Court Opinion

ID: 8610674
Source: CourtListenerOpinion
Date Created: 2022-11-24 08:19:24.507136+00
Date Added: 2024-06-11T14:11:38.824418
License: Public Domain

Mack, J.: At the threshold we are met with the objection, that this court has no jurisdiction in the premises; that all matters as well astthe entire property involved in this litigation is subject to the prior jurisdiction of the Federal court in the creditor bills there pending; that comity bids this court to dismiss the bill and to remit the parties to the Federal court for an adjudication of their rights. In opposition to this plea, it is urged that the circuit court of appeals has expressly held that this court has jurisdiction and in support thereof reference is made to the decision of that court, reversing the order of Judge Grosscup which restrained the complainants .herein from prosecuting their suit.1  That the circuit court of appeals believed this court had jurisdiction is apparent from the following language in the upinion rendered by Judge Jenkins: “We are unable to perceive that the prosecution in the state court of the suit enjoined by the decree appealed from, does in any way interfere with the possession of the res, by the receivers or encroaches upon any rightful jurisdiction under this creditors’ bill.” I agree however with the argument of defendant’s counsel that this decision is not conclusive of the question. The sole issue before the Federal court was whether the power to enjoin an action in the state court, restricted as it is both by federal statute and by the comity that prevails between the Federal and state courts, had been rightly exercised or not, whereas the question here in issue is whether the Federal court has acquired such prior and exclusive jurisdiction over the subject-matter that a state court must or should refrain from •acting. The views of the circuit court of appeals are however very persuasive and reinforce the conclusion to which I have arrived that though the full measure of relief prayed for could not be granted by this court, nevertheless this court has full and complete jurisdiction to determine the rights of complainants as stockholders in relation to the corporation itself and to the other stockholders. The litigation in the Federal court is in no respect in the nature of winding up proceedings; the suits are mere creditors’ bills for the enforcement of unpaid judgments and other debts. The entire property and property rights of each defendant corporation are in' the custody and control of the Federal court for administration and if necessary, sale, and the stockholders’ interests in those assets, being dependent on the rights of the corporation itself, is necessarily within the jurisdiction of that court. But such control and jurisdiction, for the sole purpose of .paying the debts of the corporation, does not subject either the corporation or the stockholders to the exclusive jurisdiction of that court in their relations inter sese or oust this court of jurisdiction to determine whether or not the alleged directors are the legal directors of the corporation, whether or not certain acts alleged to have been done by the corporation either through its directors or stockholders, are the legal acts of the corporation, binding upon all stockholders. That the bill prays for an accounting between the corporations, that is to say a determination of certain liabilities and assets of each corporation—one of the specific objects of the creditor’s bill and as to which prior and exclusive jurisdiction is vested in the Federal court—does not deprive this court of jurisdiction to determine other and vital matters as to which relief is sought. More serious, perhaps, than the objection of lack of jurisdiction over the subject matter, is the objection of lack of necessary parties for a full hearing. It is strongly urged' that this court cannot proceed to hear and decide any question here involved, in the absence of the receivers of the several corporations; that none of the receivers are parties defendants or can be made such, without leave of the Federal court, and that for want of necessary parties, the bill must be dismissed. That all of the property rights of the corporations are vested in the receivers must be conceded; it follows from this, that the court could not, unless the receivers be made parties to the litigation, determine any matters affecting these property rights, that would be binding on them; and it would follow, ordinarily, that unless the court could bring within the binding effect of its decree all parties having an interest in the subject-matter, it will refrain from acting. But there is' ño imperative rule, absolutely prohibiting a court of equity from adjudicating the rights of those litigants who are before it, even though such adjudication may affect others without being res adjudicata as to them. Irrespective however of this,, and conceding that the court should not or could not adjudicate upon matters in which the receivers as such have a direct interest, it does not follow, in this case, that the bill should be dismissed; the same answer may be made to this objection as is made to the point that the Federal court has exclusive jurisdiction, namely, that there are matters properly presented