BRISCOE, J. The appeal in this case is [erage carried to some common point for from a decree of the circuit court for Prince treatment or discharge. George's county dismissing a bill in equity,

The sanitary district will cover an area filed by the appellant, for an injunction to of about 90 square miles of territory and restrain the appellee corporation, from car-will practically include all of the territory rying out the provisions of chapter 122 of the contiguous to the District of Columbia, in Acts of 1918, creating a suburban sanitary the state of Maryland. The present popudistrict, within the counties of Montgomery lation of this district, including the incorand Prince George's, in the state of Mary-porated towns, is about 40,000, and the asland and contiguous to the District of Co- sessed valuation of its property about $25,lumbia. 000,000.

The objections raised to the constitutionality of the act, as stated in the bill, are: (1) The appellant is a citizen of the state of That it violates and is in conflict with secMaryland, a resident of the town of Bladens- tion 1, art. 13, in that it creates an admin. burg, in Prince George's county and a tax-|istrative and taxing district of parts of two payer in the suburban sanitary district creat- counties, without the consent of the residents ed by the act.

The object and purpose of the act is to bring within the jurisdiction of a commission, acting for these counties, within the territory incorporated, an elaborate and complete system of water supply, sewerage, and drainage in this district, by which the sec- 93 Atl. 449; tions and communities would be served with 94 Atl. 384. water from some adopted source and the sew- In Hagar v. Reclamation District, 111 U.

S. 705, 4 Sup. Ct. 663, 28 L. Ed. 569, the Supreme Court said the fact that the lands may be situate in more than one county cannot affect the power of the state to delegate the authority. Such authority may be lodged in any board or tribunal which the Legislature may designate. The expense of such works may be charged against parties specially benefited, and be made a lien upon their property. This is a matter purely of legislative discretion. Whenever a local improvement is authorized, it is for the Leg islature to prescribe the way in which the means to meet its costs shall be raised, whether by general taxation or by laying the burden upon the district specially benefited by the expenditure. Orr v. Allen et al., 248 U. S. 35, 39 Sup. Ct. 23, decided December 9, 1918; Mobile v. Kimball, 102 U. S. 691, 26 L. Ed. 238; Orr v. Allen et al. (D. C.) 245 Fed. 486.

rates of assessment and taxation will be equal and uniform as to all the property within the taxing district, and, this being so, it cannot be said that its provisions are in conflict with any constitutional requirement. Daly v. Morgan, 69 Md. 460, 16 Atl. 287, 1 L. R. A. 757; Leser v. Wagner, 120 Md. 680, 87 Atl. 1040.

[6] This brings us to the last and fifth objection to the act, and that relates to its title. It is contended that the law is invalid because in conflict with section 29, art. 3, of the Constitution, which provides that every law shall embrace but one subject and that shall be described in its title.

The title of this act is very broad and comprehensive and contains a very clear and definite description of the subject-matter of the act.

The rule is well settled by a long line of cases in this court that, while the title must [4] The second, third, and fourth objec indicate the purpose of the act, it need not tions to the act, relate to questions of tax- give an abstract of the contents of the act, ation and assessment, and the classification or the details thereof, nor need it mention of the property, under section 8 of the act. the means and methods by which the generThis section, it will be seen, provides for the al purpose is to be accomplished. Fout v. classification by the commission of all prop- Frederick County, 105 Md. 545, 66 Atl. 487; erty within the sanitary district into four County Com'rs v. Meekins, 50 Md. 28; Steclasses, for the purpose of assessing bene-vens v. State, 89 Md. 669, 43 Atl. 929; Queen fits for the construction of the water supply Anne's County v. Talbot County, 99 Md. 13, and sewerage system, namely, agricultural, 57 Atl. 1; Crouse v. State, 130 Md. 370, 100 small acreage, industrial or business, and Atl. 361; Ruehl v. State, 130 Md. 189, 100 subdivision property, and to be assessed in accordance with its classification. The commission may change the classification of properties from time to time, as the properties change in the uses to which they are put. The act also provides for written notice and a hearing before the commission as to both

classification and assessments of benefits, and the Public Service Commission is given jurisdiction to determine upon appeal the reasonableness of all assessments, tax levies,

or service charges, as in the case of public service corporations. We find nothing in the provisions of this section that in any way contravenes or is in conflict with the state or federal Constitutions.

[5] The contention that the provisions of the act impose an unjust discrimination in favor of agricultural lands when in use for farming and trucking purposes and when not in such use is based upon an improper construction of the act, and cannot be sustained. Nor do we find any valid objection to the classification of the property for assessment and taxation as prescribed by the act. The

Atl. 75.

