500 HARVARD LAW REVIEW arises when there are nonassenting bondholders. When such a contro- versy is on, the chancellor in our opinion not only has the right but owes the duty of being vigilant to see, on the one hand, that a dissenter be not permitted to create a maneuvering value in his bonds by opposing confirmation, and, on the other, that the majority does not use its power, imique in sales of this class, to oppress a helpless minority. Mr. Justice Brewer in Ballentyne v. Smith, 205 U. S. 285, 27 Sup. Ct. 527, 51 L. Ed. 803, said: "'That a court of equity owes a duty to the creditors seeking its as- sistance in subjecting property to the payment of debts, to see that the property brings something like its true value in order that to the extent of that value the debts secured upon the property may be paid; that it owes to them something more than to merely take care that the forms of law are complied with, and that the purchaser is guilty of no fraudulent act.'" 32 It is to be noted that the language from Ballentyne v. Smith ^ quoted above, so often used by the lower federal courts to bolster up the doctrine of an upset price, is not in point. In that case there was no reorganization involved. A small electric railway issued bonds to the amount of $50,000 secured by a deed of trust; the property cost and was worth about $78,000. On the foreclosure it was bought for $1,000; the master and the lower court advised against the confirmation of the sale and the Supreme Court of the United States confirmed this finding. In such cases, where the wronged party who seeks the chancellor's aid is either the mort- gagor, who complains that he will be despoiled of his equity in the property, and subjected in addition, to an unjust deficiency judg- ment, or the holder of an inferior lien, or an unsecured judgment creditor, who will be deprived of property rights thereby, the chancellor can well intervene.^ But the situation is entirely ^ Investment Registry, Limited v. Chicago & M. E. Ry. Co., 212 Fed. 594, 609 (1913)- ^ 205 U. S. 285, 289 (1907). •* In a case, where first mortgage bondholders are seeking to buy in the property imder a foreclosure sale and to exclude junior bondholders who claim that the value of the property is such that they have a substantial equity, theoretically there would be a need of fixing a value for the properties or determining an upset price. But this situation is purely theoretical, and seems never to have arisen in the books. Since the first mortgage bondholders would not impair their rights by giving junior lien-holders "residuary claims to the property," i. e., third mortgage bonds, or common stock in the new corporation, they are almost always willing to do so to avoid litigation. Yet, if senior bondholders seek to exclude jixnior bondholders who have some equity in
