or right of the stockholder, or hope of future profit. The creditors held the vantage ground, and in law their rights and interest were paramount to the stockholders. The latter might accept propositions but were in no position to dictate terms. These were the circumstances under which the settlement and agreement was made. Stated in short, the compromise and settlement led to the issue of the debentures to the creditors in lieu of their original evidences of debt, and a mortgage upon certain property to secure them, a plan for a sinking fund for their benefit, and the right and privilege under an irrevocable power of attorney to vote the stock until the debentures luere paid. The power of attorney was not in perpetuity, or absolute, but only until the debentures were paid, and a fair construction under the circumstances required that the voting power should be used fairly and honestly to this end, or as stated in the agreement itself, “for the uses and purposes declared in said memorandum, and until the same are fully accomplished.” In consideration therefor.the decrees of foreclosure at first suspended, were transferred to the trust company, creditors surrendered their claims and accepted in lieu thereof the debentures, the receiver under the orders of the court restored, the property to the Mobile & — 120 — Ohio Bailroad Co., wbicb resumed management and control •of its property and affairs, and the stock preserved to the stockholder. To this agreement over forty-five thousand out .of a total of about fifty-three thousand of shares of stock assented, and among those which assented were complainant^. The creditors had the right to accept debentures for their debts. The agreement continued in existence the corporation and preserved to the stockholders their stock. It did • not violate the charter of the railroad corporation. The purpose was legal, the means used did not contravene any statute of the State or principle of public policy, and was within the scope of the power of the contracting parties-, (xuod faith on the part of the assenting stockholders,'whose interest were thus preserved, and to those who accepted the debentures in lieu of other evidences of debt and securities, and to those who have since purchased them upon the faith of the plan of compromise demand that the terms of the contract be fulfilled. Tested by any principle of law, legal or equitable, the agreement was not'only valid luit fair at least to the corporation company and stockholders. The next question for consideration arises upon the agreement made in 1887-8, under which 10,500,000 bonds were issued and a general mortgage executed to secure them. The averments of the bill show that all the debentures not absorbed by the sinking fund, except 64,000, were surrendered and general mortgage bonds accepted in lieu of them. It is contended by complainants that the acceptance of these general mortgage bonds, extinguished, pro tanto, the debentures issued under the settlement of 1876 and 1879, and as there were left only 64,000 of the debentures not exchanged for the bonds, complainants had the right to pay off and extinguish the 64,000 outstanding debentures, and thereby, under the original agreement, become reinvested with the voting power conveyed for the benefit of the debenture holders. The correctness of the conclusion, by the agreement, is made to rest upon the soundness of the premises. Did the acceptance of the bonds and the surrender of the debentures, in law under the conditions operate an extin-guishment of the debentures? The bonds exchanged for debentures, in a different form, and with some additional and different securities, represented the same debt as the debentures for which they were exchanged. "Whether therefore the debentures were extinguished by the acceptance of the bonds, depends entirely upon the intention of the par — 121 — ties as manifested by tbe agreement itself, tbe stipulations of tbe bonds and provision of tbe general mortgage. Tliese have -been sufficiently stated in another part of this opinion, and need not be here repeated at length. Can any' fair construction be placed upon-the written evidence, of tbe intention of tbe parties, so carefully and fully expressed, in tbe agreement, tbe bonds, and tbe mortgage, which would justify tbe conclusion that it was understood and intended by tbe parties that tbe surrender of tbe debenture and tbe acceptance of tbe four percent, bonds was intended to effect a payment or extinguishment of tbe debenture? It would bave been a very easy and simple matter to have inserted a provision to this effect in tbe contract. Instead of doing this, tbe contracting parties stipulated 2nd “that tbe lien of tbe debentures deposited with the trustee of tbe new mortgage shall be maintained for tbe security and benefit of tbe bonds issued under said new mortgage.” 