Daniels, J.
The object sought to be obtained by this action is the foreclosure of a mortgage executed on or about the 16th day of December, in the year 1871, by the Atlantic and Great Western Railroad Company to the plaintiffs, as trustees, upon its line of railroad extending from Salamanca, in this state, to Dayton, in the state of Ohio, and upon other property owned or leased by it. This mortgage was made to secure three classes or series of bonds issued by the company, and designated first, second and third mortgage bonds. The-first series was not to exceed the sum of eighteen millions, the second not to exceed twelve millions, and the third not to exceed twenty-nine millions of dollars, in American gold coin, in amount, and each on its face bears interest at the rate of seven per cent, payable semi-annually. These bonds in terms referred to the mortgage given for their security, and consequently operated as notice to the persons or parties receiving them, of the contents of that instrument.
For that reason the defendants, who received a portion of the second class or series, cannot be permitted to claim that they took them in ignorance of any of the facts whose existence was disclosed by the statements of that security. Host of these bonds were issued and used to replace other bonds issued by previous railroad corporations, some of which owned portions of, and one of which acquired title to all, the property of the present corporation. And the residue, amounting in no event to more than $5,300,000, and probably not exceeding $1,750,000 of the first mortgage bonds, and $2,000,000 of second mortgage bonds, were known as surplus bonds and used in the purchase of rails and the borrowing of money for the use of the railroad corporation. To the defendant, The Banque Franco-Egyptienne, there were transferred, of this portion of the second mortgage bonds, the sum of $1,816,000, or about that amount, to secure a loan made by it to the agent of the railroad company, and for its use and benefit upon which the sum of $1,158,380, besides interest, still remains unpaid. The mortgaged property is greatly [38]*38inadequate for the security or payment of all the bonds issued under the mortgage.
The whole amount authorized was fifty-nine millions of dollars, while the property subject to the preceding incum.brances upon it will not probably sell for more than ten or twelve millions of dollars at most.
The case shows that of this amount authorized, over fifty-six millions of dollars in these bonds were actually issued, and the consequence therefor must be that a very large deficiency of the debt imposed by them will, under the most fortunate circumstances, remain unpaid. For that reason, and to protect itself against this prospective loss, the banque, whose debt is undoubtedly valid as an obligation against the company, has intervened for its own protection against all the bonds which may have been exchanged for the debts of other corporations owning previously the same property.
The banque is a banking corporation existing under the laws of the republic of France, and carrying on its business in the city of Paris, and appears to have acted in the utmost good faith in making the loan and receiving, for its protection, these securities, and it is entirely justifiable for it to endeavor to maintain a priority over those whose bonds were received merely upon the consideration of a pre-existing indebtedness., But it can only be permitted to succeed in the effort by establishing some legal or equitable infirmity in the titles or rights of the other parties claiming protection under v the mortgage.
For the purpose of maintaining that position, it has been alleged, in its answer, that the exchanged bonds were issued without consideration and were, also, illegal and void.
In what respect this illegality consisted has not been fully set forth but as that has been amplified by the evidence, the case may be regarded as sufficiently before the court to require the consideration and decision of these points. If they apparently ought to be determined adversely to these other parties they probably would be required to be brought before the [39]*39court in order that they might be furnished with an opportunity of showing that their bonds were not without consideration and were not illegal or void. For most purposes they are represented by the trustees under the mortgage in contest concerning the mortgaged estate. But when the validity of the claims of the respective holders are brought in controversy it may well be doubted whether that should be heard and decided without their presence. If the decision should be in their favor of course no grounds of complaint on account of their not being parties can exist
But if it should, upon the facts now presented, be adverse to them, then an opportunity for a further hearing on their own behalf would probably be found to be an intervening necessity in the case.
As the facts now appear, the corporations preceding the defendants, giving the mortgage and issuing the bonds, were all hopelessly insolvent.
