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are still outstanding $2,482,000, the time of payment having been extended to 1937. This form of mortgage upon railroad property, involving a foreclosure sale in case of default, is not available to railroad corporations in England. The borrowings of English railroads are upon promissory obligations somewhat similar to our corporate bonds, but which constitute merely a charge upon "the undertaking," or, in other words, upon the income of the property enforcible through the appointment of a receiver.1 Such obligations are given the general term “debentures." Sir Francis Palmer in his "Company Precedents," traces the term "debentures" from very early times, and concludes that the word admittedly has no technical significance, but that its meaning is to be determined by the popular sense in which it is used. In England, according to Palmer, the term "debenture" seems to comprehend all serial obligations of the corporation, whether or not secured by a charge, and whether or not issued under a trust deed, those issued under a trust deed being generally styled debenture stock. In this country, the term "debentures" has come to mean any class of serial obligations of a corporation not secured by a specific lien upon property.

From the very beginning, and still continuing, the form of the corporate serial obligation and of the mortgage or other instrument pursuant to which such obligations are issued, has been undergoing enlargement because of the development of new requirements by investors. The condition corresponds to that which originally produced the idea of the corporate bond and mortgage, namely, the urgent demand for capital for corporate enterprise, and the necessity of offering to the public a form of security which will satisfy as well as attract purchasers of corporate bonds.

The mortgage of the Baltimore & Ohio, made in October, 1846, to the President of the Company and his successors as

1 The English and Canadian procedure "takes the place . . . of foreclosure sales in the United States, which in general accomplish substantially the same result with more expense and greater delay."-WAITE, C. J., Canada Southern Railway Co. v. Gebhard, 109 U. S. 527, 539; 1883.

Trustees, is interesting, in that it recites that the Company has issued "certificates of debt in which was contained the pledge of the property and funds and stock" of the Company, and that "it has been suggested that the security intended to be given by the Company to the holders of said certificates, and their assigns, would be to them more satisfactorily expressed if there was executed by the said Company an instrument of writing which being duly acknowledged might be recorded as deeds and mortgages are recorded," and thereupon proceeds to grant in trust for the holders of said certificates the property and funds of the Company comprehended in the authority of the statute governing the Company. Except as to the recitals, the mortgage instrument is substantially an ordinary real estate mortgage without covenants. The Baltimore & Ohio issued also various mortgages, including a sterling mortgage running to Baring & Company of London, in 1850, and three later mortgages in 1850 and 1853 to the President of the Company as trustee.

In 1850 and later, various railroads in the South were mortgaged by statute to secure advances made to them by the incorporating State, among which may be mentioned the First Mortgage of the Richmond and Danville Railroad to the Commonwealth of Virginia, made in 1850 to indemnify the State against its indorsement of $200,000 six per cent bonds of the Railroad Company; the Second Mortgage of the same company to the Board of Public Works of Virginia to secure a loan by the State of $600,000; a lien upon the Laurens railroad created by the South Carolina statute of 1859; and various liens upon other roads under the Internal Improvement Laws of Tennessee and other states in 1853 and 1854.

In tracing the development of the corporate mortgage from the statutory lien phase it may be advantageous now to resume and continue consideration of the story of the funded debts of the New York and Erie Railroad and its successors. For a long period the managers of that corporation were the pioneers in the gradual expansion of the corporate mortgage from a simple real estate

lien to the complex agreements which have become necessary to meet the increasingly exacting demands of the investing public.

The Baltimore & Ohio mortgages are of less interest than the Erie mortgages, inasmuch as the modern form of instrument indicates a development of the Erie mortgages rather than of the Baltimore & Ohio form.1

Next succeeding the New York and Erie bonds of July 1, 1847, secured by the State lien of 1845, came the Company's so-called "second mortgage," being its first deed of trust, dated March 1, 1849, to John J. Palmer and others as Trustees. This mortgage granted to the trustees of the railroad all the appurtenances of the Company "now owned . . . or which shall hereafter be owned," but subject to the $3,000,000 lien of the statute of 1845. It will be observed that, even at this early date, there was recognized the necessity of obtaining a lien on the corporate enterprise as a whole, by providing that after-acquired property should be included. The debt to be secured by the mortgage was $4,000,000, evidenced by 7 per cent bonds, each of one thousand dollars.