The title, upon examination, will be seen, fully describes the subject-matter of the act; that is, the sanitary system for the protec tion of the public health, within the district designated. There is nothing in the act it

self that is foreign or not germane and does not relate to what the title indicates.

The purchase and cancellation of bonds, issued by authority of chapter 313 of the Acts of 1916, out of the funds derived from any issue of bonds under the act, is a part of the subject-matter covered in the title for the construction of the sanitary system and the issuance of bonds for the development of the same water and sewer systems provided for by the act.

As we find no reason for declaring the act of 1918, c. 122, invalid or in conflict with any provision of the state or federal Constitutions, the decree of the court below denying the relief sought by injunction and dismissing the plaintiff's bill must be affirmed. Decree affirmed, with costs.

2. CORPORATIONS 99(2) DIRECTORS ULTRA VIRES ACT OF DIRECTORS-PAYMENT FOR PROPERTY BY STOCK.

In view of Code Pub. Gen. Laws 1888, art. 23, §§ 61, 62, 65, relating to the sale of corporate stock in return for property, such transaction must be made by the stockholders, and the action of the directors in issuing a duebill for such property was ultra vires, and a fraud upon prospective purchasers of stock, who would look to the records of stockholders' and not directors', 'meetings, and it is immaterial that all stockholders were directors. 3. CORPORATIONS

80(8)-SALE OF CORPORATE STOCK-NOTICE TO PURCHASER OF CORPORATE DEBTS.

Stockholders and directors of a corporation holding duebills under resolution of the board of directors in payment for property furnished the corporation, when selling the corporate stock, were in equity and justice under obligation to make known to the purchaser the fact that they held such certificates and claimed the right to be paid for them, in view of their sale contract covering all their rights.

4. CORPORATIONS 473-CERTIFICATES OF INDEBTEDNESS VALIDITY-RELIEF OF BONDHOLDERS OF PURCHASER.

Where plaintiff, representing holders of power company bonds secured by mortgage, purchased the mortgage and also land company stock owned by the power company, and the power company, when giving mortgage, had 'notice of claims against the land company evidenced by duebills given to directors, the bondholders were not precluded from relief from such duebills, if invalid.

5. CORPORATIONS

273 BONDHOLDERS' SUIT TO CANCEL CERTIFICATES OF INDEBTEDNESS-EQUITY JURISDICTION.

In a suit by plaintiff, representing bondholders of a corporation, to cancel certificates of indebtedness against the corporation, made payable to bearer, unlawfully issued without consideration, and to enjoin their payment, held, that plaintiff was entitled to protection, and could obtain ample relief only in a court of equity.

6. CORPORATIONS 473-RIGHTS OF BONDLACHES JUSTIFICATION OF DELAY IN BRINGING SUIT.

HOLDERS

Delay in asking relief by bondholders in suit to cancel and set aside corporate certificates of indebtedness held justified, because of delays through objections filed to sale of properties to bondholders and by pending litigation |

between the corporation and holders of such certificates.

Appeal from Circuit Court No. 2 of Baltimore City; James M. Ambler, Judge.

Bill in equity by Frank J. Hoen against George K. McGaw and another. From a decree for complainant, defendant McGaw appeals. Affirmed?

Argued before BOYD, C. J., and BRISCOE, BURKE, THOMAS, URNER, and CONSTABLE, JJ.

W. Irvine Cross, of Baltimore (W. T. Warburton, of Elkton, on the brief), for appellant.

Thomas H. Robinson, of Bel Air, for appellee.

BOYD, C. J. In the case of Conowingo Land Co. v. McGaw, 124 Md. 643, 93 Atl. 222, we reversed the judgment and awarded a new trial. When that case was about to be reached for retrial, the appellee filed a bill in equity against McGaw and the Conowingo Land Company, in which he alleged that he was the owner of 400 shares of the capital stock of that company, and prayed, amongst other things, that McGaw be required to deliver up the evidences of debt claimed by him, which were involved in the case in 124 Md. 643, 93 Atl. 222; that they be declared to have been invalidly, illegally, and fraudulently issued, and void; that said McGaw be enjoined from asserting any right or claim to the said evidences of debt, and to the sums of money mentioned therein, and from prosecuting his said claim against the Conowingo Company. It was further prayed that the Conowingo Company be enjoined from paying said evidences of debt, or any sum or sums of money thereunder, and there was a prayer for general relief. A preliminary injunction was issued, separate answers of the defendants filed, and testimony taken. A decree was passed, making the injunction permanent, and enjoining McGaw from further prosecution of the action referred to, or from instituting any other action or proceeding on the "duebills" or "certificates of indebtedness" mentioned. It further ordered McGaw to cancel said duebills, or cause them to be canceled, and to pay the costs. From that decree this appeal was taken.