Divisional bonds had first been issued and secured by mortgages upon the respective divisions of the railroad, situated in the states of Hew York, Pennsylvania and Ohio. And they had been succeeded by other bonds and a mortgage upon the consolidated line, extending through or into these states. The holders of these bonds became dissatisfied by reason of their non-payment, and proceedings were taken for the foreclosure of three of these preceding mortgages, and the sale of the property for their benefit. While these proceedings were pending an arrangement was made for the disposition of the property, in pursuance of which it is insisted that all the bonds in dispute were lawfully issued. And in order to determine the present controversy, that arrangement and its validity will require examination.
The stockholders were not included as parties in it, and with so great a load of indebtedness upon the property of the corporations whose stock was held, they had no tangible interests requiring serious consideration. The demands of the creditors could be but partially paid, upon a disposition [40]*40of the property to others, and for that reason it had become necessary for them to do what appeared to be most expedient for their own protection.
With this end in view they made the arrangement and entered into the agreement, which afterwards became the foundation for the exchange of these bonds, or the substitution of those issued by the railroad company for' those previously issued and secured upon the property.
By that arrangement and agreement it was settled that the property should be sold under the foreclosure proceedings then in progress; that it should be purchased by General George B. McClellan, Allen G. Thurman and William Butler Duncan, as trustees for the bonded creditorsoand others; that they should convey the Ohio portion of it to George B. Wright, Reuben Hitchcock, Joseph Perkins, Charles Hickox and Morrison R. Waite, the present chief-justice of the United States, under and by whom a new corporation was to be formed in the state of Ohio and other similar corporations were to be otherwise formed in each of the states of Pennsylvania and Hew York, which were respectively to become the grantees and owners of so much of the property as was situated within the states in which they should exist and after-wards they were all to consolidate themselves into one corporation owning the entire property which should issue and secure the bonds required to carry into effect the agreement for their substitution as well as to supply the contemplated financial necessities of the consolidated corporation.
In this manner the old bonds were to be finally retired and the new ones substituted in their place and it was substantially earned out and observed in what subsequently transpired.
Whether it was a lawful agreement and lawfully performed is the substantial controversy existing in this case. The learned counsel representing the banque insist that both the agreement and what was transacted under it were in contravention of the laws of the several states in which the business was done. And for the purpose of sustaining their position [41]*41copious references have been made to these laws. But in the views which have impressed themselves as the most reliable to be followed in the disposition of the case, many of these references will be found not to require particular consideration. It may be, as it should be, conceded at the threshold of the discussion that corporations, railroads as well as others, must be confined in their acts within the limits of the authority affirmatively given to them or appropriately requisite for the attainment of the objects they are designed to accomplish. And under the effective operation of this principle for whatever they do, some warrant of legal authority must be found. The principle is highly salutary and its observance should be watched and guarded in order to prevent corporations from becoming, what they are so often inclined to become, unrestrained and destructive monopolies of individual enterprise. But if, with that restriction, their acts appear authorized, then they are to be sustained the same like all other exertions of lawful authority.
It was obviously not unlawful for the creditors and bondholders to agree that a sale should be made of the property mortgaged by way of security for their debts, and that it should be purchased by the three trustees selected by them for their benefit. They had the right to bid the property off themselves, or to agree that it might be done by those persons as their trustees or agents, and that they should hold or dispose of it for the ultimate benefit of these beneficiaries. To that extent the arrangement and what took place pursuant to it transcended no legal restraint whatsoever. It merely provided what was strictly requisite for the creditors’ own protection, and the subsequent conveyance of a portion of the property to the individuals who formed the Ohio corporation, and the residue of it to the corporations respectively formed in Pennsylvania and Hew York, were acts which were equally well authorized. The vice inherent in what transpired is not attributed to these different steps, and no reason can be perceived for the support of any such imputa[42]*42tion. But that has been affirmed to have originated in what afterwards took place.
It was urged that the consolidation was more extended than had been provided for by the laws of this state. But that is opposed to the admission made on this subject by the answer of the banque, and by which it could be reasonably held to be now concluded. That, however, is not necessary, for the statute of this state does not restrain the power of consolidation within limits so restricted. It permits any railroad corporation organized under the laws of this state, or of this state and any other state, and operating a railway either wholly within or partly within, and partly without this state, to merge and consolidate its capital stock, franchises and property with the capital stock, franchises and property of any other railroad company, or companies organized under the laws of this state, or under the laws of any other state or states, whenever their railroads may form a continuous line of railroad (Laws of 1869, vol. 2, 2399, 30, sec. 1).
