danger that they will willingly incur the serious reprobation of public opinion. And it has sometimes been doubted whether contracts, whereby one railway company seeks to assume the entire business of other companies, affording them a guaranty in regard to stock and profits, or either, could be regarded as coming within the fair interpretation of the English general statutes, allowing one company to contract for running upon the track of other companies, for tolls, and so could be held valid by the courts of that country, either in law or equity.2 But some of the later cases seem to sustain such contracts.3

2. There is no principle of public policy which renders void a traffic arrangement between two lines of railway for the purpose of avoiding competition. And if the arrangement embrace the division of the net earnings of both companies in certain definite proportions, the court will not interfere upon the ground that one company may not adventure its profits upon the chances of the earnings of another company. And it is no valid objection that such division is based upon the experience of the result of past traffic.1

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SECTION VI.

What is requisite to constitute a perpetual Contract between different Railway Companies.

1. Railway connections commonly temporary. 2. The matter is one mainly of public conven

ience and so subject to legislative control.

§ 147. 1. Where in the charter of a railway company a right is reserved to the legislature to allow other railways to connect with the former, upon such terms as shall be reasonable, complying with the established regulations of such company upon the subject, and in pursuance of such reservation a junction is made by a second railway company with the first, which, in faith *of such connection, proceeds to make expensive and permanent arrangements for the accommodation of the enlarged business thus brought upon its track, it was held, that this imposed no

2 Simpson v. Denison, 10 Hare, 51; s. c. 13 Eng. L. & Eq. 359. 3 Ante, § 142.

4 Hare v. London & N. W. Railw., 2 Johns. & H. 80; s. c. 7 Jur. N. S. 1145; post, § 148.

obligation upon the second company to continue this connection permanently. And also that the second company might lawfully obtain an extension of their own road, so as to do their own business, without continuing the connection.1

2. It seems that ordinarily a mere legislative permission to railway companies to connect their lines imposes no obligation upon either company to do so. And if that were to be so regarded, it is certain that no absolute vested right to insist upon the permanency of such connection could exist in either company, which it would not be competent for the legislature to dissolve. After the connection is made, it is optional with either party to discontinue it, and clearly so by legislative permission. Even after such connection is made, it is not incumbent upon either company to continue the same gauge, or if so, such right cannot by possibility exist until the connection is made, and if, before that, either company, by legislative act, is relieved from all obligation. to connect, this will terminate all possible claim on the part of the other.2

§ 148. 1. It has been considered, that a contract by a railway company with the corporation of a city, by which the company bind themselves to erect a bridge and other accessory works across a river, at a point where, by their charter, they are not authorized to pass, and to do this by a definite time, and in default to pay one thousand pounds, as liquidated damages, 1 Boston & Lowell Railw. v. The Boston & Maine Railw., 5 Cush. 375. Androscoggin & Kennebec Railw. v. Androscoggin Railw., 52 Me. 417.

2

such works being, without an act of parliament, a nuisance, is an illegal contract, and equally so notwithstanding a stipulation that the company shall in the mean time exert themselves to obtain an act authorizing the erections.1

2. And where the chairman of the Southeastern Railway Company promised the managing committee of a proposed railway company, that in consideration of their not abandoning their project, but pursuing it in parliament, the Southeastern *Railway Company would, in case of their bill being rejected, insure the company, of which they were the managing committee, against all loss, and would pay all expenses incurred by them in endeavoring to obtain the act; and the Southeastern Railway Company were authorized, by their acts, to apply their funds in certain ways, not including this: it was held 2 that the agreement was void, as it was an agreement made by contracting parties (who must be presumed to know the powers of the defendants' company, by their acts of parliament, which are public acts) that the company should do an act which was illegal, contrary to public policy and the provisions of the statutes.3

3. And a contract by which one railway agrees to give up to another railway a part of its profits, in consideration of securing a portion of the profits of the other company, is illegal, and ultra vires.a

The Mayor of Norwich v. The Norfolk Railw., 4 El. & Bl. 397; s. c. 30 Eng. L. & Eq. 120.

2 McGregor v. The Official Manager of the Deal & Dover Railw., 16 Eng. L. & Eq. 180, in Exchequer Chamber; s. c. 18 Q. B. 618. See also East Anglian Railways Co. v. Eastern Counties Railw., 11 C. B. 775; s. c. 7 Eng. L. & Eq. 505, where the same question, in effect, is determined. Ante, § 16.