3rd. “That tbe sinking fund under tbe debenture deed of trust shall be continued and maintained until all tbe debentures not held by tbe sinking fund, shall be deposited with tbe trustee of tbe general mortgage,” &c. 4th. “That in case tbe holders of tbe new bonds issued under tbe general mortgage shall desire to dispose of their holdings to tbe trustees of the sinking-fund, who may ask for tenders of debentures as provided in tbe debenture deed of trust, such bolder may for that purpose obtain from tbe trustee of tbe general mortgage in exchange for tbe new bonds dollar for dollar, tbe debentures called.” Tbe 7th paragraph of tbe general mortgage which has 'been fully stated, is particularly referred to in this connection, and other provisions might be cited, but it is clear, that these could not be carried out, if tbe acceptance of tbe bond operated an extinguishment of tbe debentures. The case of Billingsley v. Harrell, 11 Ala. 777, cited by complainants, is wholly unlike tbe present. In that case there was no reference in tbe second mortgage to the first mortgage and in tbe statement of facts, it is said “at tbe time of tbe execution of this deed there was no understanding or agreement between tbe parties as to what was to be its effect on tbe bill of sale (which was a mortgage) previously made to Becton.” By tbe express terms of tbe agreement and mortgage in tbe case at bar, tbe debentures and tbe provisions and securities for their payment, were to be kept alive. Had these four per cent, bonds been issued and secured by a general mortgage of tbe property of tbe railroad corporation and simply provided for their exchange for tbe debentures, surrendered in lieu thereof, — 122 — tlie doctrine of novation or payment of the debentures might be ur^ed with more plausibility and force. We know of no decision or text, which has ever declared that the doctrine ’of novation applied, or that a previous contract of indebtedness was extinguished by a subsequent contract, when by the terms of the latter and as a part of its consideration, the former with its securities were to be kept alive and continued in force for the “security and benefit” of the latter, there being no question of suretyship involved. To apply these principles in the face of the carefully guarded provision for keeping the debentures alive, the preservation of the feeders to the sinking fund, and securing to the bondholder, the privilege to exchange his bond for the debenture, thus preserved, would be to apply principles of law and an effect, not authorized by the agreement, and at variance with the intention of the parties- so clearly and unmistakably and carefully expressed and provided in the agreement itself. Lee v. Green, 83 Ala. 492-3; Keel v. Larkin, 72 Ala. 500; McDonnell v. Gold Life Ins. Co., 85 Ala. 401. The bill of complaint does not seek to annul and cancel the four per cent, bonds. It declares that they are valid. The whole argument in reference to the extinguishment of the debentures and the right to tender payment of the 64,000 outstanding debentures, rest upon the validity of these bonds. We simply declare that.the issue of the bonds and their acceptance by the debenture holders, under the conditions and terms specified did not effect an extinguishment of the debentures. If the bill had charged that .the proxy of the stockholders, held by the trust company, and the power of the debenture holders, to vote had been used for other purposes, than that authorized by the power of attorney and agreement made in 1879, in the issuance of the four per cent, bonds, and execution of the general mortgage and in the authority granted to the holders of these bonds to vote, and had prayed for a cancellation of the four per cent, bonds, and the mortgage to secure them, a different case and different questions would arise. Whether there was an abuse of the trust, or the authority granted, was exceeded in the issue of the general mortgage bond, and if so whether there had been a ratification of such acquiescence or laches on the part of complainants as to estop them from seeking relief from the obligations entered into for their issue and security, are not raised by the demurrer to the bill, and are not necessarily involved in the questions upon which complainants seek relief. These questions have been discussed by some of the counsel at length, but as their de123 cisión is not necessary, we express no opinion upon them. Any decision affecting the validity of the four per cent, general mortgage bonds would not lead to a différent conclusion., If declared null and void, as having been issued without proper authority, such a decision necessarily asserts the non-extinguishment of the debentures. A void obligation can not pay or extinguish a valid obligation, or in any sense be accepted as a novation of a previous valid agreement. If the bonds should be declared valid, either as having been legally issued, or as having become obligatory by ratification or acquiescence, or should be upheld upon principles of equitable estoppel, we have seen that the debentures, and sinking fund were expressly kept alive and enforceable for the “benefit and security” of the general mortgage bonds. It