Two railroad corporations- — the Alabama and Florida Eailroad Company of Alabama, and the Mobile and Great Northern Eailroad Company- — -had separate meetings of their stockholders, and at such separate meetings, each of said corporations agreed - to a common basis of consolidation, submitted to them, by which they became one corporation under the new name, “ The Mobile and Montgomery Eailroad Company.” The proposition, thus submitted and acted on, contained a statement of what purported to be the financial condition of each of the corporations. The Alabama and Florida Eailroad Company was reported as owing first and second mortgage debts amounting to about eleven hundred thousand dollars, a third mortgage debt of three hundred and fifty thousand dollars, and a floating debt. The mortgage debts were evidenced by coupon bonds, in the form of commercial paper, and were secured by mortgages on the railroad and its property, as was expressed on the face of the bonds. The third mortgage bonds were issued during the civil war, and, it is alleged, were sold for Confederate money. The report and proposition so made to the twTo companies, and acted on by them, was in writing, and, together with the action of the two corpbrations thereon, was spread on the records of the Alabama and Florida Eailroad Company. This record showed the statement of the debts above referred to, and the book containing it became' the record book of the Mobile and Montgomery Eailroad Company, from that time forth. In the proposition for consolidation, thus submitted and acted on, it was proposed that, after the consolidation should be perfected, the new corporation should issue new coupon, commercial bonds, secured by mortgage on the consolidated road, for the purpose, in part, of paying the debts of the old corporations, and, in part, to provide a fund for the repair and completion of the consolidated road. All these propositions were agreed to, at the several stockholders’ meetings. On the 5th day of August, 1868, the act was approved “to consolidate and make joint stock of the Mobile and Great Northern Eailroad Company, and the Alabama and Florida Eailroad Company of Alabama, and to change the name of said companies to the Mobile and Montgomery Eailroad Company.” — Sess. Acts, 1868, p. 82. By said act it is declared, “ That in accordance with the action of the stockholders of the Alabama and Florida Eailroad Company, of Alabama, at the convention held on the 10th day of March, 1868, and with the action of the stockholders of the *584Mobile and Great Northern Railroad Company, at their convention held on the 13th and 14th days of March, 1868, full authority is hereby given to said companies to make joint stock of the stock of the two companies, and to consolidate said companies into one corporation, by the corporate name of the Mobile and Montgomery Railroad Company.” The act also conferred on the new company the franchises and property-rights of the old companies, and authorized the new company “to issue bonds, payable at such times and places, and bearing such rate of interest as they may deem desirable, and to secure the same by mortgage or deed of trust on the road, property and franchises of said company,” and to dispose of the bonds, etc. The sixth section of said act is in the following language: “That the consolidation of the said Alabama and Florida Railroad Company with the said Mobile and Great Northern Railroad Company, and the change of the name of the said companies, as provided for in the foregoing sections of this act, shall in no way affect the rights of the creditors of the said companies, and their separate existence shall be continued as to all the lights and remedies of creditors, and the president of said Mobile and Montgomery Railroad Company shall be held in law, as to service of process, as the president of the said Alabama and Florida Railroad Company, and of the Mobile and Great Northern Railroad Company; and the said Mobile and Montgomery Railroad Company may dispose of any property, real or personal, held by each of said companies, and make'and execute titles for the same, and may sue for and recover in its name all debts, dues and demands, of every kind and description whatever, due to each of said companies.”
Under the statute of August 5th, 1868, the Mobile and Montgomery Railroad Company, having organized, issued its commercial coupon bonds to the amount of two and a half millions ; and, to secure their payment, executed to trustees a mortgage, conveying to them, for such purpose, the franchise and all the property of said Mobile and Montgomery Railroad Company. The bonds so issued were put on the market, and sold to purchasers. The bona fide sale of these new bonds is not questioned, nor is any question raised on the sufficiency of the consideration paid for them.
The Mobile and Montgomery Railroad Company made default in the payment of its interest on said coupon bonds, and thereupon the trustees sought and obtained, by bill in chancery, a foreclosure of said mortgage. Neither the Alabama and Florida Railroad Company, the Mobile and Great Northern Railroad Company, nor any of the creditors of either, were made parties to said suit. Under a decree rendered in said cause, the franchise and entire property of the Mobile and *585Montgomery Railroad Company was brought to sale, and the trustees became the purchasers, in trust for the bondholders. The latter thereupon incorporated themselves, under the corporate name of the “ Mobile and Montgomery Railway Company.” The present suit is against the last named corporation, and is prosecuted by third mortgage bondholders of the Alabama and Florida Railroad Company, — their bonds not having been paid. The purpose of the suit is, to subject to the payment of their said claim that portion of the consolidated road which was originally the property of the Alabama and Florida Railroad Company. Their suit is rested on the sixth section of the act approved August 5th, 1868, and on the report and proposition submitted, on which the consolidation proceedings were had by the original companies.—M. & W. P. R. R. Co. v. Branch, 59 Ala. 139.