3 Ante, § 56, n. 3.

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Shrewsbury & Birmingham Railw. v. London & Northwestern Railw., 6 House of Lords, 113; s. c. 29 Law Times, 186. But one company may lawfully accept the lease of an unfinished railway under a specified rent yearly after the same is finished, and may stipulate for the payment in advance of the rent for the whole term for the purpose of constructing the road; and this will be no infringement of the statute allowing the connection of the two roads, upon condition the first company shall not expend any portion of its reserved funds for the construction of the other road. This looks very much like one company building the road of the other out of its own funds, surplus or borrowed, for the use of such road a certain number of years. If so, it is converting surplus into capital without legal warrant. The case is so near the dividing line between what is and what is not justifiable as not to be of much authority, for general adoption, by those who desire to protect an existing company against expending its funds in extending its line. It is one of those cases which relucts, at declar

4. The rule laid down upon this subject by a distinguished English judge, on a recent occasion in the House of Lords,5 is perhaps as fair and full a definition of the doctrine as can be made. "There can be no doubt that a corporation is fully capable of binding itself by any contract under its common seal in England, and without it in Scotland, except where the statutes by which it is located or regulated expressly or by necessary implication prohibits such contracts between the parties. Prima facie all its contracts are valid, it lies on those who impeach any contract to make out that it is avoided. This is the doctrine of ultra vires, and it is no doubt sound law, though the application of it to the facts of each particular case has not always been satisfactory to my mind.". His lordship here declares that it would not be ultra vires for a company wishing to alter one of its branches, and about to apply to parliament for authority to do so, to enter *into a contract for land which would be necessary for the purpose if they should obtain the act.

5. The question how far a railway company, without special grant of power for that purpose, may accept bills of exchange, is very carefully examined and thoroughly discussed, both by court and counsel, in a recent English case. It seems to be there * coning the bona fide acts of corporations ultra vires, where no great harm to any one is expected to ensue, and the public interest has been materially subserved. Durfee v. Old Colony & Fall River Railw. 5 Allen, 230.

5 Lord Wensleydale, in the Scottish Northeastern Railw. Company v. Stewart, 3 McQu. Ho. Lds. 382; s. c. 5 Jur. N. S. 607.

Bateman v. Mid-Wales Railw. Company, Law Rep. 1 C. P. 499; s. c. 12 Jur. N. S. 453. The language of Crompton, J., in Chambers v. Manchester & Milford Railw. Co., 5 B. & S. 588; s. c. 10 Jur. N. S. 700, seems to place the question upon its true basis.

"The law as laid down by Parke, B., in the South Yorkshire Railw. & River Dun Company v. The Great Northern Railw. Company, does not appear to be questioned, and seems to be applicable to the present case. ' Corporations, which are creations of the law, are, when the seal is properly affixed, bound just as individuals are by their own contracts, and as much as all the members of a partnership would be by contract in which all concurred.' This is undoubtedly true of corporations generally; but as Mr. Lush has observed, railway corporations are the creatures of an act of parliament; and the question is, how far provision has been made for conferring upon them borrowing powers, which are said to have been exercised in the present case. 'But,' proceeds Parke, B., where a corporation is created by act of parliament for particular purposes, with special powers, then indeed another question arises; their deed, though under their corporate seal, and that regularly affixed, does not bind them, if it appear

sidered, that unless the corporation is a trading company, as the Bank of England or the East India Company, there is no presumptive power to accept bills of exchange. In the case of railway corporations, created for a special purpose, there is no presumptive power either to borrow money, or to issue or accept bills of exchange for the purpose of negotiation in the market. The rule is thus stated by one of the judges in the case last cited, speaking of trading corporations. "Such a corporation may, in some cases, bind itself by promissory notes and bills of exchange. ... But a corporation will not have these extraordinary powers, unless the nature of the business in which it is engaged raises a necessary implication of their existence.”

6. Contracts ultra vires, entered into by the directors, and which are not binding upon the company, cannot be specifically enforced against the directors, nor can the directors be decreed by the court to make good their representations.7

7. A corporation having no power to lend, made a loan to a company having no power to borrow. The borrowers were aware of those facts. They bought a canal with the money; but that

by the express provisions of the statute creating the corporation, or by necessary and reasonable inference from its enactments, that the deed was ultra vires,that is, that the legislature meant that such a deed should not be made.' This, as it appears to me, touches the very question before us, and, moreover, seems to convey the notion that directors of a railway company are of the nature of special rather than general agents of the company they represent. They have the custody of the seal of the company, but they have not the power to affix it to instruments which the legislature has declared to be ultra vires; and should this be done, the company are not bound." . . .

"These bonds, therefore, seem in effect to amount to an account stated, and a promise to pay, under seal; and, so long as they are used for the purpose for which they were originally intended, it may be that there is nothing objectionable in them. But here the bonds are issued by the directors for the purpose of raising money to discharge liabilities into which the plaintiff has entered on behalf of the company, of which he was chairman; and this is, to say the least of it, an indirect mode of borrowing, and beyond the powers conferred upon the company under their act. The point was also put to us upon the argument whether the prohibition to borrow was to be held to extend to the raising of small sums for the immediate necessities of a newly started company; and to this, we think, it was well answered, that if once a company be permitted to overdraw one hundred pounds, there would be no impediment to their doing so to any extent to which their credit would reach. I am therefore of opinion that these bonds are void, and that the plaintiff is not entitled to recover upon them."

7 Ellis v. Coleman, 25 Barb. 662.