Page:Harvard Law Review Volume 32.djvu/538

502 HARVARD LAW REVIEW there is needed an appreciation by the courts that foreclosure sales are merely arrangements which can be effected only by majority control under the guidance of the courts, and that the chancellor should not think primarily of minority rights and sorrows. And what is needed more than anything else is a vigorous hand by the courts in carrying out this poHcy. Indefensible as the fixing of an upset price is in principle, the practical difficulties involved constitute a greater objection. By what rule should this upset price be determined? The cases where an upset price has been fixed are few in nimiber and in hopeless confusion. In one case the court capitaHzed the net earnings at four per cent; ^^ this would result in an unusually high upset price. In another case the court fixed the upset price at the amount of the costs of litigation and outstanding receiver's certificates; ^* this result, of course, was of no protection to the minority bond- holders. In another case a compromise figure was adopted, based upon the net earnings and the future bonding value of the prop- erties.^^ Indeed, when one considers the confusion in the law of Equitable Trust Co. v. Western Pac. Ry. Co., 233 Fed. 335, 336 (1916); Rospigliosi V. New Orleans M. & C. R. Co., 237 Fed. 341, 344 (1916); Simon v. New Orleans T. 6 M. R. Co., 242 Fed. 62, 63 (1917). See also dissenting opinion of Justice Lurton in Northern Pac. Ry. Co. v. Boyd, 228 U. S. 482, 513 (1913); Cook, Corporations, 7 ed., § 849, note 2; Short, Railway Bonbs & Mortgages (1897), § 792; Jones, Corporate Bonds and Mortgages, 3 ed., § 422. In none of these cases has the theory or necessity of fixing an upset price been considered without confusion with the case of a fraudulent sale where the mortgagors or unsecured creditors complain because the price is too low. For a good example of this confusion see the discussion in Short, Railway Bonds, supra. In some of the cases the courts have felt the need of majority control, but were not called upon or were imwiUing to enforce the rights of the majority in a practical way. See Simon v. New Orleans T. &. M. R. Co., supra; Investment Registry v. Chicago & M. E. R. Co., supra, etc. In Fearon v. Bankers Trust Co., 238 Fed. 83, 88 (1916), the Circuit Court of Appeals for the Third Circuit in refusing to set aside a sale said, "In view of these considerations — that the great majority of the bond-holders favor this sale; that all the bond-holders, whether in favor of the sale or objecting to it, will have an opportunity of sharing on equal terms in the reorganiza- tion — we are of the opinion that the court below committed no error." In Lake St. El. R. Co. V. Ziegler, 99 Fed. 114, 129 (1900), the court held that it would "lend all proper aid to a plan of reorganization which is fair and just"; in Conley v. Interna- tional Pump Co., 237 Fed. 286, 287 (1915), the court denied the right of the minority to oppose a foreclosure in vigorous terms. For language somewhat contra, see Hol- lister V. Stewart, in N. Y. 644, 19 N. E. 782, 790 (1889). " Central Trust Co. v. Washington R. R., 124 Fed. 813, 818 (1903). »8 Blair v. St. Louis H. & K. R. Co., 25 Fed. 232, 233 (1885). " Equitable Trust Co. v. Western Pac. Ry., 233 Fed. 335, 336 (1916).