for adjudication as to which the receivers are not necessary parties. The receivers are not stockholders of the company; they have at the best an equitable interest in some stock; their rights are fully and completely represented by the bank, the legal stockholder and trustee. Ordinarily a cestui que trust is not a necessary party to litigation in which it is fully represented by its trustee. Controversies as to voting power of stock, as to questions of majority rule, as to the legality of the election of and the extent of the power of directors, are not ordinarily within the exceptions to this rule. It may be, of course, that the trustee does not truly represent the cestui que trust or that conflicting interests of several cestuis que trustent should be brought to the attention of the court, but with these, the other stockholders have no concern; they need look only to their co-stockholders of record in litigation affecting the internal affairs of the corporation. And this I believe to be true even though the case presents a question such as arises here, in which the right of a stockholder of record to vote is questioned, not because of any lack of power of that stockholder as such to act but because of alleged inability of the cestui que trust to control the stock or voting power. The ultimate, question for decision, nevertheless is, has the bank, the legal ■stockholder, certain rights; the bank itself is fully capable of defending those rights on its behalf as well as on behalf of its cestui que trust. The receivers, therefore, are not indispensable parties even under a stricter doctrine of necessary parties than has been adopted either by the Federal or many state ■courts. Moreover, any rights that they may have acquired since this court obtained jurisdiction by the filing of the bill and the issuance of process, and with full knowledge of these proceedings, would not prevent this Court from acting though the receivers are not made parties. The additional prayers of the supplemental bill are aimed at undoing that which the original bill sought to prevent and it would be the duty of this court to annul any act, the doing of which should and would have been enjoined, but for the intervening injunction of the Federal court, if the rights acquired thereunder were obtained with knowledge of the pendency of this suit. This leads then to a consideration of the merits of the case on the pleadings, affidavits and testimony heard so far at least as may be necessary in order to determine whether a preliminary injunction should be granted. There is little controversy on the facts. In the opinion of the court, the charges of fraud or wilful wrongdoing by the protective committee or by those representing the Traction Company in their dealings with the members of the protective committee or with the stockholders of the underlying companies are not sustained. It may be that the action taken in amending the leases and tripartite agreement was unwise from a business standpoint; it may be that subsequent developments have thrown new light on the situation and that some who once approved would now join hands with those seeking to annul. On these points, the (jjourt expresses no opinion and wishes to -be understood' as not intimating any opinion whatsoever, firstly, because on a business proposition, the judgment of able business men financially interested who, as the court views the evidence, are absolutely free from the slightest personal or material interest in the opposite side of the question, is of greater value than that of the court, and secondly, because, in the absence of fraud, or mistake, and merely because of a difference of opinion on the wisdom of a business act, the court could not undo-that which has been done. It cannot be denied that the Traction Company displayed the utmost care in guarding its own interests when it carefully refrained from permitting a new board of directors of the underlying companies to, be elected until it knew just exactly what kind of amendments and modifications would be-adopted and recommended by them; and it may be that the protective committee should have insisted on the election of the new directors irrespective of the pending controversies. If such a demand had been conceded, it may be that modifications more favorable to the underlying companies would have been secured. But the failure so to insist, particularly in view of the "probable refusal of the Traction Company to grant the demand, cannot be said to be such dereliction of duty or fraud as to lend the weight to the charge that the protective committee was under the domination of the Traction Company. Nor is the fact, expressly stated to the stockholders in the circular letter, that counsel for the protective committee would be paid by the Traction Company and that the committee itself would be similarly reimbursed for the expenses incurred' by it, even though it be coupled with the further fact, not stated to the stockholders, that Mr. Bobbins had accepted the retainer without a fee and with the express statement by those employing him that they did not know when or how his services would be compensated for, sufficient to charge the committee or their counsel with wrong-doing or neglectful disregard of those interests which