is contended in the next place that the agreement by which the stockholder parted with his voting power, created, the relation of surety and creditor between the stockholder and debenture holder, and “that the voting trust has been terminated by the extension and enlargement of the debt, and by the substantial modification of the terms upon which the voting franchise was to be exercised.” Many authorities have been cited to sustain the proposition, that any extension of the time of payment by tire creditor and principal debtor, or material modification of the contract, without the assent of the surety, will release the surety and this without regard to the fact, as to whether the extension, or modification was to the benefit or injury of the surety. Authorities have also been cited, to the effect, that property pledged or conveyed by a third person as security for a debt, would be released, by any agreement between the debtor and creditor which would release a surety. We think these propositions undeniably correct. The difficulty lies in sustaining the premise for the argument. Did the agreement of 1876 and 1879, and the execution of the power of attorney by the stockholders to the reorganization committee constitute the stockholders sureties for the railroad company, the corporation in which they held their stock? or was the “voting power,” vested in the trust company, property in such sort, as that a modi-cation of the contract of 1876 and 1879, discharged and released it, so that it became re-invested in the stockholder? Can a stockholder as such, not as an individual, but as a stockholder, purely, become a surety for the debt of the corporation ? What property has a stockholder as such, of money value, that is not liable for the debts of the corporation ? The capital stock of the corporation, the fountain — 124 — of life to the shareholder, is a fund specially set apart by law for creditors. Neither the capital stock, nor any asset of the corporation could be pledged as surety for tile debt of the corporation; and we can not well see how the “voting power,” the means provided by law, to control corporate affairs for the protection of these interests, can be pledged as a surety for a debt, for which these interests could not be pledged as surety. Eor many purposes, and especially in a court of equity, for the protection of the stockholder, the corporate entity is distinct and separate from the stockholder. They may contract with each other, and the one may be sued by the other. Rut the stockholders and the corporation are not separate entities for all purposes. Morawetz says: “While a corporation may, from one point of view, be considered as an entity without regard to the corporators who compose it, the fact remains self evident that a corporation is not in reality a person ox a thing distinct from its constituent parts. The word corporation is but a collective name for the cor-porators or members who compose an incorporated association; and where it is said that a corporation is itself a person, or being or creature, this must be understood in a figurative sense only.” Ib. § .227. “A clear perception of the real nature and constitution of an incorporated association is of the utmost importance in considering the rights and obligations of the individual shareholders, and their relation to the association as a body. It is especially necessary that the legal fiction by which a corporation is regarded as a person, or entity apart from its several members, be correctly understood and applied. The statement that a corporation is an artificial person, or entity apart from its members, is merely a description in figurative language of a corporation viewed as a collective body; a corporation is really an association of persons, and no judicial dictum or legislative enactment can alter this fact.” The same author in §-879 uses this language: “It has sometimes been said, that the individual liability assumed by the shareholders of a corporation for the security of creditors, is that of guarantors or sureties of the corporation. Statements of this character must always be considered with reference to the particular subject-matter to which they are applied. It is a truth which no legislative act or judicial decision can alter, that a corporation consists of its shareholders, and that when shareholders become individually — 125 — liable for tbe debts of tbeir corporation, they become individually liable for tbe debts wbicb tbey themselves owe in a corporate capacity. This individual liability, may be, in some respects, similar to tbat-of suretyship, but it is certain that the shareholders are not in fact sureties within the accepted meaning of that term. To hold that, because shareholders are called sureties within a special meaning of that term, their liability must be governed by the principles of ordinary suretyship, would clearly be illogical.” We have quoted from this author extensively, not only because his work on Private Corporations is entitled to great