Section 6 of the act ratifying the consolidation provides, that such consolidation “shall in no way affect the rights of the creditors of such companies, and their separate existence shall be continued as to all the rights and remedies of creditors.” Immediately in connection with this provision, and separated from it only by a comma, is this language: “And the said Mobile and Montgomery Railroad Company may dispose of any property, real or personal, held by each of said companies, and make and execute titles for the same.” It is contended, that this second clause confers a right to sell the entire road and property; and when so sold, the liability resting on the original roads, for their unpaid debts, would necessarily cease. This, it is claimed, distinguishes this case from M. & W. P. R. R. Co. v. Branch,supra. There are several reasons why we can not adopt this interpretation. It would render almost, or quite nugatory, the connected clause which preserves and continues the old corporations, so far as their debts are concerned. It would be somewhat a duplication of the power, conferred by the fifth section, to make a “mortgage or deed of trust on the road, property and franchises of the company.” It authorizes the sale of only real and personal property, saying nothing of the franchise, while the fifth section expressly authorizes the mortgage of the franchise. We should so construe the statute, as to give to each clause some operation, if we can. We accomplish this object by holding, as we do, that the authority to sell and convey real and personal property .which had belonged to the original corporations, was confined to such property as was not needed for running or operating the road, surplus lauds, and probably personal effects, not in present use, nor required for use on the road. The clause immediately preceding had fastened a charge. This was intended to release the property not needed, and also “dues and demands of every kind *586and description,” from that charge and incumbrance, and permit them to be utilized.
The important question in this case arises out of the inquiry, Were the purchasers of the bonds, known as first-mortgage bonds of the Mobile and Montgomery Railroad Company, chargeable with notice of this prior incumbrance or charge, resting on that part of the consolidated road, which was formerly the Alabama and Florida Railroad Company of Alabama? If they were, then the complainant in this case is entitled to recover. Otherwise, not. We may premise, that the proof fails to show satisfactorily that the alleged third mortgage of the Alabama and Florida Railroad Company was ever executed, although there is some proof pointing in that direction. But, if executed, there is a failure of proof that it was ever recorded. This, however, is immaterial. The presentsuit claims relief in equity ; and if the purchasers of the consolidated road’s bonds are chargeable with notice of the liability resting on the original roads, as preserved by the act of consolidation, then such purchasers can not claim the immunity which purchasers, in good faith, of commercial paper can assert. This would leave the third-mortgage bonds of the Alabama and Florida Railroad Company an equitable charge on that part of the consolidated road.—White Water Valley Co. v. Valleth, 21 How. U. S. 414; Young v. M. & E. R. R. Co., 2 Woods, 606; Jones’ Eq. Mortgages, § 73; Miller v. R. & W. R. R. Co., 36 Ver. 452; M. & W. P. R. R. Co. v. Branch, 59 Ala. 139.
The rules as to notice, sufficient to charge a purchaser of commercial paper before maturity, are widely different from those which obtain in the purchase of property and of noncommercial paper. “A purchaser of negotiable bonds before due, for a valuable consideration, in good faith, and without what is equivalent to actual knowledge or notice of a defect of title, holds them by a title valid as against every other person. Even gross negligence at the time of purchase does not, alone, defeat the purchaser’s title. A purchaser may have had suspicion of a defect of title, Or knowledge of circumstances which would excite such suspicion in the mind of a prudent man ; or he may have disregarded notices of stolon bonds ; and yet, if he has purchased for value in good faith, his title can not be impeached. ... It must be shown that he did not purchase honestly.”,—Jones’ Railroad Securities, § 207; 2 Danl. Negotiable Instruments, §§ 1502-3; Murray v. Lardner, 2 Wall. 110; Galveston R. R. Co. v. Cowdry, 11 Wall. 459; St. John Township v. Rogers, 16 Wall. 644. And when a negotiable bond, or other negotiable instrument, is thus purchased, a mortgage given to secure its payment is alike protected against latent defenses, as is the instrument it is intended *587to secure. Such negotiable instruments — particularly railroad bonds — derive their strength, solvency, and negotiability, from the mortgaged railroad which puts them on the market. Withdraw from them this support, and their negotiability at once perishes.—Hawley v. Bibb, 69 Ala. 52; Carpenter v. Logan, 16 Wall. 271; Kennicott v. Supervisors, Ib. 452; 1 Jones’ Mort. § 834; 1 Hilliard Mort. 526; 1 Danl. Neg. Instr. § 834; Taylor v. Page, 6 Allen, 86; Martineau v. McCollum, Chand. (Wis.) 153; Cornell v. Hickens, 11 Wis. 353; Pierce v. Farmer, 47 Me. 507; Cicoth v. Gagnin, 2 Mich. 381; Blower v. Henderson, 8 Mich. 394; Potts v. Blackwell, 1 Jones’ Eq. 58; Fisher v. Otis, 3 Chand. 53; Croft v. Bunsterm, 9 Wis. 503. See, also, Town of Colona v. Eaves, 92 U. S. 484; Bissell v. City of Jeffersonville, 24 How. 287; Moran v. Com'rs, 2 Black, 722; City of Elizabeth v. Force, 29 N. J. Eq. 587; Deming v. Inhab. of Holton, 18 Am. Rep. 253, and note.
