Where a corporation mortgage vests cer tain powers of control in a majority of the bondholders, as to sanction a modification of a deed of trust ; 55 L. T. N. 'S. 347; Hack ettstown Nat. Bank v. Brewing Co., 74 Fed. 110, 20 C. C. A. 327 ;. [1893] 1 Ch. 477, 484; to direct the trustee to purchase the mort gaged property at a foreclosure sale and to reorganize a new company ; Sage v. R. Co., 99 U. S. 334, 25 L. Ed. 394; or to control the mortgagee trustee in beginning or dis continuing foreclosure proceedings ; Elwell v. Fosdick, 134 U. S. 500, 10 Sup. Ct. 598, 33 L. Ed. 998 ; the courts will carry into effect the decision of such majority.
In Sahlgaard v. Kennedy, 13 Fed. 242, Treat, J., criticized the decree of foreclosure then before the court, for the omission of what he considered the usual clause in fore closure decrees, viz., one permitting the mi nority bondholders to come in, after purchase, within a limited time, on equal terms with purchasing bondholders.
A sale under foreclosure of an insolvent railroad company under an agreement by which the bondholders, according to their priorities, got more or less of their debt (100 to 30 per cent.), and the stockholders of the company the residue of the proceeds (16 per cent. of the par of their stock), was held fraudulent as against general creditors, al though the road was mortgaged far above its value ; Chicago, R. I. & P. R. Co. v. Howard, 7 Wall. (U. S.) 392, 19 L. Ed. 117; and the unsecured creditors could hold the new com pany ; Central of Georgia Ry. Co. v. Paul, 93 Fed. 878 ; St. Louis Trust Co. v., Ry. Co., 191 Fed. 632; contra; Carlisle v. Trust Co., 109 Fed. 177, 48 C. C. A. 275.
But where the plan gives stockholders an interest but does not include general credi tors, it is not invalid unless the scheme is to give the stockholders that which should go to creditors ; Paton v. R. Co., 85 Fed. 838. Such plan will be subjected to close scrutiny, if there are old creditors unprovided for ; but the mere fact that stockholders are given some interest in the new security, while it may be indicative of fraud, does not render the sale fraudulent; actual fraud must be shown, and that property exceeding the mort gage debt had been placed beyond the credi tors' reach ; Wenger v. R. Co., 114 Fed. 34, 51 C. C. A. 660; and where a bondholders' plan permitted •stockholdera to take new 'stock, on the payment of a difference, it was not, for that reason, fraudulent if it deprive the creditors of no right ; Farmers' L. & T.
Co. v. R. Co., 103 Fed. 110.
The holders of preferred stock may not use it to make up the amount of their bid on foreclosure sale of the property; Conti nental Trust Co. v. R. Co., 86 Fed. 930.
Where the local managers and officers of an insolvent railroad company, holding a small portion of its bonds, of which a much greater portion was held by non-residents, got an order of sale and proceeded in a hasty and rather secret way to sell and buy it in at the lowest value for themselves, the pro ceedings were held invalid as against the bondholders, generally, and the stockholders ; Jackson v. Ludeliug, 21 Wall. (U. S.) 616, 22 L. Ed. 492.
In England, if some of the majority of bondholders are not acting in good faith, a reorganization agreement will not be sanc tioned ; 44 Ch. Div. 403. Secured creditors of a railroad company, after bringing the property within the jurisdiction of the court, will not be permitted, by any private arrange ment with the company or otherwise, so to dispose of the property as seriously and un necessarily to prejudice the unsecured credi tors. They may not, for their own benefit or for the common interest of themselves and the debtor, place the surplus which may ex ist after the .satisfaction of their own claims beyond the reach of the latter ; Farmers' L. & T. Co. v. R. Co., 21 Fed. 264.
On proceedings by an unsecured creditor praying that the stock of a reorganized com pany, set aside in the reorganization agree ment for the stockholders of the old company, should be sold and the proceeds paid to the holders of the floating debt, it appearing that the plan showed a due regard for the inter ests of all classes of creditors and stockhold ers, and that the bill did not show any in justice intended or done to the complainant, the bill was dismissed ; Hancock v. R. Co., 9 Fed. 738.
Bondholders who decline, on request, to assent, and take no steps to protect them selves, have no standing in equity to set aside a foreclosure sale, if the transaction was fair ; Wetmore v. R. Co., 3 Fed. 177. An un secured creditor may be barred by laches from going against the new company ; Wen ger v. R. Co., 105 Fed. 796.