5o8 HARVARD LAW REVIEW The Monon case was followed by the famous Boyd case ^° which offers a still more serious and perplexing menace to most reorgan- ization plans. The most striking danger in the doctrine of this case arises not merely from the uncertainty it left as to the right of stockholders to participate in a reorganization, but rather from the fact that the court held that, although Boyd, an unsecured creditor, brought his suit to upset the foreclosure sale, and the reorganization thereunder, by subjecting the property of the rail- road company to a hen for his claim, nine years after the fore- closure sale had been confirmed by the court, nevertheless he could prevail. To be sure, the long litigation in a collateral suit that Boyd had been forced to undergo in order to establish his claim probably meant that the statute of limitations had not nm, or that he was not barred by laches; nevertheless the case holds that so long as a reorganization contains a flaw it can never be considered the basis of fixed rights, regardless of foreclosures or confirmations of sales by solemnly entered decrees of the court.^* Surely such is a deplorable rule; it arises from the fact that the courts view foreclosure sales as devices and will not be boimd by them. The court said in the Boyd case: ^^ "But, of. course, such a transfer by stockholders from themselves to themselves cannot defeat the claim of a non-assenting creditor. As jEgainst him the sale is void in equity, regardless of the motive with /which it was made. For if such contract reorganization was consum- mated in good faith and in ignorance of the existence of the creditor, yet when he appeared and established his debt the subordinate interest of the old stockholders would still be subject to his claim in the hands of the reorganized company. Cf. San Francisco, b° N. P. R. R. v. Bee, 48 Calif. 398; Grenell v. Detroit Gas Co., 112 Mich. 70. There is no difference in principle if the contract of reorganization, instead of being effectuated by private sale, is consummated by a master's deed imder a consent decree." The plan involved in the Boyd case, whereby the Northern Pacific Railway Company was reorganized, proceeded upon the theory that the bondholders owned the property and could do as they chose with it. Thus no provision was made for a large float- so Northern Pac. Ry. v. Boyd, 228 U. S. 482, 498 (1913). ^1 See Cook, on Corporations, 7 ed., § 849.
- Northern Pac. Ry. v. Boyd, 228 U. S. 482, 502 (1913).
