Peoria & Springfield Railroad v. Thompson

Citations

• 103 Ill. 187
• 1882 Ill. LEXIS 167

Syllabus

<p>1. Railroads—constitutional prohibition against issue of bonds or stock, except for money, labor or property received. The object of sec. 13, art. 11, of the present constitution, in providing that “no railroad, corporation shall issue any stock or bonds, except for money, labor or property actually received and applied to the purposes for which such corporation was created,” and that “all stocks, dividends, and other fictitious increase of the capital stock or indebtedness of such corporation shall be void,” was to prevent reckless and unscrupulous speculators, under the guise or pretense of building a railroad or of accomplishing some other legitimate corporate purpose, from fraudulently issuing and putting upon the market bonds or stocks that do not, and are not intended to, represent money or property of any kind, either in possession or in expectancy, the stock or bonds in such case being entirely fictitious.</p> <p>2. Same—and herein, of the rights of innocent holders of railroad bonds. But it was not intended by that provision to interfere with the usual and customary methods of raising funds by railroad companies, by the issue of its stocks or bonds, for the purpose of building their roads, or of accomplishing other legitimate corporate purposes. Under that provision of the constitution, railroad companies have no right to lend, give away, or sell on credit, their bonds or stock, nor have they the right to dispose of either, ( except for a present consideration, and for a corporate purpose. But if, upon 1 a sale of its stocks or bonds by a railroad company for a present consideration, it should subsequently divert the proceeds to other than corporate purposes, the purchaser of such stock or bonds, who has acted in good faith in the matter, or his assignee, can not be affected by the subsequent misappropriation by the company.</p> <p>3. In short, where one, for a present consideration, in good faith purchases bonds or stocks in the regular course of busine