And the right or ability so to consolidate has not been made dependent upon the circumstance that no previous consolidation of one of the constituent railroad companies shall not previously have been made, but it has been generally conferred upon all railroad companies existing as such, subject only to the conditions that the railways must be so situated as to form a continuous line, and that they shall not be parallel or competing lines of railroads (Id., vol. 1, 2403, sec. 9). Subject to those restraints, all railroad companies have been given this right or power of consolidation. And it may be effected by any two or more railroad companies, which was all that was done in this instance. It has not been insisted that any irregularity or infirmity existed in the organization of either of the corporations formed in this state and Pennsylvania, for the purposes of carrying into effect the agreement and arrangement of the bondholders and creditors of the previously existing corporations. But it has been insisted that the corporation formed for that purpose in the state of Ohio, [43]*43was defectively and irregularly formed, for the reason that the arrangement first entered into, contemplated an organization under one law while it was, in fact, made under another and later statute of the state. This, however, cannot be a matter of any controlling importance, for the reason that the later act provided for the corporate organization in accordance with the agreement actually made, even though for want of the assent of the stockholders, that could not be accomplished under the preceding law. The act under which the corporation was formed, according to the evidence of senator Thurman and that afforded by the certificate filed in the office of the secretary of the state of Ohio, was that of 1868 as it was amended and extended in 1869. Together they applied to, and provided for, the sales of railways in the hands of receivers as this portion of the previously consolidated railroad then was. And according to their titles and also the terms of the act of 1868, they ostensibly applied only to unfinished road-beds.
But the act of 1869 went further, for it included within the authority given by it all real and personal property—roadbeds, rights of way, fixtures and franchises — of any railroad company in the state of Ohio, that either had been or should be sold pursuant to a judicial decree, where the sale had been confirmed by the court directing it ( Wilcox’s R. R. Laws of Ohio, 224, 227). The terms of the laws of 1869 were more extended and unrestrained than those of 1868 and were not limited, as this act was, to companies that had not completed any part of their roads. But it included all railway property in the hands of receivers, and provided that they might sell the same and the title thereto with all the rights, liberties, faculties and franchises, and that the same should vest in the purchaser or purchasers thereof as fully as the same had been exercised and enjoyed by the railroad company itself. The proceedings had for the sale of this portion of the railroad were evidently taken under these statutory provisions and the court in which they were [44]*44pending apparently regarded them as fully authorized by these acts. And so much certainly has been conceded by the defendant’s answer and by the argument made- in its behalf in the presentation of this case. Besides that, some weight should be accorded in making this construction of the general and unrestrained language of the act of 1869 by which the preceding act of 1868 was enlarged to the judgment of the eminent men who purchased this portion of the railway under the decree of the court in the state of Ohio, and to that of those who succeeded them in the purchase and formed the Ohio consolidating corporation. They supposed they were observing all the restraints while, they were exercising the authority of these acts and in that they were confirmed by the action of the court in Ohio so far as that added its sanction to the proceedings by ordering and afterwards confirming this sale. These proceedings were further confirmed by the deed made by the receiver pursuant to the sale and by the subsequent conveyance by the purchasers to the persons who proceeded to form the corporation and, as they acquired, title to the corporate property and franchises in this way, they appear to have been abundantly indorsed with the further authority exercised by them of actually organizing the new corporation. That was done under the second section of the act of 1869 which, in its terms, seems to have been ample for this purpose, for it provided that these purchasers might form the corporation and when formed that it should have perpetual succession under the general railroad laws of the state regulating corporations and hold the property, rights and franchises purchased free and discharged from all liability for the debts of the original corporation (Wilcox's Railroad Laws of Ohio 227, sec. 2). According to this authority the three corporations must be regarded as having been lawfully formed which afterwards entered into the consolidated company executing this mortgage. They each actually existed and had the power to, exercise all the functions secured to such corporations under the laws of them respective states. And while it was in terms [45]*45provided that the newly-formed corporations should hold the property purchased free and discharged from all liability for the debts of the original corporation, as that was a provision made solely for its benefit and advantage, it could be waived by it; for this power of waiver has been so far extended as to permit it to be exercised as to statutory and even constitutional advantages (Buel agt. Lockport, 3 Com., 197; Lee agt. Tilleston, 24 Wend., 337; People agt. Murray, 5 Hill, 408; Houston agt. Wheeler, 52 N. Y., 641).
