Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/818

 § 815.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. of his trust, an injured creditor will have a standing in court to enforce the proper distribution of the corporate assets. 1 Mortgages or trust deeds covering the property of corpora- tions are usually made to a trustee for bondholders, who there- by becomes, in accordance with the terms of the mortgage or trust deed, the representative of the bondholders for the pur- poses of the trust. 2 " The trustee of a railroad mortgage," said Chief Justice Waite, giving the opinion of the Federal Supreme Court in Shaw v. Railroad Co., "represents the bondholders in all legal proceedings carried on by him affecting his trust, to which they are not actual parties, and whatever binds him, if he acts in good faith, binds them." 3 Bondholders ordinarily are not necessary parties to a foreclosure suit brought by their trustee ; 4 and notice to the trustee in matters relating to his trust is notice to the bondholders. 5 §815. When a number of creditors, as, for instance, bond- holders, have claims against a corporation arising from the same transaction or series of transactions, and secured by the same security, their mutual rela- tions, as well as their relations towards the corpora- tion, will largely depend on the terms of their security. In such case, however, even in the absence of any special provision or agreement forbidding it, one creditor Creditors having claims founded on the same instrument. 1 See Pfohl v. Simpson, 74 N. Y. 137. 2 Bondholders are ailected with notice of the terms of the mortgage or trust deed securing their bonds. See § 674. 605, 611; ace. Beals v. Illinois, etc., R. R. Co., 133 U. S. 290; El well v. Fosdick, 134 U. S. 500; Rumsey v. People's R'y Co., 154 Mo. 215. 4 Shaw v. Norfolk County R. R. Co., 5 Gray (Mass.), 162; Williamson o. New Jersey Southern R. R. Co., 25 N. J. Eq. 13. 5 Actual notice to a mortgage trustee of an agreement to which property received by a railroad com- pany is subject, is notice to bond- holders. Pierce ». Emery, 32 N. H. 798 484. So is actual notice to trustee of a prior equitable mortgage. Mil- ler v. Rutland, etc., R. R. Co., 36 Vt. 452. But see Commissioners, etc., v. Thayer, 94 U. S. 631. A mortgage trustee in possession cannot bind the bondholders per- sonally for the payment of the ex- penses of the road. See Chaffee v. Rutland R. R. Co., 53 Vt. 345. Com- pare Sturgis u. Knapp, 31 Vt. 1. When a mortgage trustee is him- self a judgment creditor, bondhold- ers cannot object to his levying exe- cution on property of the railroad company not covered by the mort- gage. Elbridge v. Smith, 34 Vt. 384. As to officers of the corporation acting as trustees for bondholders, see § 629 note.
 * i Shaw v. Railroad Co., 100 U. S.