consideration, but we approve of his definition of a “corporation” — that “it is but a collective name for the corpora-tors, or members who compose an incorporated association” —it “is really an association of persons.” This definition kept clearly in view, will prevent confusion, and enable the courts to apply proper principles of law to transactions entered into by the corporation in its corporate name, by shareholders as such, and by the shareholder in his individual capacity, and to distinguish their respective liabilities. The charter defines the purposes of the corporation and prescribes its duties and powers, and those of the members of the association, or stockholders. The legislature may also impose upon each stockholder an individual liability in favor of the creditors of the corporation. The individual liability when thus imposed, has been held by some of the courts to be that of a surety, and any extension of time for its payment by the creditor, to operate a release of the in-individual liability of the stockholder. The weight of authority on this question seems to hold to the contrary. Many authorities-for and against the proposition, are collected in the case of Thompson v. Reeves, 3 Am. St. Rep., notes, page 848-849. Taylor on Corporations, § 715, says : “That it is not the liability of guarantors, seems too evident to require argument. Suretyship is a legal institution, composed of peculiar rules, based on the general notion that a surety is a man conferring a benefit and receiving none in return.” We have already quoted Morawetz, and criticis-ing the doctrine that, time given to the corporation by its creditor would release the stockholder from individual liability imposed by the statute, this author says : “ If the court had borne in mind that the indulgence given to the corporation was, in fact, given to the shareholders themselves, acting in a corporate capacity, through agents of their own appointment, a different conclusion would probably have been reached. In this sense, the debt of the corpora — 126 — tion is tbe debt of tbe “members of tbe incorporated association.” Acting collectively by tbeir corporate name, tboy could not become surety for tbe corporate debt. It would be absurd to bold that acting separately, but still as members of tbe association, a different result would be effected. We are clearly of tbe opinion, that by tbe agreement and compromise of 1876 and 1879, tbe stockholders did not become bound as sureties for tbe Mobile & Ohio Railroad Company. We tbink another principle of law equally fatal to complainant’s contention in this respect. A surety is one who “contracts to answer for tbe debt, default or miscarriage of another“an obligation accessorial to that of a principal debtor,”' but tbe relation of surety does not exist where the consideration moves directly to or from tbe person claiming tbe privilege of a surety. As Mr. Taylor says, supra, “The peculiar rules of suretyship are based on tbe general notion that a surety is a man conferring a benefit and receiving none in return.” Who were tbe beneficiaries under tbe compromise and adjustment of 1876 and 1879, by which tbe foreclosure decrees were suspended and tbe property restored to tbe railroad company, and tbe stock preserved to tbe shareholder ? Complainants contend that tbe Mobile & Ohio R. R. Co. was tbe debtor and beneficiary. But it is too clear for argument, that tbe benefit to tbe Mobile & Ohio Railroad Company was a direct and intended benefit for tbe members of tbe associatien incorporated by that name, and who were tbe stockholders, now claiming to be sureties. Tbe stockholders were not only tbe immediate beneficiaries under tbe plan of compromise, but so far as tbe creditors demanded tbe surrender of tbe “yoting power” tbe stockholders were principals to that agreement and tbe only parties who could make a valid agreement, to this effect. In so far as tbe vesting of tbe “voting power” in tbe Trust Company was an act, which tbe corporation in its corporate name could not do, but which could be done and was done, by tbe stockholders, it was for a consideration directly in the interest of tbe stockholders forming tbe association incorporated. In this respect and for this purpose (tbe benefit to be derived) tbe “members of tbe association” constituted tbe corporation, and acting for themselves and in tbeir own several capacities as stockholders, they were necessarily principals to tbe agreement. At common-law, a stockholder was such an interested party in, or such a part of tbe corporation as to disqualify him from being a witness for tbe corporation. Tbe question may be asked, if tbe stockholder can thus contract as principal, independent of tbe .corpora — 127 — tion, wby can lie not become surety for tbe corporation ? If we keep in -view tbe definition of a corporation adopted by us as being correct, tbe answer is plain. As a “member of tbe incorporated associatien,” tbe debt of tbe corporation is bis debt so far as be is a stockholder, and being sucb, be can