The most important questions for our decision are: (a) Were the certificates of indebtedness legally and validly issued by the Conowingo Company? and (b) if they were not, was the plaintiff entitled to relief in a court of equity? Other questions were argued, but those are the most material ones.

[1] (a) The form of the certificate is set out in full in 124 Md. 643, 93 Atl. 222, and we will not copy it in this opinion. Mr. McGaw had two certificates for $5,000 each and

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

mitted to the stockholders of the Conowingo Land Company the following proposition:

"I, Charles C. Caldwell, hereby submit a proposition to subscribe for 591 shares of the capital stock of the par value of $100 each, of the Conowingo Land Company of Cecil county, and in payment therefor it is proposed to sell, transfer, and convey to said company all my right, title, interest, and claim of, in, and to the tracts of land located on the east bank of the Susquehanna river in the Eighth district of Cecil county, as conveyed to me by deed from Philip T. Bell and others, representing the estate of James C. Bell, deceased, by their deed dated the 10th day of July, 1900, and duly recorded in the land records of Cecil county, and upon the

one for $3,150. Certificates were issued to James H. Harlow for the same amounts. What we said in the opinion in 124 Md. 643, 93 Atl. 222, is sufficient to show that we were of opinion that there was nothing in the form of the certificates which would necessarily affect their validity, but it is strange that the president of the company was not called upon to sign them, as the treasurer, who did sign them, was an interested party. But, inasmuch as the directors had unanimously authorized them to be issued, at a meeting over which the president presided, it may be that they were executed in the form they were for convenience, and not for the purpose of withholding from him knowl-delivery of a deed by me to your company for edge that they were issued. After a careful examination of the evidence and the law applicable thereto, we are of opinion that there was no consideration for them, and that the directors had no power to pay Messrs. McGaw and Harlow the amounts they represented. Mr. Caldwell held the title to what was spoken of as the Bell property. He purchased it for $50,000, $25,000 of which were paid in cash and the remainder secured by mortgage. Mr. McGaw and Mr. Harlow each contributed $13,150, which was used in making the cash payment and some other payments in connection with the purchase. They had an arrangement with him by which he was to have an interest in the profits or the proceeds of sale to be made by him, and without now referring to the evidence of Messrs. Harlow and Caldwell on that subject, we will quote from that of Mr. McGaw, which in part was as follows:

"5 Q. What was the purpose of the incorporation of the Conowingo Land Company? A. The purpose was to define the three interests to Mr. Harlow, Mr. Caldwell, and myself. We

*

*

had agreed to give Mr. Caldwell one-third of the profits above the cost of the property, and the corporation was formed and the stock issued in order that he might definitely confine his interest above the cost of the property. * 6 Q. It has been suggested that the stock issued represented the total value of the land free from the debt to you and Harlow. Please state what the fact was about that. Mr. Robinson: I object. The Witness: It did not. It was done more especially to define and to give Mr. Caldwell his interest above the cost that we had promised him for his various services."

The Conowingo Land Company was organized to take over that property. It had an authorized capital stock of $60,000, divided into 600 shares of $100 each. After it was organized, 9 shares of stock were subscribed -3 by Mr. McGaw, 3 by Mr. Harlow, and 3 by Mr. Caldwell. A share was given by Mr. Harlow to his brother, George R. Harlow, and one by Mr. Caldwell to his brother, S. J. Caldwell, for the purposes of the organization. Those five were named as directors. On April 17, 1902, Charles C. Caldwell sub

said property, your company is to assume and pay the purchase-money mortgage of $25,000 made and given by me in part payment for said James C. Bell, deceased, and is also to issue land and property to the estate of the said and deliver to me the said 591 shares of the capital stock of your company, of the par value of $100 each. All of which is respectfully submitted.

"[Signed] Charles C. Caldwell."

and later on the same day Charles C. CaldThat was accepted by the stockholders, well, George K. McGaw, S. J. Caldwell, and James H. Harlow, who were four of the five directors, met and organized by electing Charles C. Caldwell president, James H. Harlow secretary, and George K. McGaw treasurer. At that meeting the secretary read the resolutions of the stockholders passed relative to the purchase by the company

from Charles C. Caldwell of the property recently acquired by him from the estate of James C. Bell and the subscription thereby made by him to the capital stock of the company. It was resolved that the proper officers of the company be directed to carry out the instructions as provided for in the resolutions adopted at the meeting of the stockholders, and, after providing for the procuring of a corporate seal, stock certificates, and necessary books and stationery, the minutes of that meeting concluded as follows:

"On motion, it was unanimously resolved that the officers be and they are hereby authorized and directed to issue due bills of this company for cash advances with interest, namely: A duebill to George K. McGaw for $13,150, and a duebill to James H. Harlow for a like amount of $13,150, and that said duebills shall bear interest from the 1st day of April, 1902, at the rate of 6 per cent. per annum until paid by the company; the same having been part of the purchase money paid the said Bells for the real estate."

