Creditors who do not assent to a reorgan ization agreement are entitled to enforce pay ment of the purchase price paid at a fore closure sale by the reorganization committee, for the purpose of discharging their claims. Creditors coming in under the plan thereby release their rights against the old com pany ; First Nat. Bank of Chattanooga, Tenn., v. Trust Co., 80 Fed. 569, 26 C. C. A. 1.
Where a reorganization agreement provid ed that if stockholders neglected to pay the assessments within the period limited, the privilege of receiving the shares allotted to them should be ratably distributed among those who did pay their assessments, it was held that as soon as the default occurred on the part of a non-assenting stockholder, his interest became a vested right in the assent ing stockholders under the plan. Likewise that an assenting bondholder who fails to deliver his 'bonds to the trustee under the agreement is debarred from any benefit there in; Carpenter v. Catlin, 44 Barb. (N. Y.) 75.
In an action against a reorganized railroad company for failure to deliver its stock in amount equal to the bonds and coupons of the old company held by the plaintiff, it was held that as the plaintiff had not exercised his option to come into the plan prior to the execution of the deed of the property to the new company, he was not entitled to the stock, and his only right was to. take his share of the proceeds of the sale ; Landis v. R. Co., 133 Pa. 579, 19 Atl. 556. The right to participate ceases when the property, has passed to the new corporation ; the rights of the security holders thereby become fixed, and a majority of certificate holders cannot then modify them ; Dutenhofer v. Ry. Co.; 60 Hun, 578, 14 N. Y. Supp. 558.
Where a statute required the consent of bondholders for foreclosure proceedings of a railroad property and such consent was giv en, it was held that outstanding bondholders would be regarded as consenting by reason of their silence during a protracted litigation ; Barnes v. Ry., 122 U. S. 1, 7 Sup. Ct. 1043, 30 L. Ed. 1128.
A majority of 'bondholders cannot compel a minority, however small, to enter into a joint agreement with them ; Canada South ern R. Co. v. Gebhard, 109 U. S. 535, 3 Sup. Ct. 363, 27 L. Ed. 1020 ; nor will equity, at the suit of the corporation, compel minority bondholders to accept new bonds for a small er amount, without additional security, in aid of stockholders ; Lake St. El. R. Co. v. Zieg ler, 99 Fed. 114, 39 C. C. A. 431; but it is said that the relations of corporate bond holders are peculiar, and that the courts, in foreclosure proceedings, have sometimes con sidered them as analogous to those which exist among stockholders ; Short, Ry. Bonds,
§ 27 ; and that this is especially true in car rying out reorganization schemes ; id. See Shaw v. R. Co., 100 U. S. 605, 25 L. Ed. 757. An act for the reorganization of an embar rassed corporation which provides that all mortgage bondholders who do not, within a given time, expressly dissent from the plan of reorganization, shall be deemed to have assented to it, is valid ; Gilfillan v. Canal Co. of Pennsylvania, 109 U. S. 401, 3 Sup. Ct. 304, 27 L. Ed. 977; and so is an act which provides that a majority of the bondholders, with equal opportunities to all, may reorganize a new corporation ; Gates v. R. Co., 53 Conn. 333,' 5 Atl. 695. The the ory is that railroad property is pledged to public use and that this consideration is su perior to the property rights of corporators, stockholders, and bondholders See Canada Southern R. Co. v. Gebhard, 109 U. S. 535, 3 Sup. Ct. 363, 27 L. Ed. 1020. It seems to be eminently proper that, when the legislative power exists, some statutory provision should be made for 'binding the minority in a rea sonable way by the will of the majority, and unless laws impairing the obligations of con tracts are forbidden, there seems no reason that such provision should not be made as to existing obligations. In respect of em barrassed corporations, it would be a species of bankrupt act ; Canada Southern Ry. Co. v. Gebhard, 109 U. S. 527, 3 Sup. Ct. 363, 27 L. Ed. 1020 (concerning a Canadian rail road). But in Northern Pac. Ry. Co. v. Boyd, 228 U. S. 482, 33 Sup. Ct. 554, 57 L. Ed. 931, it was held that reorganization contracts be tween bondholders and stockholders of a company financially embarrassed, involving the transfer of the property to a new cor poration, cannot, even where made in good faith, defeat the claim of non-assenting cred itors ; nor is there any difference whether the reorganization was made by contract or private sale or consummated by a master's deed under a consent decree or even in the absence of fraud ; any device, whether by private contract or under judicial sale where by stockholders are preferred to creditors, is invalid ; Northern Pac. Ry. Co. v. Boyd, 228 U. S. 482, 33 Sup. Ct. 554, 57 L. Ed. 931. Lurton, J., dissented upon the ground that any plan of reorganization which in any way Includes stockholders of the reorganized com pany is not for that reason alone to be re garded as illegal, but that every case should stand upon its own facts. White, C. J., and Holmes and Van Deventer, JJ., concurred in the dissent.