The statute contained no prohibition preventing the new corporation from assuming the debts of its predecessor in whole or in part, but it simply exonerated it from liability for them. And that privilege was waived by the agreement pursuant to which the sale was madfe and the new corporation was formed. For it was a portion of the plan that the debts should be carried along and be assumed by this corporation, and the one which was ultimately to arise out of the consolidation.
That was the primary object of the creditors themselves, for whom and under whose agreement these proceedings were instituted and carried into effect; and they were not prohibited by any law from providing for their security and protection in this manner.
The sales made — the corporation formed—and the consolidation finally resulting, were merely so many instrumentalities adopted for the protection of their interests, which were superior to those of others over the property and franchises affected, and which they were at liberty to resort to for their own indemnity.
And the conveyances and other instruments executed and delivered in the course of the proceedings, exhibit the continued existence of the intention to preserve and carry into final effect this controlling design. The proceeding, it is true, was a circuitous one, but that was rendered necessary by the circumstance that the laws did not provide for the original formation of the continuous corporation, whose rail[46]*46road was to extend and be operated in all three of the different states; the only way in which that conld be lawfully accomplished at that time was by the formation of the three local corporations in the different states, and then to have them avail themselves of the statutory powers of consolidation, which the laws of each state had provided. The consolidation was formed previous to the system formed by chapter 430 of the Laws, of 18Y4, in this state, amended by chapter 446 of the Laws of -18Y6, and accordingly was deprived of the advantages of those provisions. It could only be formed, as it was, by first creating the local corporations, and then allowing them to avail themselves of the powers given for that purpose to existing railroad companies.
The companies which were formed under the bondholders’ agreement, appear to have observed the formal requisites necessary to make a lawful and complete consolidation.
But, while that may be the case, it has been strenuously urged that it could not be done with the view that the consolidated corporation should assume the preceding liability of the corporations whose property was sold under the foreclosure proceedings, so that this purpose could in the end be secured.
The objection to the exercise of this power in this state, has been chiefly placed upon a provision contained in chapter 140 of the Laws of 1850, which was rendered applicable to the consolidated, corporations by section 8 of chapter 91Y of the Laws of 1869.
By this it was provided that railroad corporations could, from time to time, borrow such sums of money as might be necessary for completing and finishing or operating their railroad, and issue bonds for the money borrowed and secure their payment by a mortgage upon the corporate property and franchises (Laws 1850, 225, sec. 28, sub. 10).
But, while this may have been designed to carry with it an implication that mortgaged bonds could not be issued for any other purpose, it was still competent for the same author[47]*47ity that provided for the restraint, afterwards to remove it, and that in effect it did, as to consolidations, by the second section of the act of 1869. For, by that, unlimited authority was expressly given to the directors of the companies now proposing to consolidate, to enter into an agreement prescribing the terms and conditions for the consolidation, and the mode of carrying it into effect (Laws of 1869, sec. 2, sub. 1). And upon that being submitted to the stockholders of the respective companies and securing the approval of two-thirds of their votes for it, the agreement made became the lawful basis of the consolidation designed to be effected (Id., sub. 2).
Such agreements as this statute authorized appear to have been entered into and sanctioned in the manner prescribed by the terms of the act. That was first done for the pmpose of creating the consolidation between the corporations formed in this state and the state of Pennsylvania, and-again between the company resulting from this consolidation and the corporation formed in the state of Ohio. And, by the terms of the agreements made, it was stipulated that all rights of creditors should be preserved unimpaired, notwithstanding the consolidation; and debts, liabilities, obligations and duties of either of the corporations should thenceforth attach to the new corporations, and be enforced against it to the same extent, and in the same manner, as if said debts, liabilities, obligations and duties had been incurred and contracted by it. The preceding corporations had been respectively subjected to the obligation of carrying into effect the agreement and plan of the bondholders, and they were not prevented from assuming by any disability to which they had been subjected, for they merely assumed the liability or obligation to carry along and preserve the existence of these debts until the consolidation could be formed and the new mortgage bonds could be issued by that company for them.