alone they purported to represent. It may be that the committee did become legally indebted to Mr. Bobbins but if not, it may be that he had such confidence in the outcome, because of the apparent absolute-necessity of an adjustment of the differences between the Traction and the underlying companies in order that they might present a united front in their joint controversy with the city, that he was satisfied to take chances on getting his; fees. No opportunity for criticism would have been afforded if the members of the committee, having and representing large interests had paid counsel fees and expenses on behalf of all the stockholders whom they represented or if they, at least, had guaranteed these payments, irrespective of the success or failure of the efforts at adjustment. Nevertheless the court is clearly of the opinion that the acts ■of neither the counsel nor the committee were influenced by the omission to take such steps as the exercise of the highest degree of prudence would perhaps have demanded. Irrespective however of the charges of fraud, complainants contend that the execution of the new document should have been enjoined and that they should now be declared null and void as illegal and ultra vires. No citation of authority is required for the well established proposition that a public service corporation is without power to grant, by way of lease, all of its property, thereby disabling it from personally performing its duties to the public. The state may certainly object to such a lease and any stockholder who is not otherwise equitably estopped may prevent the consummation of such an illegal act. On the other hand it is equally clear that if the public policy or statutory law of the state permits such a corporation to execute such a lease, neither a stockholder nor the state can object on the ground that the act is illegal. It may, however, notwithstanding such statute, be ultra vires. The charter granted to a corporation in a state having such a statute might expressly, provide that the property shall not be leased. Under such circumstances, though the corporation would be legally empowered to execute a lease so far as the state is concerned, in other words though the act would not be illegal or ultra vires in the strict sense, nevertheless as the act would be a breach of the compact between the shareholders, any shareholder could object and enjoin the transaction. But as the right sb to object is personal to the stockholder, he may, by his acquiescence, estop himself and his successors in title from thereafter objecting, and though the purposes for which a corporation is chartered can be changed only in the manner fixed by statute, yet such an estoppel arising against each stockholder, effectuates a virtual change in the purposes of the corporation. To this extent the distinction sought to be made by complainants between the powers of a corporation and the object and purposes for which it is formed, is good. Though legally capable of doing certain ■things so far as the state is concerned, the corporation may be enjoined from exercising the power, if such action would be contrary to its declared objects. The corporation is not merely a creature of the state limited in its powers to those conferred upon it by express terms or reasonable implication therefrom; it is also the creation of the stockholders—created by them for certain definite purposes, to the prosecution of which each has contributed a definite amount of money. Unless the agreement—including therein the law under which the charter is granted—otherwise provides, unanimous consent of the stockholders is required for a fundamental deviation from these agreed purposes or for a change in the relative rights of the shareholders. And even though the charter itself provides that the capital stock may be increased and subsequently provides that all the powers of the corporation are conferred on the board of directors, it is held that only the ordinary powers are there referred to and that the power to increase' the capital stock and thus possibly alter the relative interests of the stockholders is so fundamental a change as to require unanimous consent. Railway Co. v. Allerton, 18 Wall. 233. The increase in that case without such consent would not have been an act ultra vires, in the strict sense; the corporation had the power—the exercise of it however would have been a violation of the rights of each non-assenting stockholder. Assuming now that the underlying companies had the power under the law of 1855 to grant, and the Traction. Company to accept this lease, can it be said that the execution of such a lease was within the corporate purposes for which the .underlying companies were formed. The charter does not expressly provide that a lease shall not be made. The incorporators must be assumed to have known that the state had waived any objection that it might have had and had expressly conferred this power on any railroad thereafter formed. That these corporations were formed under the general incorporation act which is silent as to the power to lease is clearly immaterial. In view of the express grant in the act of 1855, it cannot be held that the denial of a power to lease can be implied from the language of the act of 1872. It