UPSET PRICES IN CORPORATE REORGANIZATION 509 ing debt; but the stockholders, both common and preferred, were given stock in the new company, upon condition that they paid a heavy assessment. Some eleven million dollars were raised in this way, and it was admitted that this money was essential and served as the basis of the prosperity of the new company. The unsecured creditors sought to defeat the foreclosure plan because they were excluded and the stockholders were not, but the Cir- cuit Court held, in a decision from which no appeal was taken, that, since the assets were insufficient to pay the mortgage debt, the unsecured creditors had no claim to the property, and that, in as much as the bondholders, in reality owned the property, they could donate an interest to whomsoever they chose, including the ' stockholders.^ The Supreme Court held however, years later, in the Boyd case, four judges dissenting, that it was illegal to allow / the stockholders to participate when an unsecured creditor like Boyd had received nothing, and that Boyd's claim was a lien upon the property purchased "subject, however, to the mortgages placed thereon." This decision in the Boyd case was recently followed by the court in an unsatisfactory opinion written by Mr. Justice Holmes, who had dissented from the Boyd case.^ Certain conclusions can be drawn from the doctrine of the Boyd case, aside from the menace of allowing the court to set aside con- sent foreclosure decrees at any time, which will aid one in ascer- taining the real problem involved. It must be admitted, first, that it is unfortunate and undesirable rigorously to prevent bond- holders from allowing stockholders to participate in a reorganiza- tion where all the creditors cannot be paid in full, thus making it impossible to get money from the stockholders. Secondly, it would seem clear that the basis of the decision in the Boyd case that the court cannot tolerate the participation of stockholders in a plan of reorganization where a class of creditors are coldly and com- pletely barred is just. The fundamental rule that debtors, i. e. « Paton V. Northern Pac. Ry. Co., 85 Fed. 838, 839 (1896). " Kansas City, So. Ry. Co. v. Guardian Trust Co., 240 U. S. 166, 174 (1916). The decisions of the lower Federal Courts following the Boyd case cast little light upon the problem. See Mechanics & Metals Nat. Bank v. Howell, 207 Fed. 973, 983 (1913); Central Improvement Co. v. Cambria Steel Co., 210 Fed. 696, 708 (1913); Equitable Trust Co. v. United Box Board & Paper Co., 220 Fed. 714, 719 (1915); Western Union Tel. Co. v. United States & Mexican Trust Co., 221 Fed. 545, 550 (1915)-
