ties on an equality with the majority under the reorganization plan. The recognition of this right in the majority, and the refusal to fix an upset price, will make possible the same facile and expeditious procedure as is found under English "Arrangements," without unwise imitation of English methods and consequent violence to our American procedure, and also without the denial of any constitutional rights.
II
The Supreme Court of the United States[1] has recognized the validity of a reorganization effected under this precise plan. Indeed, Chief Justice Waite, who wrote the opinion in the Shaw case, as appears from his opinion in the Canada case, was an admirer of the English method of "Arrangements" and recognized fully the necessity of majority control in corporate reorganization. In this case the railroad company had issued two series of bonds; one for $3,500,000 secured by a mortgage on the uncompleted railroad; a second issue of $5,000,000 secured by a mortgage of its federal land grants. Upon the insolvency of the railroad company the trustees brought foreclosure proceedings; a committee representing the holders of $6,097,000 of the bonds bought in the property at the foreclosure sale for the nominal sum of $50,000 and incorporated in the decree confirming the sale a stipulation allowing all bondholders to participate on an equality in the reorganization by receiving stock in the new company. After confirmation of the sale, minority bondholders sought to set it aside; this the Supreme Court refused to do, saying by Chief Justice Waite:
"To allow a small minority of bondholders representing a comparatively insignificant amount of the mortgage debt, in the absence of any pretence even of fraud or unfairness, to defeat the wishes of such an overwhelming majority of those associated with them in the benefits of their common security, would be to ignore entirely the relation which bondholders, secured by a railroad mortgage, bear to each other. Railroad mortgages are a peculiar class of securities. The trustee represents the mortgage, and in executing his trust may exercise his own discretion within the scope of his powers. If there are differences of opinion among
- ↑ Shaw v. Railroad Co., 100 U. S. 605, 611 (1879).
