512 HARVARD LAW REVIEW which provides for part payment of unsecured creditors, and also allows stockholders to participate, the court must, it seems,^^ re- fuse to allow stockholders to participate, unless the class of creditors is unusually small and is acting with bad faith in reliance upon their nuisance value. Then equity should, on elementary prin- ciples, refuse relief, exclude the class, and refuse to fix an upset price. The majority of any class of security holders almost always will act reasonably in order to preserve the property; the danger arises from an unreasonable minority. Such is the theory upon which the English Acts providing for arrangements are based; the soimdness of this theory is shown in actual reorganization experience. In the Boyd case the reorganization committee did acquire $14,000,000 of the unsecured claims; at what discount it does not appear. In the Guardian Trust case, a fund has been provided to buy in unsecured claims and many had been acquired. These facts indicate sharply the necessity of the rule of fair majority control urged herein. Obviously for a reorganization committee to arrogate to itself the right of paying off some unsecured creditors in part or whole, — or even the majority of the unsecured creditors, — and to ignore the rest, as was done in the Boyd case, for ignored and dissatisfied creditors brought the suit in the Paton case,®" is an act of oppression. Merely to provide a fund, which can be with- drawn, for the purpose of buying in unsecured claims, is not enough; all classes must be given definite legal rights. The majority should control only where the plan is a fair one; and even then the majority of all classes of bondholders and unsecured creditors must consent and the plan be open to all on an equality. Again, the court was right in holding as it did in the Boyd case that the fact that Boyd did not appear at the time of the fore- closure sale did not mean that the decree foreclosed his rights as would be true in the case of an ordinary foreclosure sale where all
- ' For, unless the rule that debtors shall not prevail over creditors is to be regarded
lightly, stockholders, where creditors are not paid in full and a majority of these creditors fairly refuse to accept a plan for the participation of stockholders, cannot participate. The only alternative is to allow an additional privilege to the reorganizers and to extend them, in case they caimot get the consent of a majority of the xmse- cured creditors, the right to prove that the objecting creditors are unfair because of the value of the property regardless of their motives. This theory, of course, depends •upon an upset price and seems too uncertain to be adopted. •» Paton V. Northern Pac. R. R., 85 Fed. 838, 839 (1896).