not, as a stockholder, become its surety. As a stockholder (and not as an individual) be is invested with a “voting power,” which be can use independent of tbe corporate body. Tbe corporation in its corporate name bolds property, which, under proper authority, it may mortgage or pledge to secure its debt. Tbe making of the mortgage or pledge to secure its own debt, can not change its relation as principal debtor to that of surety. Tbe stockholder in bis corporate capacity and in this alone, bolds a “voting power.” As a stockholder be may surrender bis voting power, upon proper consideration and for a proper purpose, to secure the debt of tbe corporation, which, as a member of tbe corporate association, is bis debt. He does not thereby change bis relation as principal debtor to that of surety, no more than tbe corporate body itself, by giving a mortgage. Of course these principles of law would have no application, if tbe stockholder acting in bis individual capacity should mortgage or pledge bis individual property, and not a corporate right or property held by him in bis corporate capacity as stockholder. All corporate rights and property of money value, the subject of contract, whether held in tbe name of tbe corporation, or by tbe shareholder, is liable, without a special contract to that effect, to tbe claims of creditors of tbe corporation, and no contract between tbe corporation, or stockholder, or corporation and stockholder on tbe one part, and a creditor of tbe corporation on tbe other part, by which sucb property or sucb right Í3 pledged or transferred, to secure a debt of tbe corporation, can be regarded in law a contract of mere suretyship in tbe sense that a modification of tbe contract of indebtedness, will wholly release tbe pledge or transfer. In all sucb cases, there is that entity of parties and oneness or community of beneficial interest, of the corporation and stockholder, which excludes tbe relation of principal and surety, as to creditors of tbe corporation they are principals to sucb a contract. Tbe agreement was simply this: To preserve bis own property interest owned as a stockholder, from sale by tbe creditor of tbe corporation, tbe stockholder agreed that tbe creditor should manage and control tbe corporate affairs until tbe debt was paid. What ingredient of suretyship is there involved in such an — 128 — agreement? There is no undertaking by the stockholder to pay the debt, if a principal does not pay it. There is no pledge of property which is to be or may be subjected to the payment of the debt, if the principal fails to pay. These are necessary elements in every obligation of suretyship, and if wanting the contract can not be that of a surety. The object of the agreement was to preserve the interest of the stockholder. It moved directly to him. The relation of surety does not exist when the party contracting is the direct beneficiary and the contract is entered into by him for his own benefit. The creditor may be restrained from any unlawful use of property or privileges conveyed by the agreement, or held responsible for any damage or injury wrongfully sustained by the grantors, but the property or right pledged, or transferred, will not revert to the grantor, there being no provision in the agreement to that effect. Our conclusion is, the original bill is without equity, and the injunction granted thereon ought to have been dissolved. Under this view of the case, it becomes unnecessary to determine whether the city judge had the power to modify the order granting the writ of injunction before it was executed and returned into the chancery court. The decree dissolving the injunction and dismissing the bill for want of equity will relate back and take effect so as to place the parties in statu quo before the bill was filed, as to any election held under the order granting the writ of injunction, or in violation of the order as modified by the city court judge. We deem it, therefore, unnecessary, to consider the questions presented in the cross bill. Judges invested with the power to grant writs of injunction, should examine with great care the merits of the application, when a mandatory injunction or restraining order is applied for. In the case at bar, two days before the election for directors, the voting power was taken from those who had been exercising this right for thirteen years, and without notice to them, was transferred to others, whose right to vote was denied, upon the averments of a bill, the very purpose of which was to determine the rights of the respective parties in this respect. In effect the case was predetermined, before a hearing and without notice. A decree will be here rendered dissolving the injunction granted upon the original bill, and dismissing the original bill for want of equity. A decree will also be rendered modifying the decree, dismiss — 129 — ing tbe cross bill absolutely, so tbat tbe same shall stand dismissed but without prejudice. Original bill reversed and rendered. Cross bill modified and affirmed.