the bondholders as to what their interests require, it is not improper that he should be governed by the voice of the majority, acting in good faith and without collusion, if what they ask is not inconsistent with the provisions of his trust."[1]
The same court[2] considered a somewhat similar question some seven years later, and took an even more advanced view. Here the trustees under two mortgages on the same railroad property were following the desires of the majority of the bondholders under each mortgage in bringing about an immediate sale of the property so as to enable a reorganization to be carried out, and were seeking to have disputes, as to the priority of liens, postponed until after the foreclosure, and determined upon distribution of the proceeds of the sale.
Chief Justice Waite said, in delivering the opinion of the court upholding the acts of the trustees:
"As a rule the trustee of a railroad mortgage represents the bondholders in all legal proceedings carried on by him affecting his trust to which they are not actually parties. There is here no evidence to show fraud or unfairness on the part of the trustees. The company is satisfied with what they are doing, and so are all the bondholders under the Rawle mortgage and a majority of those under that to Devereux. As was said in Shaw v. Railroad Company, 100 U. S. 605, 612: 'Railroad mortgages are a peculiar class of securities…' Here the majority want an immediate sale. In this the trustees both agree, as does the railroad company itself. There is no evidence whatever of a want of good faith in any one. The court below, having the practical workings of the receivership under its own eye, did not hesitate to say that 'it is now entirely clear that the best interests of all parties concerned will be promoted by a speedy sale,' and we see nothing to the contrary."
The Supreme Court of Errors of Connecticut[3] has followed these decisions of the Supreme Court. A minority bondholder sought to enjoin a foreclosure sale and reorganization from being carried out without his consent. The court trenchantly said of the plaintiff's rights as a minority bondholder to insist upon the necessity of unanimous consent:
