5IO HARVARD LAW REVIEW stockholders, must not defeat the just claims of their creditors, directly or indirectly, cannot be violated. To the argument that the bondholders own the property and can donate it to whom they choose, the answer is clear. Whether or not the bondholders own the property depends upon the valuation fixed upon the property by the court, an unsatisfactory guess upon which no rule should be based. In other words, here again arises the question of the upset price, the folly of a court attempting to put a special price upon a special kind of property, for which there is" no market value, where no opportunity is afforded even to ascertain the facts of value in- volved. This truth involving a rejection of the value of an upset price, was cogently stated by Mr. Justice Lamar who delivered the opinion of the court: ^^ "The invalidity of the sale flowed from the character of the reorgani- zation agreement regardless of the value of the property, for in cases like this, the question must be decided according to a fixed principle, not leaving the rights of the creditors to depend upon the balancing of evidence as to whether, on the day of sale the property was insuflficient to pay prior encumbrances. The facts in the present case illustrate the necessity of adhering to the rule. The railroad cost $241,000,000. The lien debts were $1 57,000,000. The road sold for $61 ,000,000, and the pur- chaser at once issued $190,000,000 of bonds and $155,000,000 of stock on property which a month before, had been bought for $61,000,000." Some equitable middle ground should be found reconciling, or at least dehmiting, these two elements. In the Guardian Trust Company case ^^ the court indicated its desire to reach some fair result in solving this problem, Mr. Justice Holmes saying: " " In short while it is true that reorganization plans often would fail if the old stockholders could not be induced to come in and to contribute some fresh money, and that the necessity of such arrangements should lead Courts to avoid artificial scruples, still we are not prepared to say " Northern Pac. Ry. v. Boyd, 228 U. S. 482, 507 (1913). " In Kansas City So. R. Co. v. Guardian Trust Co., 240 U. S. 166, 176 (1916), Mr. Justice Holmes uses the following^ language: "It is essential to inquire whether the appellant {i. e. the reorganized corporation), received any such property, that is, whether it got by the foreclosure more than enough to satisfy the mortgage, which was a paramount lien." This might indicate that the court was inclined to regard the fixing of an upset price as the solution of the difficulty. See Paul D. Cravath, "Reorganization of Corporations," in Stetson, Lynde, et al., Some Legal Phases OF Corporate Financing, Reorganization and Regulation, 198. " 240 U. S. 166, 178 (1916).
