vertible at the option of the holder, at any time within five years, into common stock of the company at par. The company paid interest on those bonds to May 1, 1865.

On May 29, 1865, no lien of any kind then existing in favor of the equipment bonds, the Toledo & Wabash R. Co., and three railroad corporations incorporated by the States of Indiana and Illinois, whose roads formed a continuous line from Toledo to the Mississippi river, entered into an agreement to consolidate the railroads, property and capital stock, and to become one corporation under the name of the Toledo, Wabash & Western R. Co., with a capital stock of $15,000,000, "upon the basis and conditions hereinafter to be specified," the material parts of which were as

follows:

"The Toledo & Wabash R. Co. enters into said consolidation on the following basis, viz.: Its capital is $10,000,000 composed as follows: first mortgage bonds, $3,400,000; second mortgage bonds, $2,500,000; convertible equipment bonds, $600,000; convertible preferred stock, $1,000,000; common stock, $2,500,000."

The basis on which each of the three other corporations "enters into said consolidation" was then set forth in like manner, by which the capital of the three together appeared to be $8,486,000, composed of mortgage bonds, $5,800,000; and stock $2,686,000; and one of those corporations assigned to the consolidated company certain mortgage bonds, and agreed to pay to it in cash the sum of $780,300, required to place its road in equal condition with the Toledo & Wabash R.

"It is further agreed that the bonds and other debts hereinabove specified, in the manner and to the extent specified, and not otherwise provided for in this agreement, shall, as to the principal and interest thereof, as the same shall respectively fall due, be protected by the said consolidated company, according to the true meaning: and effect of the instruments or bonds by which such indebtedness of the several consolidating companies may be evidenced.

"The directors shall have power to issue any other and further bonds of said corporation to such an amount that the indebtedness of the consolidated company at any time shall not exceed the amount of the capital stock authorized by this agreement, and they may secure the bonds so issued by mortgage or other lien on the property of the consolidated company, or any specified part thereof."

The agreement of consolidation was ratified by the directors and stockholders of all the companies, and the stockholders of the old companies became stockholders in the new one; and this company. came into possession of all the railroads and property of the four old companies, and received and distributed the earnings.

On February 1, 1867, the consolidated company execnted to trustees a mortgage of all its railroads, property, and franchises, to

secure bonds to be issued by it, to the amount of $15,000,000, payable in forty years, with interest at the yearly rate of seven per cent, and convertible at the option of the holders, at any time within ten years, into common stock of the company at par. The mortgage recited the consolidation, and also contained the following recitals:

Whereas at the time of such consolidation the property of said various companies was subject to certain bonded debts, and the mortgages created by said several companies, or by other railroad corporations which, at the time of the creation of said debts and mortgages, were the owners of the property so consolidated; and whereas all the bonded debt of said company, party of the first part, including that secured by said mortgages as well as that not secured by any mortgage, now amounts in the aggregate to the sum of $13,300,000, besides interest; and whereas said bonded debt, as it now exists, is represented and made up as follows, viz." Then followed a statement of the various classes of mortgage bonds, above mentioned, amounting in all to $11,700,000; the equipment bonds, $600,000; and bonds issued by the consolidated company, due April 1, 1871, $1,000,000; and the last two classes described as not secured by any mortgage.

"And whereas it has been deemed for the interest of the said party of the first part, as well as for the benefit of the holders of all said various classes of bonds, that the whole of the same should be consolidated into one and the same mortgage debt, upon equitable principles; and whereas the increasing freight business of the road of the party of the first part requires additional equipments to do the same; and whereas it has been deemed expedient for the preservation of the bridges on the line of said road that the same should be covered, and that additional depot accommodations should be obtained, and that the road through its entire length should be fenced; and whereas the expenses to be incurred for the above should be provided for by the creation of new capital; and whereas for the purposes aforesaid, and for the objects herein stated, the said company, party of the first part, has resolved to make and issue its bonds to the extent of $15,000,000, and to secure the payment of the same by a mortgage upon its entire property; and that of the amount of said bonds to be made and issued thereon should be retained $13,300,000 to retire, in such manner and upon such terms as the directors of said company may from time to time prescribe, a like amount of the bonds of the various companies hereinabove enumerated and described, and representing the aforesaid bonded debt; and that the balance of said bonds, to wit, $1,700,000 thereof, should be used to provide the said additional equipment and other improvements, hereinabove mentioned, and for such additional purposes as the said directors may deem advisable."

Bonds to the amount of $2,700,000 only were issued under that mortgage; $1,700,000 for money borrowed, and $1,000,000 to retire the bonds of the consolidated company that became due April 1, 1871.

The consolidated company paid the interest on the equipment bonds until November 1, 1874, after which no payment was made of interest thereon.

On April 1, 1873, the consolidated company executed to the trustees under the mortgage of February 1, 1867, and in order "to give assurance to all persons whom it may in any wise concern, that the said reserved bonds shall not, nor shall any or either of them, be used for any other purpose than the retiring of the said funded debt in some part thereof," a supplemental agreement, by which it covenanted with the trustees, and with all such parties, that it would not "make or issue, or attempt to make or issue, any of the remaining $12,300,000 aforesaid bonds secured by the said indenture of mortgage, except for the purpose of, and subse-. quent to or simultaneously with, the retiring of an equal amount of the balance remaining of the said funded debt."