Two States — Ohio and Illinois — depart from the general ruling, which extends the immunity accorded to negotiable instruments to the mortgages given to secure their payment. Bailey v. Smith, 14 Ohio St. 396; Kleeman v. Frisbie, 63 Ill. 462. And in 2 Pom. Eq. § 708, n. 1, the reasoning of these cases is commended. Our ruling in Hawley v. Bibb, supra, is supported by the great .weight of authority.
The rule in regard to purchasers of property is, that any information or notice to the purchaser, of any fact or circumstance calculated to excite suspicion, and which, if followed up, will lead to a discovery of the latent equity, or defect of title, is the equivalent of actual notice.—Le Neve v. Le Neve, 2 Lead. Cas. in Eq. 35; Milhous v. Dunham, 78 Ala. 48; Hodges v. Coleman, 76 Ala. 103; Dudley v. Witter, 46 Ala. 664; Marks v. Cowles, 61 Ala. 299; Center v. P. & M. Bank, 22 Ala. 743; Wilson v. Wall, 34 Ala. 288.
The bonds issued by the Mobile and Montgomery Bailroad Company, as we have shown, were put on the market and sold, and the holders of them had the mortgage foreclosed, the railroad, its equipment and franchise sold, and themselves became the purchasers. It is not pretended they had actual notice of the charge left on the consolidated road, by the agreement and act of consolidation. The bonds under which the later corporation, the Mobile and Montgomery Bailway Company, asserts title, expressly refer to the statute “to authorize the governor of the State of Alabama to indorse, on the part of the State, the first-mortgage bonds of the Mobile and Montgomery Bailroad Company,” approved February 15th, 1870. — Sess. Acts, 1869-70, p. 175. They also refer to the mortgage, on its face styled a first mortgage, made to secure the payment of said bonds. Neither the mortgage nor the bonds make any *588reference to the act of consolidation and incorporation of August 5th, 1868, stated above. The later act makes no allusion to the charge left on the original roads by the agreement made part of the act of consolidation. By its terras and provisions, it is shown that one million five hundred thousand dollars of these bonds were designed and set apart specially to “first pay off, satisfy, and discharge all the existing liens on the said railroad, outfit and equipment, so that the State of Alabama shall have a first and only lien on the said railroad, outfit and equipment.” Other provisions of the statute are such that the said million and a half of bonds could only be used in paying the old indebtedness resting on the road ; and the bonds could only be delivered by the governor, in performance of an agreed arrangement, by which the new, indorsed bonds were to be given in exchange for the old. If these statutory requirements had been faithfully adhered to, not a dollar of these first million and a half of bonds would have passed from the governor’s hands, except in exchange for old indebtedness, until that entire indebtedness was taken up; and the last of said million and a half could be delivered only when the outstanding, old indebtedness had been cancelled within one hundred thousand dollars of its full amount. And by the second section of said act it is provided, that “Whenever the governor of the State of Alabama is satisfied that all of the existing liens on the said railroad, outfit and equipment have been discharged, and the State of Alabama has a first and only lien on the said railroad, outfit and equipment, and satisfactory evidence is submitted to him that the said Mobile and Montgomery Railroad Company have let out, to good and responsible parties, the building of their road from its present terminus at Tensas to the city of Mobile, the governor is hereby authorized and required to indorse, on the part of the State of Alabama, the other one million of dollars of the first-mortgage bonds of the said railroad company.” By these provisions it will be seen that, until the entire old indebtedness on the road was cancelled, the last million of the bonds could riot be indorsed ; and the first million and a half could only be surrendered by the governor, in liquidation of the old lien indebtedness. The entire two and a half millions were indorsed by the governor, delivered to the railroad officials, and sold in the market. It was the governor’s duty to satisfy himself by proof that all these conditions were complied with, before he was authorized to surrender the bonds. Finding the bonds in market, each having the governor’s indorsement, the purchasing public was justified in inferring that all conditions precedent had been complied with ; that the entire old debt had been cancelled, and that the mortgage security was what its face, the bond, and the statute all *589declared it was, a first mortgage. This, if there be nothing else, placed the bondholders on the high vantage-ground of purchasers of commercial paper, without notice.—Mercer County v. Hackett, 1 Wall. 83; Van Hostup v. Madison City, Ib. 291; Supervisors v. Schenck, 5 Wall. 772; Belo v. Comm’rs Forsythe Co., 76 No. Car. 489; Comm's Knox Co. v. Nichols, 14 Ohio St. 260: Com. Mut. Life Ins. Co. v. C. C. & C. R. R. Co., 41 Barb. 9; Welch v. Sage, 47 N. Y. 143; N. O. J. & Gr. Nor. R. R. Co. v. Mississippi College, 47 Miss. (5 Morris) 560.