That transcended nothing contained in the act of 1850, restraining the power to borrow money on the mortgage bonds of the company to that which should be necessary for [48]*48completing, finishing or operating the railroad. For this did not prevent the company from assuming the obligation to recognize and carry along these debts, as simple liabilities or obligations, but only from seeming their payment by a mortgage of its property and franchises. But while that might not he done by the local corporation, the one produced by the consolidation was not in that respect restrained, for it was empowered to carry out and perform the terms of the agreement whatever they might be, which was made as the basis of such consolidation after it had received the sanction of two-thirds of the stockholders, and by those terms construed and understood, in view of what had previously taken place; the evident intention was that the railways in each of the three states should be sold for the benefit of the creditors, whose demands far exceed its value, that these demands should he transmitted through the local corporations to the new consolidated company to be formed, and then secured by its bonds and a mortgage upon its property. This was the substance of what transpired and it was practically embodied in the terms of the agreements for the consolidation. Its existence is clearly indicated by the documents and other evidence in the case, and it was substantially acknowledged as a part of the basis of the consolidation and of the mortgage now in process of foreclosure in this action.
It has been objected that the company was not empowered to assume this obligation for the security of these demands by mortgage bonds, because preceding mortgages were in terms excepted from the obligations which were to attach to, and rest upon, the new company (Laws of 1869, 2402, sec. 5). But that argument is deemed to be fully answered by the circumstance that there were no such mortgages existing against the constituent consolidating company in this state. And no mortgage was assumed either by that or either of the other companies in point of fact. What was assumed and carried along, were, as the foreclosure sales left them, simple debts which were to be provided for by the final organization, and [49]*49that was not prohibited but in terms allowed by the very general authority created by this act of 1869.
That this was not opposed to the legislative policy of this state relating to railroad corporations has been since more clearly manifested by chapter 430 of the Laws of 1874, and chapter 446 of the Laws of 1876. For they were enacted to render its observance more feasible and practicable. They have now created a complete and plainly intelligible system for doing all that was accomplished in this instance. But it is not to be inferred from their enactment that the plan pursued in this case was not within the limits of the authority previously existing upon the subject.
That is not to be determined by the fact that these acts were deemed essential still by the legislature, but by the terms and scope of the pre-existing laws. And they, as already suggested, are deemed broad enough to sanction the proceeding by which the liabilities intended to be preserved were finally transferred to the consolidated company, which executed the present mortgage for the creditors’ security. The laws of Ohio under which the consolidation was made, were in their terms substantially the same as the act existing in this state (Wilcox's R. R. Laws, 134, 140). It was permitted to be done on the basis of a joint agreement, prescribing the terms and conditions thereof after that had been adopted by a vote of two-thirds of the stockholders of the different companies. When that was done and the agreement or a certified copy of it was filed in the office of the secretary of the state, it was made the agreement and act of consolidation of the two companies, as that was also provided for by the statute of this state. Upon this subject the laws were practically alike, and they each in terms delegated to the directors and stockholders of the different companies full power to declare and adjust the terms of the consolidation, which necessarily included that of providing for the security of the debts and obligations carried over and to be assumed by the final organization.