A certificate of stock was issued to Caldwell for 591 shares, which was returned, and three certificates, for 197 shares each, were issued to Messrs. McGaw, Harlow, and Caldwell, which, together with the shares already held or controlled by each of them, made 200 shares for each, thus including the whole of

the capital stock of the company. Sections [mitted by the statute. Any one desiring to 61 and 62 of article 23 of the Code of 1888 were still in force when the subscription of Caldwell was made and accepted for the 591 shares, as they continued to be for some years afterwards. The transactions were therefore governed by them and other provisions of the statute then applicable to subscriptions of the capital stock of corporations payable in land or other property.

buy stock of a company which had issued any of its stock for property would, under the statute, look to the minutes of the proceedings of the stockholders, and not to those of the directors, to ascertain what was done. The property was paid for by the stock, but, if the theory of the appellant be correct, then any person who subscribed for stock to be paid for in property could not only have gotten stock, represented to be fully paid, but he could have been repaid all that the property had cost him. In short, he would have gotten his money back in cash and then got the stock for nothing, if the property was not worth more than it had cost him. The law as found in those sections has been very materially changed, but it never contemplated such results as those we have suggested. Mr. McGaw said that the plan was adopted so that Caldwell would get what he was en

By section 61 subscriptions to capital stock of a corporation were authorized to be made in land or other property at a valuation to be agreed upon between the corporation and the subscriber, when the property was such as it was proper that the corporation should own, but not unless previously authorized by the stockholders, assembled in general meeting pursuant to a call to consider the propriety of receiving the subscription and of fixing the terms. By section 62, when property of any kind was so received in pay-titled to-one-third of the profits out of the ment of stock, it was provided that

"The books of the company shall be so kept as to show at all times fully what property was received for the said stock, at what value and the number of shares of the capital stock issued for the same; in all other cases money only shall be considered as payment of a subscription to any part of the capital stock."

Then by section 65 the president and a majority of the trustees, directors, or managers of such corporation were required to make a certificate, within 30 days after the payment of the last installment of stock limited in the certificate of incorporation, stating the amount of the capital stock so fixed and paid in, and of all property received in payment for any of said subscriptions, and the extent to which said payments have been made in property, which certificates were required to be sworn to by the president, and filed with the clerk of the court in which the certificate of incorporation was recorded.

land. That was a matter between Caldwell, of the one part, and McGaw and Harlow, of the other part, and not between the company and them. If the understanding was that they were first to be paid what they had paid out on the property, it could easily have been arranged. It could have been provided in the subscription that the company was to pay the amount or give a mortgage for it in addition to the stock, or they could have agreed with Caldwell that $26,300 worth of stock, or such amount as would have been proper and fair, should be first given to them, and the balance divided into three parts. According to the terms of the subscription the property was to cost the company $59,100, plus the $25,000 mortgage, and that is what parties dealing with the company or in its stock had the right to believe it did cost; but according to the appellant it cost $26,300 more. Such a transaction would be directly contrary to the letter and spirit of the stat

ute.

[2] It was suggested that the stockholders and the directors were the same parties, and hence it could make no real difference; but, as we have shown, when they acted in one capacity, as stockholders, they were authorized to do what they could not do when act.

It is therefore clear that the stockholders, and not the directors, were required to act in such matters. There is no suggestion in the proposition submitted by Caldwell and accepted by the stockholders of a proposed payment by the company of any sum of money, except the $25,000 secured by the mortgage, subject to which the land was conveying in the other, as directors, and the same ed. The 591 shares of the capital stock were to be in full payment of the property, subject to the mortgage. That was required to be made a matter of record on the books of the company, so as to show what the corporation received and what it gave in the transaction. In this case it gave $59,100 in the par value of stock for property which was subject to a $25,000 mortgage, but was not subject to the mortgage, plus $26,300 of indebtedness. The directors had no power to add such a burden on the company in that transaction. It would have opened the door to the grossest fraud, if that had been per

protection is not afforded the public in the one case as in the other. Moreover, the stock was liable to be sold as it subsequently was sold, but there was nothing in the books of the company to suggest that there was such an indebtedness as this, excepting the resolution of the directors authorizing the giving of "duebills" and some later action by them providing for giving a second mortgage. We feel constrained, therefore, to answer the first question in the negative and to hold that the certificates of indebtedness were not legally issued and the directors' action was ultra vires.