On February 1, 1873, two months before the execution of the agreement of further assurance, the consolidated company made another mortgage to secure other bonds to be issued by the company to the amount of $5,000,000, payable in gold. Default having been made in the payment of interest on bonds so issued, proceedings for the foreclosure of that mortgage were instituted and a receiver appointed on February 22, 1875; and a decree was afterwards entered for the sale of the railroad, franchises, and other property of the company, subject to the liens of all earlier mortgages, and without prejudice to any claim that might be made by the holders of the equipment bonds. Under that decree the property was sold and conveyed to the purchasers, who afterwards became the Wabash, St. Louis & Pacific R. Co., the appellant in this

case.

None of the equipment bonds were ever exchanged for bonds under the mortgage of 1867, nor did any holders of equipment bonds demand an exchange until after May 1, 1875.

The statute of Ohio of April 10, 1856, in force at the time of the issue of the equipment bonds and of the consolidation in question, by § 1, made it lawful for any railroad company in Ohio to consolidate its capital stock with the capital stock of any railroad in an adjoining State, whenever their roads united so as to form a continuous line; by § 2, provided that the consolidation should be made by agreement of the directors of each company, "prescribing the terms and conditions thereof," and that such agreement, when ratified by the stockholders, should "be deemed and taken to be the agreement and act of consolidation of said companies;"> and also contained the following provisions:

"SEC. 3. Upon the making and perfecting the agreement and act, as provided in the preceding section, and filing the same, or a copy, with the Secretary of State, the several corporations, parties thereto, shall be deemed and taken to be one corporation, possessing within this State all the rights, privileges, and franchises, and subject to all the restrictions, disabilities, and duties, of such cor poration of this State so consolidated."

"SEC. 5. Upon the election of the first board of directors of the corporation created by said agreement of consolidation and by the provisions of this act, all and singular the rights, privileges, and franchises of each of said corporations, parties to the same, and all the property, real, personal, and mixed, and debts due on account of subscriptions of stock or other things in action, shall be deemed to be transferred and vested in such new corporation without further act or deed; and all property, all rights of way, and all other interests shall be as effectually the property of the new corporation as they were of the former corporations, parties to said agreement; and the title to real estate, either by deed, gift, grant, or by appropriations under the laws of this State, shall not be deemed to revert or be impaired by reason of this act. Provided that all rights of creditors, and all liens upon the property of either of said corporations, shall be preserved unimpaired, and the respective corporations may be deemed to be in existence to preserve the same; and all debts, liabilities, and duties of either of said companies shall henceforth attach to said new corporation and be enforced against it to the same extent as if said debts, liabilities, and duties had been contracted by it."

"SEC. 7. Suits may be brought and maintained against such new company in the courts of this State for all causes of action in the same manner as against other railroad companies in this State." 1 Swan & Critchfield's Statutes, 327, 328.

The statute of Indiana in force at the same time, upon the subject of consolidation, was as follows:

"Any railroad company heretofore organized under the general or special laws of this State shall have the power to intersect, join, and unite their railroad with any other railroad constructed or in progress of construction in this State, or in any adjoining State, at such point on the State line, or at any other point, as may be mutually agreed upon by said companies; and such railroad companies are authorized to merge and consolidate the stock of the respective companies making one joint-stock company of the two railroads thus connected, upon such terms as may be by them mutually agreed upon, in accordance with the laws of the adjoining State with whose road or roads connections are thus formed: provided their charters authorize said railroads to go to the State line, or to such point of intersection." Stat. February 23, 1853, $1; 1 Gavin & Hord's Statutes, 526.

The only provision of the statutes of Illinois, cited in argument, was the provision that "such consolidation may take place whenever the said companies shall respectively agree upon the terms and conditions of the same." Stat. February 28, 1854, ch. 9, § 2; 1 Gross's Statutes, 537.

Wager Swayne, Abram Hendricks, and H. S. Greene for appellants.

Charles W. Hassler for appellees.

R. P. Ranney, E. C. Sprague, George F. Comstock, and John G. Milburn, counsel for parties in like interest with the appellees in a suit pending in the Supreme Court of the State of Ohio, also by permission of the court, and with the consent of appellants' counsel, filed a brief in support of the lien of the equipment bonds.

GRAY, J.-The claim of the holders of the equipment bonds to a lien on the property of the Toledo, Wabash & Western R. Co. was asserted upon several grounds.

1. It was contended that the property of the Toledo & Wabash R. Co. was a trust fund for all its creditors, and that upon the consolidation the Toledo, Wabash & Western R. Co. took the property of the Toledo & Wabash R. Co. charged with the payment of all its debts.

CORPORATE

WHAT EXTENT A
TRUST FUND FOR
CREDITORS.

The property of a corporation is doubtless a trust fund for the payment of its debts, in the sense that when the corporation is fawfully dissolved and all its business wound up, or when it is insolvent, all its creditors are entitled in PROPERTY-TO equity to have their debts paid out of the corporate property before any distribution thereof among the stockholders. It is also true, in the case of a corporation, as in that of a natural person, that any conveyance of property of the debtor, without authority of law, and in fraud of existing creditors, is void as against them. Story Eq. Jur. § 1252; Curran v. Arkansas, 15 How. 304; Graham v. Railroad Co., 102 U. S. 148, 161; s. c., 1 Am. & Eng. R. R. Cas. 416; Railroad Co. v. Howard, 7 Wall. 392; Goodin v. Cincinnati & Whitewater Canal, 18 Ohio St. 169.

But upon the consolidation, under express authority of statute, of two or more solvent corporations, the business of the old corporations is not wound up, nor their property sequestrated or distributed, but the very object of the consolidation, and of the statutes which permit it, is to continue the business of the old corporations. Whether the old corporations are dissolved into the new corporation, or are continued in existence under a new name and with new powers, and whether, in either case, the consolidated company takes the property of each of the old corporation charged with a lien for the payment of the debts of that corporations, de