is true that the expressly stated object of the corporation was to construct and maintain a street railway. It is also true that the work of a lessor corporation in receiving a fixed rental and dividing it as a dividend, is totally different from that of an operating company. It may be conceded, too, that unless the company were expressly empowered to lease, even a manufacturing corporation, according to some of the authorities, could not, by the mere act of its directors or even without unanimous consent, change its character from an operating to a leasing company. Nevertheless, as these companies had, on the above assumption the necessary power to lease, their act could not be illegal or ultra vires in the strict sense. Whether the change was so fundamental a character as to come within the principle of the Allerton case, is a question involving a conflict in the authorities. The reasoning in the Beveridge case, 112 N. Y. 1, followed, since the arguments were made herein, in the case of Wormser v. Metropolitan St. R. R., 98 App. Div. 29, Van Brunt, P. J., concurring, and holding that this is an ordinary power vested in the board of directors is very persuasive, notwithstanding the extremely able decision of Van Brunt, J., in Metrop. El. R. R. Co. v. Manhattan Elev. R. R., 11 Daly, 373, to the contrary. When the court in the Allerton case added the dictum that “changes in the purpose and object of an association are necessarily fundamental,” “Mr. J. Bradley evidently had in mind a change in the character of the business like a change from transportation to manufacturing.” Louisville Tr. Co. v. L. N. A. & C. R. Co., 75 Fed. 433, 448. See Taft, J., distinguishing the Allerton case. It is, however, unnecessary to decide whether or not the board of directors or even a majority of the stockholders could have made the original lease. At least for the purposes of this case we must assume that they were valid inasmuch as they are not attacked by the complainants, and as the complainants pray in their supplemental bill that it be decreed as to them that the original leases and agreement are in full force and effect. Moreover, as every stockholder has acquiesced therein, and as, on the assumption made as to the effect of the act of 1855, the original leases are not ultra vires in the strict sense, such assent, together with lapse of time, creates a valid estoppel. Assuming, however, that the original lease was a fundamental change requiring this unanimous consent to make it valid, is the new lease of the same character ? If the original lease had been strictly ultra vires and illegal, incapablte of ratification and as to which no estoppel could arise, even by direct assent thereto, it might well be contended that the new instrument could not be properly called an amended lease, and that whether amended or original, it virtually changed the purposes of the corporation. If the original lease, however, was not illegal or strictly ultra vires, then the company had by unanimous consent of the stockholders and with the-express permission of the state, become a mere leasing corporation. What the stockholders had acquiesced in moreover' was not, merely, that a certain lease with certain terms should be made, and that thereafter no other lease should be made-without a like unanimous consent; they had necessarily also-consented that the fundamental character of the corporation-should likewise be changed from that of an operating to a-, mere leasing company. This consent by virtue of the unanimity operated not merely as an estoppel against such consenting stockholder; if it were only this, the argument that' the shareholder was thereby estopped from objecting to that particular lease but not to any other would be good. It: operated as a contract binding on all and working a change-in the corporate purposes. When it was proposed to enter into a new or amended lease, the contemplated act was no-longer a fundamental change requiring unanimous consent, it was an important transaction, it seriously affected the interests of the stockholders, but it was only an important not a fundamental change of the company’s business. It was such a change as a board of directors usually refrains from making without the sanction of the majority of the. stockholders; and in this case, it was expressly conditioned upon such consent. The board of directors is merely the agent of the stockholders ; it has only such powers as are confered upon it by the action of the majority of the stockholders, unless it be otherwise provided by statute. In this state, it is specifically provided that the corporate powers shall be exercised by the board of directors. Notwithstanding such a provision it is held, in some states, that this has reference only to ordinary corporate powers; that important matters must be referred back to the principal, the general body of stockholders. In Dickinson v. Consol. Traction Co., 114 Fed. 232, it is said by Gray, J.: “The objection most seriously and strenuously urged is, that although express power may be given to a corporation to lease, that power cannot in the absence of express legislative authority to the contrary, be exercised without the assent of all the stockholders. It is argued with some plausibility that without express