TRUST. The power to give a mortgage is said to be inherent, unless prohibited by statute, in all corporations except railway companies. In the case of the latter, the power does not exist unless conferred by charter or statute ; Cook, Stock and Stockh. § 780. In practice, however, this power is usually—perhaps universally—possessed by railroad companies ; Short, 114y. Bonds, ch. viii.; Compton v. Jesup, 68 Fed. 263, 15 C. C. A. 397, 31 U. S. App. 486. See, generally, 7 Rul. Cas. 6i3.
A corporate mortgage should be executed with the same formalities as a deed. As it is incident to the general business of a cor poration, unless restrained by statutory or charter provision, the directors can author ize"a mortgage, thodgh it is customary, and perhaps better practice, that authority should be given by the stockholders. In form it may correspond to the mortgage of an in dividual and be made directly to the holder of the bond which it secures; but as it is usually given to secure an issue of a number of bonds, it is ordinarily in form a deed of trust conveying the mortgaged property to a trustee for the bondnolders, and this trustee is usually a corporation.
Corporate mortgages usually contain cove nants or provisions which are not found in a mortgage given by an individual. Pro visions common in such mortgages are (1) that until default the mortgagor may remain in possession of the property mortgaged; (2) an express covenant that the mortgagor will pay the principal and interest of the bonds secured, when due ; (3) that all the bonds are entitled to equality of lien no matter when issued; (4) that the mortgagor shall have power to sell, free from lien of the mortgage, worn out or damaged material (usually accompanied by some provision for replacing the same) ; (5) provisions as to payment of taxes and assessments upon the mortgaged property (which are usually assumed by the mortgagor) and providing against the suffering of liens to be establish ed against it ; (6) provisions as to the ma turing of the principal of the mortgage debt in case of default in the covenants for pay ment of interest; or other covenants, by the mortgagor ; (7) precluding any one from pur• suing a separate remedy ou his bond ; (8) exemption of the trustee from liability ex cept for gross negligence; provision for the substitution of a trustee in ease the trus tee named should decline to act, or, usually, in case a substitution be desired by a major ity or some larger number of the bondhold ers; (10) any other provisions, not illegal, which may be desired, such as provisions for the conversion of bonds into stock, provisions in regard to maintaining a sinking fund, etc.
It is customary for the trustee to accept the trust expressly, or to become a party to the deed, and also to certify upon each bond that it is one of the issues secured under the mort gage. Where such certificate is forged the bond is void, though in the hands of an in nocent purchaser for value; Maas v. Ry. Co., 83 N. Y. 223. But signature by vice-president is good though the bond calls for signature of the president; Conshohocken Tube Co. v. Equipment Co., 161 Pa. 391, 28 Atl. 1119. A trustee's certificate is a warranty of the facts recited therein (as that the bond is secured by a first mortgage duly recorded) on which the trustee is liable; Miles v. Roberts, 76 Fed. 919; Miles v. Vivian, 79 Fed. 848, 25 C. C. A. 208; Byers v. Trust Co., 175 Pa. 318, 34 Atl. 629.
The trustee in a railroad or corporation mortgage represents the bondholders ; Bowl ing Green Trust Co. v. Power Co., 132 Fed. 921; Mayor, etc., of Baltimore v. Electric Co., 108 Md. 64, 69 Atl. 436; 16 L. R. A. (N. S.) 1006, and note collecting cases on the ex tent of this representation.
The mortgage should be recorded in each county in which real estate covered by it is situated, and if it covers also personal prop erty the provisions of the law iu regard to chattel mortgages should ordinarily be com plied with and the mortgage recorded as a chattel mortgage, at any rate in the county in which the principal office of the mort gagor is situated. These matters are fre quently governed by statutes. See RECORD INO.