Page:Federal Reporter, 1st Series, Volume 9.djvu/756

 HANCOCK V. TOLEDO, PEORIA & WARSAW R. CO. 741 �ant's judgment, and that of such other creditors as shall come in and be made parties thereto. �The solicitor for complainant insista that he makes just such a case here as was shown in Railroad Co. v. Howard, 7 Wall. 392. That case involved a contract made under circumstances similar to this, between the bondholders and stockholders of the Mississippi & Mis- souri Eailroad Company of lowa, whereby the road of the company was to be sold under a decree of foreclosure to be procured, and bid in by a committee for a fixed sum, $5,500,000, which was to be dis- tributed among the bondholders and stockholders in such proportions that the stockholders should receive 16 per cent, of the par value of their stock, either in money or bonds. This agreement was attacked by the holders of certain unsecured indebtedness of the company, on iihe ground that it was fraudulent as against them. �The supreme court held that plan of reorganization void as against the unsecured creditors, beeause it made no provision for the payment of the unsecured creditors, saying : �" Mortgage bondholders had a lien upon the properfcy of the corporation em- biaced in their mortgages, and the corporation having neglected or ref used to pay the bonds, they had a right to instituts proceedings to foreelose the mort- gages, but the equity of redemption remalned in the corporation. Subject to their lien, the property of the railroad was in the mortgagors, and whatever interest remained af ter the lien of the mortgages was discharged belonged to the corporation; and as the property of the coiporation when the bonds w ere discharged, it became a f und in trust for the benefit of their creditors. Hold- ers of bonds secHred by mortgage, as in this case, may exact the whole amount of the bonds, principal and interest, or they may, if they see fit, accept a per- centage as a compromise in full discharge of their respective claims ; but whenever their lien is legally discharged, the property embraced in the mort- gage, or wha,tever remains of it, belongs to the corporation." �It will be seen that while the Mississippi & Missouri Eailroad Com- pany was largely indebted to certain unsecured creditors, no provision was made under the scheme of reorganization for any payment or security to the unsecured creditors. The plan contemplated a com- plete absorption into the purchasing committee, or their successors, of the entire property of the company, free from all liens and liability for the debts of the old company, but in no manner contemplated that the holders of unsecured indebtedness were to be paid in full or in part, or in any wise provided for ; while the stockholders, who only in equity held their interest, subject to the debts of the company, were to have about |550,000 divided among them. �Here, however, express provision is made for the holders of all the ��� �