legislative authority, a corporation could not make a lease of its property and franchises even with the assent of all its stockholders, and that express legislative authority to make a lease is only a conferring of a power, not existent without such legislative grant, upon the whole body of stockholders. Many cases have been cited in the brief and in the argument to support these propositions. The distinction, however, between these cases and the one at bar, is that the former concern grants of legislative power to lease to corporations already in existence and whose stockholders have subscribed under the conditions of the original charter by which no such power was given. The implied contract between the stockholders inter sese in such cases, is as already stated that no such additional power so radical in its nature, though conferred by legislative authority, shall be capable of being exereised without the assent of all the stockholders: In the case before us, however, the power to lease was conferred by the act under which both corporations were formed. * * * The power to lease having been so given without prescribing any mode in which it was to be exercised, it must be classed with the general powers conferred by a charter which are to be exercised by the majority of corporators of stockholders. ’ ’ See, too, Baldwin, Railroad Law, 455. In the Beveridge case, on the other hand, it is held that the right so to lease is within the powers conferred bn the board of directors. Despite the fact that directors conditioned the lease upon the assent of the majority of the-stockholders, it may be important to determine whether such assent would otherwise have been necessary, because, if the board of directors, acting alone, had had the power, then the question of the true meaning of the expression “a majority of the stockholders,” whose ratification was made on condition precedent to the execution of the lease, depends solely upon the intention of the board of directors;—that is to say, if they needed no sanction but voluntarily made their act conditional upon ratification by certain parties, described by them as “a majority of the stockholders,” in a conflict as to the interpretation of this expression, the intention of the board of directors, if discoverable, will govern, even though the expression would ordinarily have a different meaning. On the other hand, if action by a ma-' jority of stockholders is required by law, it must be ascertained what the law intends by a majority and in determining this, the intention of the board of directors is entirely immaterial. ■ Moreover if it be held that the board of directors alone have this power, the question raised by the complainant as to the legality of the election of the new directors becomes important. Complainants contend that all vacancies in the board of directors must be filled by the stockholders. Const. Art. XI, s. 3; R. S. ch. 32, s. 3. The language of the constitution and the statute is “that in all elections for directors” every stockholder shall have the right of cumulative voting, and that “such directors shall not be elected in any other manner.” The statute also provides for a classification of directors so as to permit of elections for three years and concludes “all other vacancies to be filled in accordance with by-laws.” Complainants urge that the word “other” means “other than directors.” Defendants say that it means “vacancies, including that of directors, other than by expiration of term of office,” and that both constitution and statute refer only to the regular annual elections and not to the temporary appointments for unexpired terms. The universal practice in Illinois for at least 35 years is-in accordance with defendants’ views. While not conclusive-of the question, nevertheless this fact is entitled to great weight in arriving at a correct interpretation. This court is not disposed to overthrow a practice so long established, especially in view of the fact that the clear purpose of the constitutional provision was to provide for minority representation—not otherwise to regulate the election of directors. This end would be even less attainable if stockholders rather than the directors are to fill each single vacancy as it arises. The court therefore holds that the de facto directors are also directors de jure. The changes in the lease were important; they did not, however, fundamentally change the business or purposes of the corporation as they then were established. Whatever may be the right of the stockholders on an original lease, the board of directors must be held to have authority in Illinois to make the changes here in question. The most important of these, the only ones in fact that can be deemed of great importance to the stockholders of the underlying companies-were the waiver of the right of forfeiture for alleged defaults and the decrease in the rental to be paid. What, then, did the board of directors mean when they required that the lease delivered in escrow should be turned over to the lessee “in case and when the same shall be approved by a majority of the stockholders of this company,” and that a special meeting of the stockholders should be called “for the purpose of considering and voting upon the question for approving the