But there is another view of this question. Corporations are artificial persons, and, with us, exist only by positive law. They are the creatures of special statutory enactment, or of incorporation under some general law, conferring the authority. All persons dealing with them are burdened with the duty of informing themselves that they have a legal existence, and that they are clothed with the powers they propose to exercise. Being bound to inform themselves of the extent of the corporate powers, they must needs examine the act of incorporation which confers the powers. Like the investigator of a land title, they must examine all the links in the chain, and are charged with knowledge of any fact such examination would disclose.—Dudley v. Witter, 46 Ala. 664. Examination of the act of incorporation in this case would have disclosed the fact, “that the consolidation of the said Alabama and Florida Bail road Company, with the said Mobile and Great Northern Bailroad Company, and the change of the name of the said companies, as provided for in the foregoing sections of this act, shall in no way affect the rights of the creditors of said companies, and their separate existence shall be continued as to all the rights and remedies of creditors.” The bond purchasers, then, must be held to have known of these old debts which incumbered the property.—Board of Com'mrs v. Aspinwall, 21 How. U. S. 539; Com. Mut. Ins. Co. v. C. C. & C. R. R. Co., 41 Barb. 9, 27; The Floyd Acceptances, 7 Wall. 666; Marsh v. Fulton Co., 10 Wall. 676; and authorities on brief of counsel.
It must be confessed that this is a very hard case. The bonds were issued as first mortgage bonds, under the act approved February 25th, 1870. That act gave no notice of any debt, which could be outstanding when the bonds were offered for sale; for, by the very terms of the act, the offer of the bonds for sale was an official certification, by the State’s executive head, that all prior liens and incumbrances on the road had been paid and cancelled. There was no authority for delivering the bonds until such payment had been made. The bonds referred to this statute, as an authority for their issue ; *590arid referred to tire mortgage as a first mortgage, to secure their payment. Well might the bond-purchasers feel secure in the belief that the bonds, for which they parted with their money, had a first and only lien on the road ánd its property, for their ultimate payment.
All these, however, were the acts of tire railroad’s officials and the State’s officers. Thu holders of the claims against the two original corporations, preserved by the act of consolidation, were not consulted, took no part in the issue or sale of the new bonds, or in the giving of the mortgage, and hence can not be concluded by anything that was done. The agreement and act of consolidation had left their claims a charge on that part of the consolidated road which had been known as the Alabama and Florida Eailroad of Alabama, and they had done nothing to waive or cancel the charge. The legislature could not, without their consent, deprive them of this right.—Caylus v. N. Y., K. & S. R. R. Co., 10 Hun, 295; Com. of Va. v. State of Maryland, 32 Md. 501; Wilkinson v. Leland, 2 Pet. 657; Sadler v. Langham, 34 Ala. 311.
What we have said relates to the bonds outstanding against the Alabama and Florida Eailroad Company, at and before the act of consolidation. Their payment was secured by an equitable mortgage. We decide nothing as to the non-secnred debts.
If the bonds sued on in this case were sold for Confederate currency, the recovery should be for only the purchasing value of the currency thus paid, at the time of the purchase, with interest upon that value.—Thorington v. Smith, 8 Wall. (U. S.) 1.
Eeversed and remanded.