The bonds in terms acknowledge the company to be indebted to "John J. Palmer or bearer in the sum of $1,000, lawful money of the United States, which sum they promise to pay to the said John J. Palmer or bearer," and provided for the payment of the interest semi-annually "on presentation and delivery of the annexed dividend warrants." The bond then proceeds to recite that it is one of the series issued for the extension of the railroad, and that the holder is entitled to the security of the described mortgage. It is of interest to note also that a stock conversion privilege is included as follows:

"The holder of this bond shall be entitled at any time before the first day of March, 1859, to convert the principal sum into the capital stock of the Company at par, on surrendering the bond with the warwants not then due annexed."

1 The Erie Railroad Company and its predecessors and subsidiaries have issued twenty-seven mortgages now outstanding, of which eight cover the main line.

The mortgage instrument contains about twenty folios. It recites briefly the corporate authority of the mortgagor, and the purpose of the deed, sets forth the form of the bonds in full, grants the mortgaged property in trust to the trustees subject to the prior state statutory lien, contains a covenant of further assurance, and provides that in case of default it shall and may be lawful for the trustees "upon the request in writing of any one of the holders of the bonds on which interest or principal is not fully paid," to enter upon and take possession of the property and to sell the same, and as attorneys of the mortgagor to execute conveyance to the purchaser, and to apply the proceeds of sale to the payment of costs, the satisfaction of the mortgage debt and the rendering of the surplus to the mortgagor or assigns. The mortgage contains also a provision for the filling of vacancies among the trustees. This mortgage was drafted probably by Judge William Kent, then the counsel of the railroad, son of Chancellor Kent, and himself of high authority as a lawyer, conveyancer and judge.

Upon March 1, 1853, the New York and Erie Railroad Company executed its so-called "third mortgage" to James Brown and John Davis, as Trustees. This third mortgage provides for the issue of $10,000,000 bonds, of which $4,000,000 were to provide for the payment of an equal amount of bonds secured by the former mortgage of 1849. This seems to have been the inception of the refunding mortgage.

The bond is substantially in the form of the pioneer of 1849, but there appears on the margin the following;

"New York and Erie Railroad Company Mortgage Bond No.

$1000.

This is to certify that the within bond is included in a mortgage on the entire property of the New York and Erie Railroad Company, duly executed to James Brown and John Davis, Trustees, and dated March 1, 1853."

While the signature of the trustees does not appear to have been required, this is clearly the origin of the certificate of

authentication which invariably is placed upon bonds of the present day and is signed by the trustee.

The mortgage itself follows generally the form of the last preceding mortgage.

The so-called "fourth mortgage" of New York and Erie Railroad Company, dated August 15, 1857, was executed to James Brown and John C. Bancroft Davis, as Trustees.

The bond follows the form of the early bond, except that it contains a provision that in case of six months' default in the payment of any of the interest warrants "on the bonds of this issue . . . then the principal of the said bonds shall be due and payable." It provides also for the countersignature of the trustees at the foot of the bond.

The mortgage covers not only the railroad of the company, but also the rights of the company under leases of other railroads. It repeats the provision in the bonds about the acceleration of the maturity of the principal in case of default and contains also provisions setting forth the immunities of the trustees. In text this mortgage is about twice the length of the original mortgage of 1849.

The so-called fifth Erie mortgage, dated June 1, 1858, indicates no further development in form, but it provides for the issue of bonds of $500 each as well as bonds of $1000.

Subsequently to the fifth mortgage and in September, 1865, the Erie Railway Company, the successor of the New York and Erie Railroad Company, issued a series of convertible unsecured bonds for the principal amount of £1,000,000 which had no lien upon the property of the Company.

Then there appears the first mortgage of the Company to a corporate trustee, the First Consolidated Mortgage of 1870 from the Erie Railway Company to the Farmers Loan and Trust Company. The mortgage instrument is similar to the preceding one, but the bonds contain three features appearing for the first time. The first is a promise to pay, at the option of the holder, in sterling money at a fixed rate of exchange in