action of the board of directors,” etc. Does this require a majority of the stock of the company or a majority of the stock voted or represented at the meeting; and if the stock of the company, does it include such stock as is outstanding but which, because of an illegal holding or for some other reason, cannot legally be voted? The board of directors knew that a part of the stock was held in trust by the bank under the tripartite agreement; they knew that there would be some question as to the legal power to vote this stock; they knew that excluding this stock from voting, but including it in the total stock; they did not at the time control a majority of the stock. In the recommendations for modifications of the lease adopted by them as a solution of the difficulties, they say: ‘‘6th. The modifications when made shall not go into effect against the objections of a majority in interest of the stockholders, ’ ’ and in the circular letter to the stockholders, dated July 25, 1903, they say, referring to the advantages of the changes, “2nd. It will not be possible any longer for the lease to be modified by a directory elected by a bare majority of your stock including ‘the bank stock;’ it will require the sanction of five-eighths of the entire stock; that is, a majority of the stock excluding these 32,000 shares.” If the language of the resolution is to be interpreted according to the intentions of its framers, then clearly in the light of these contemporaneous documents it must be held that the only sanction required was that- of the holders of a majority of the stock, including the bank holdings, irrespective of whether the latter could legally be cast or not—i. e., unless a majority or, at any rate, one-half of the stock either did not vote or voted against the changes, they should become effective. This condition was complied with. Counting the bank stock, a majority favored the change. Excluding it, a majority of the • other shares favored the change. In any event, not a majority of the total issue, including all not voting with the opponents of the resolution, disapproved of it. If, however, the court be wrong in considering these other documents, and if only the usual and customary meaning of the language of the resolution is to be sought, or if the court be wrong in holding that the directors would have had the right to adopt the new leases without consulting the stockholders, and if it be the law that the sanction of the holders of a majority of the .shares is essential, it then becomes necessary to consider whether that sanction has been given. Complainants contend that one Illinois corporation cannot own stock in another Illinois corporation except under certain exceptional circumstances, not necessary to be here considered ; that such holding is both ultra vires because of lack of charter power and illegal as against the public policy of the state; that though the legal title is vested in the bank (whose corporate power to hold and vote stock, the beneficial interest of which is in an individual, would not be questioned), nevertheless the equitable title is in one or both traction corporations ; that such equitable control is equally void as against public policy and ultra vires; that whilst the stock is outstanding and would, at dissolution, be entitled to share in the distribution and is therefore to be counted as a part of the capital stock of the corporation, nevertheless the voting power is suspended during the pendency of the illegal and ultra vires holding; that notwithstanding the suspension of the voting power, at least the clear majority of all outstanding stock, counting the illegally held portion to ascertain the total issue, but not counting it as voting, is essential to the validity of the new lease. So far as this requirement is based on the language of the resolution as requiring perhaps something more than the law would otherwise have demanded, the answer is that either the specific intention of the directors must control the interpretation of the language, or a general intention to require that which the law itself demands for a majority whatever that may be, must be attributed to them. If the former, then as heretofore stated, a majority have sanctioned the transaction. It remains, therefore, to inquire what the true meaning of “majority” is, under the rule that the assent of a majority of the stock is needed. The authorities conflict as to whether, at a regularly called meeting, a majority of the shares represented, a quorum being present, is empowered to bind the entire body. If it be, then a majority has sanctioned the new lease. If, however, it be the law that a majority of the shares represented is not sufficient and that a majority of the entire outstanding stock is required, then the further question remains —shall stock incapable of being legally voted be counted as part of the outstanding issue for the purpose of determining what is a majority? Suppose a clear majority of the stock were so illegally held; it would follow that unless this were corrected, no business could ever be transacted, no election of directors ever be held while this situation lasted. The minority instead of being protected would be rendered powerless. It follows that such illegally held stock is not to