§ 816a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. the bondholders, and that each held his interest subject to the controlling power therein given to the majority. 1 It has recently been held by the United States Supreme Court, that when the franchises of a corporation are mort- gaged under statutes conferring upon purchasers at foreclosure sale the authority on compliance with certain forms to become a corporation, no contract arises between the bondholders and the state that these statutory forms shall remain the same or that the state shall impose no further conditions. The right of the bondholders is to reorganize under whatever laws are in force at the time of reorganization. 2 § 816a. Ordinarily, a majority of mortgage bondholders cannot by an agreement that the railroad company Reorganize mav issue a mortgage taking preference to theirs, tions. J ° ° ° * affect the rights of a minority. 3 And neither can bondholders or shareholders claim the benefits of a reorganiza- tion when they fail to comply with its terms. 4 In a case 1 Sage v. Central R. R. Co., 99 U. S. 334. See, also, Shaw v. Rail- road Co., 100 U. S. 605. 2 Schurz v. Cook, 148 U. S. 397; Memphis & L. R. R. R. Co. v. Com- missioners, 112 U. S. 609, 621. 8 Poland v. Lamoille Valley R. R. Co., 52 Vt. 144 ; Hollister v. Stew- art, 111 N. Y. 644. Nor can trus- tees of the mortgage do so, nor waive defaults in payments of principal or interest. lb. But provisions ena- bling a majority of bondholders to modify the mortgage rights of all may be inserted in the mortgage. Follit v. Edistone Granite Quarries, (1892) 3 Ch. 75; Sneath v. Valley Gold, (1893) 1 Ch. 477. As to pri- orities of the holders of detached coupons over bondholders, see Se- wall v. Brainerd, 38 Vt. 364; Miller v. Rutland, etc., R. R. Co., 40 Vt. 399. A person who advances money to the corporation to take up coupons, under an undisclosed agreement that they are to be delivered to him un- 802 cancelled, but the coupon-holders having no reason to think they were not paid, but rather having every reason to suppose them simply paid and cancelled, cannot claim a lien under the mortgage; he is merely a creditor of the corporation. Cam- eron v. Tome, 64 Md. 507. 4 Fidelity Ins. Co.'s Appeal, 106 Pa. St. 144. See Weston v. New Guston Co., 64 L. T. Rep. 815. When a statute provides that any shareholder may within six months come in and assent to a plan of re- organization (after a railroad fore- closure) and comply with its terms and thereby become entitled to share in the benefits, he gains no rights by an assent after the six months have expired; and equity cannot relieve him from the effect of his failure to perform this condition precedent. Vatable v. New York, etc., R. R. Co., 96 N. Y. 49. In setting aside a foreclosure sale and directing a further inquiry into the circumstances of the case, the
