Page:Harvard Law Review Volume 32.djvu/550

514 514 HARVARD LAW REVIEW general grants of power to the majority will be construed closely, because of uncertainty and because of the nature of the relation- ship involved. No careful lawyer drawing a deposit agreement, whereby securities are to be deposited with a committee effecting a reorganization, fails to insert an express and concrete power to do everything possible ; ^^ yet general clauses in the case of deeds of trust giving the majority general powers are usually relied upon. Thus, the conventional provision providing for a meeting of the bondholders, or their consent thereto in writing, and binding the minority absent or present, to do anything the majority de- cide upon, so far as reorganizations are concerned, appears to miss the mark. An effort has been made to show that majority con- trol is not the sole essential of a reorganization; the plan pro- vided must be a fair one, and a means must be afforded of determining that the plan is fair.^^ Surely the majority cannot draw up the plan, accept it, and also determine that it is fair. Re- organizations, since they involve large property rights, absent par- ties, and also represent a fundamental change in the nature of the corporation, and since the public interests are often concerned, should be carried out publicly under the protection and guidance of a court as is done in England. And it seems clear that the courts will not allow general provisions in a deed of trust to de- prive them of this duty. Definite provisions can well be inserted in a deed of trust providing that, upon default of the mortgagor corporation, the trustee must propose, or accept at the request of two thirds of the security holders of all classes, a fair plan of re- organization providing for and open to all classes of security holders; that upon the written consent of a majority of each class, and de- termination of the court before whom the foreclosure is pending that the plan is fair to all security holders,^ each and every bond- holder surrenders all rights to have an upset price fixed, and agrees to accept securities under the reorganization, similar to those '^ See, as to the dangers of general provisions. United Water Works, Limited v, Omaha Water Co., 164 N. Y. 41, 58 N. E. 58, 59 (1900); Short, Railway Bonds & Mortgages (1897), § 28. ^ Possibly it is difficult to confer jurisdiction upon a court to determine a condition precedent — the fairness of the plan. Yet the court shoiild void the surrender of the right to fix an upset price if the plan is fraudulent or oppressive. Thus the result is the same.
 * 2 See Cook on Corporations, 7 ed., § 833.