be counted; that a majority of the balance of the stock is the majority that the law would demand, whenever corporate action requires this sanction. And a similar meaning would be given to the language of the resolution here in question, if the intention that must be attributed to the directors is to control. In this sense then, too, a majority of the stockholders have given their sanction. • If", however, a clear majority of all stock is necessary, then we must ascertain whether the stock deposited with the bank may be legally voted. The public policy of Illinois clearly forbids the acquisition by one corporation of a majority of the stock of another corporation for the purpose of controlling it. This much is established by the decisions of -the supreme court. There is no express legislation forbidding or permitting the holding of a minority interest, except in specific cases. For some purposes, as in payment of an honest debt, such acquisition may be made as incidental to the express powers. Ordinarily a corporation is not in business for the purpose of investing its moneys, but for the purpose of employing them in its normal and legitimate enterprises. The purchase of the stock of another corporation for investment purposes is therefore generally beyond the corporate power. It may, however, in the due course of business become essential to invest part of the funds as in this very ease. The Traction Company had to set aside ten million dollars as security for its obligation. It had to buy securities of some kind for this purpose. Can it be said that it must purchase bonds; that it cannot do what business men would ordinarily do under like circumstances; that it cannot buy stocks of the lessor company as long as those stocks do not enable it to control the company? Clearly the mere holding of stock for some purposes is not necessarily ultra vires. Whether ultra vires or not, depends upon the purposes of the acquisition. Moreover that which at one time is not ultra vires may become so. One corporation may innocently acquire a small interest in another corporation in payment of a debt, and may thereafter purchase an additional minority interest for the purpose of securing control. It cannot be doubted that the entire holding would become ultra vires and illegal in Illinois under such circumstances. The supreme court in People ex rel. v. Ch. Gas Tr. Co., 130 Ill. 268, 284, referring to insurance corporations which may find it necessary to keep funds on hand for the payment of losses, says: “But it is questionable whether even these can invest their surplus funds in the stocks of other corporations without special legislative authority.” And in People v. Pullman Car Co., 175 Ill. 125, 159, they say: “That a corporation cannot become a stockholder in another corporation unless power to do so is specifically granted in its charter or necessarily implied from it.” While it would follow from these decisions that ordinarily in Illinois one corporation cannot acquire even a minority interest in another corporation, yet the court does not lay down an absolute rule to this effect which would control under the circumstances of this case. The act of June, 1897, as amended by the act of May 11, 1903, demonstrates, however, that it is not against the public policy of Illinois for one street railway company to hold stock in another street railway company under certain circumstances. In view of this legislative declaration and in the absence -of an express decision to the contrary in this state and the conflict of authority in other states, in view of the necessity of malting an investment as collateral security for the lease, it must be held that the corporation had the implied power to invest its funds, incident to the express power of acquiring a street railroad by lease and that the investment in these stocks, not having been made for the purpose of securing control and not' directly tending to secure such control, was not illegal as against the public policy of Illinois or ultra vires as beyond the corporate power of the Traction Company. But even if the cestui qu,e trust could not legally hold the stock, it would not follow that the trustee, the stockholder of record, would, because of- this, be debarred from voting it. The court adheres to the opinion heretofore rendered in Dunbar v. Kellogg Switchboard Co.1 that the corporation and the other stockholders are not concerned with the beneficial ownership in determining the right of a stockholder of record to vote. In view of. what has been said, it becomes unnecessary to determine whether the fact that the equitable rights have become vested in individuals, the receivers, revived the alleged suspended voting powers; or whether the complainants can be heard to. urge these objections. It must therefore be held on this record that the new or amended leases and agreement have been validly adopted and are in full force and effect if the original assumption that the act of 1855 (private laws, pp. 304, 305) enabled the underlying companies to become lessors and the Traction Company to become lessee. A want of power in either lessor or lessee would render the transaction null and void. St. Louis R. R. Co. v. Terre Haute R. R., 145 U. S. 393. The act of 1855, entitled “An act to