[50]*50The law of Pennsylvania in plain language provided that the consolidated company might issue bonds secured by a mortgage of its property, privileges and franchises and exchange them for the debts of the respective companies merged or consolidated. And the only restraint imposed upon the exercise of this authority, was that the bonds to be issued should not exceed the whole of the debts of the companies merged in the consolidation (General R. R. Laws of Penn., 121, 122). This act when it was passed seems to have been applicable only to railroad corporations chartered by that ■state, but it was afterwards so enlarged as to allow similar consolidations when one of the companies existed wholly or partially out of the state of Pennsylvania (Id., 81). In that .state, therefore, the authority seems to have been plenary over this subject allowing, in direct terms, all that was done for the purpose of effecting the consolidation and carrying the agreement and plan of the creditors into execution. While this was within the spirit and terms of the laws of New York and Ohio, it was literally provided for by the state of Pennsylvania. And under all these laws it was a duty created by the constituent corporations which were brought into being merely to promote and consummate the agreement and plan •of the creditors themselves and imposed by the concurrence -of all through the consolidation upon the company finally formed. The scheme devised, divested of the peculiar forms followed for the purpose of carrying it into effect, was, in substance, the sale of the property under the foreclosures for the benefit of the creditors — its purchase by them through the agency of the three persons selected by them — and who acted as their trustees — and the sale to the railroad company formed by the consolidation of the intermediate corporations and a mortgage executed by the latter to secure its obligations to pay the purchase-price. This is what the transaction really was; and in that respect it did not materially differ from an ¡ordinary sale of property on credit, where the purchase-price is secured by the mortgage of the purchaser given upon [51]*51the property. Upon such a sale the power to buy would seem to include the further power to become obligated to pay the price of the property bought either in cash or upon credit and in the latter case to secure by mortgage its future payment. While the company held property so purchased it would be plainly estopped from denying its liability for the price ( Whitney Arms Co. agt. Barlow, 63 N. Y., 63).
And the same estoppel would conclude those deriving title under it. In any view the corporation was legally obligated to issue its-bonds and provide for their security as it did by the mortgage in suit. And those delivered by way of substitution for debts existing previously which were assumed and to be protected by the consolidated company were taken upon sufficient consideration to render them%inding obligations.
The banque advanced its money on vouchers plainly referring to this mortgage and constructively giving it notice of its provisions and purposes. Both classes of obligations are consequently equally entitled to be sustained, and one cannot be held to have obtained any preference over the others.
It has been urged that the covenant' that the property conveyed was free from these preceding incumbrances, should be held to preclude the adoption and securing of the debts previously secured by them. But this argument cannot be regarded as sound, for the reason that while it was true these incumbrances had been extinguished by the foreclosures and sales, they nevertheless left the unpaid and unsatisfied debts still in full force and vigor, capable of being transferred to, and assumed by, the final organization as they were.. That was the object of the creditors in taking the proceedings which were carried on and maintained, and the intention to accomplish it was the controlling consideration in all that was performed by them. It was both legal and equitable in its nature and no provision or principle of law has been discovered which would require its observance to be denied. Various authorities have been cited as warranting the conclusion that this consummated arrangement carrying out as it does the [52]*52design of the parties having the authority to control the disposition of the property, should be held to be unlawful. But an examination of them has produced the conviction that they are in no respect in conflict with the legal propriety of the course which has resulted in the creation of this mortgage.
It has also been objected by the learned counsel representing the plaintiffs, that the banque having derived its entire right to protection under this mortgage, cannot assail its validity, so far as it may be necessary for the security of the bonds received by the creditors. But it is not necessary to decide whether that be the law or not, as these bonds must be regarded as legal obligations against the railroad company.
The creditors whose debts have been assumed are equally entitled to protection as the banque, whose debt was created ■by a loan of money on the faith of the hypothecated bonds. Both are lawful obligations, ^and the other creditors have neither done nor authorized any thing depriving themselves of that equal right to protection which has so often been held to be equity itself. The facts that one class of the bonds is held as security for a loan made directly upon them, while the others were transferred in satisfaction of debts, will not warrant any legal discrimination between them. The consideration for each was good, and that the kw holds to be sufficient to sustain them. This case might probably have been fully disposed of by limiting its consideration to the effect upon it of the laws of this state. But the range taken in the arguments, which were very able and learned, indicated the existence of a different opinion on the part of the counsel, and for that reason the controversy has received a much more extended consideration than would otherwise have been regarded as necessary for its determination. That has resulted in the conclusion already mentioned, that the bonds which have been issued by the railroad company to the creditors of the preceding company, were lawful obligations secured by the mortgage. And the defense of the defendant, so far as it depended on a different view of their validity, must be overruled.