enable railroad companies to enter into operative contracts and to borrow money,” provides that all railroad companies incorporated -or organized under the laws óf this state shall have power to make such contracts and arrangements with each other and with railroad corporations of other states for leasing or running their roads or any part thereof. No restriction is placed on the length of term. The entire road may he leased. If this can be done, there can be no objection to a lease of all the other property of the corporation even though its character changes from that of an operating to a mere leasing company. The underlying companies could therefore lawfully execute the leases as lessors. In Union Traction Co. v. City of Chicago, 199 Ill. 484, 544, the court says, “The act of 1855 has reference to the making of contracts and arrangements between railroad companies already existing and in operation,, for the leasing or running of their roads. ’ ’ Attention was directed to this sentence in a petition for rehearing containing a number of points. The petition was denied and the opinion remained unmodified. The statement, however, was purely incidental as was also the further statement on p. 545. “Indeed it is questionable whether appellant was properly organized for the purpose of leasing other railroads and terminating the performance of their duties to the public. Corporations, organized under the general incorporation act, may be formed in the manner provided by that act, for lawful purposes only. If, however, the leasing of other roads exclusively was a lawful purpose of appellant’s organization, it certainly was obliged to operate such roads in accordance with the provisions of its own charter and not in violation thereof.” The point that the court was discussing and which it determined, Was whether the lessee could get the benefit of certain' privilege's granted to the lessor. This depended on whether the lessor could operate under lessor’s charter. The court held, -that under its own charter, it lacked power to operate in accordance with lessor’s charter and therefore it must, in operating, comply with its own charter and submit to council regulations. It is urged that when the original lease was made, the lessee did not own, control or operate any road. But what standing in a court of equity has the complainant who on this ground seeks to annul the second lease while at the same time he asks to have the original lease declared to be in full force. Moreover, even though it be held that because the Traction Company was not an operating road on June 1, 1899, the lease when made was null and void and could have been repudiated by the lessors, yet if this lessee subsequently remedied this, defect in its leasing power by acquiring and operating a road, the lease, not heretofore repudiated and subsequently recognized by both parties and all of their stockholders as in force,, would become valid. It is conceded that the company acquired and operated a certain extension under the city ordinances of June 4, and September 24, 1900. If the original leases are absolutely void then this extension belonged absolutely to the Traction-Company so that it was enabled to execute a lease in July, 1903. That this instrument is or is called an amendment of the old lease which for the' sake of the argument, may be-assumed to be void, does not render it invalid. It is full and complete in itself, by virtue of the confirmation clause. But even if the lessor companies have some interest in the extension constructed under these ordinances by virtue of the terms of the lease, nevertheless the essential fact remains that the Traction Company did become an operating company by its own act in seeking, obtaining and complying with the terms of these ordinances. On the record before this court, it cannot be said that the Traction Company was organized solely for the purpose of leasing other roads; it cannot be held that it was not an operating road in 1900, if under the foregoing dicta, this is-essential. The court holds that the act of 1855 is not in conflict with the general incorporation act. It is therefore not expressly repealed. Repeals by implication are not favored. The supreme court moreover has assumed in the transfer cases that the act of 1855 is in full force. The court therefore further-holds that it is not repealed by implication either by the general incorporation act or by the Allen bill.1  A much earlier decision might have been rendered in the •case in view of the fact that it is on a motion for a preliminary injunction. But the presentation of it was as complete as •on a final hearing and the extremely able and exhaustive arguments of all of the counsel engaged in the case, as well as the importance of the questions involved, demanded and merited a careful consideration of all the facts presented and an •examination of the authorities. The motion for a preliminary injunction is overruled and ■the application denied   See Guaranty Trust Co. v. North Chicago Street Railway Co., 130 Fed. 801. Certiorari denied, 194 U. S. 638.—Ed.    This case was reversed by the supreme court. See 224 Ill. 9 (Dec. 19, 1906).—Ed.    See Session Laws of 1897, pp. 282-285. This law was thereafter repealed. See Session Laws of 1899, p. 331.—Ed.