§ 816a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. to enforce a settlement upon the mortgage creditors of the company, by which they were to receive other securities of the company in place of their mortgage bonds ; and the settlement preserved the right of citizens of the United States, being bondholders, to participate in the reorganization on the same terms as Canadians and other British subjects. The settle- ment, assented to by more than three-fourths of the bond- holders, having gone into effect, the court held that it was binding on non-assenting bondholders, citizens of the United States, who brought suit in a Federal court to recover on their bonds. 1 Giving the opinion of the court, Chief Justice Waite said: " Holders of bonds and other obligations issued by large corporations for sale in the market, and secured by mortgages to trustees or otherwise, have by fair implication certain con- tract relations with each other. . . . They are not corpora- tions, and thus necessarily, in the absence of fraud or undue influence, bound by the will of the majority as to matters within the scope of the corporate powers, but they are inter- ested in the administration of a trust which has been created for their common benefit. Ordinarily, their ultimate security depends in a large degree on the success of the work in which the corporation is engaged, and it is not uncommon for differ- ences of opinion to exist as to what ought to be done for the promotion of their mutual interests. In the absence of statu- torv authority, or some provision in the instrument which establishes the trust, nothing can be done by a majority, how- ever large, which will bind a minority without their consent.* Hence it seems to be eminently proper that where the legisla- tive power exists some statutory provision should be made for binding the minority in a reasonable way by the will of the majority ; and unless, as in the case in the states of the United States, the passage of laws impairing the obligation of contracts is forbidden, we see no reason why such provisions may not be made in respect to existing as well as prospective obligations. The nature of securities of this class is such that the right of new mortgage bonds in lieu of the old bonds, and full paid up stock to the bondholders without any pay- ment of money. Memphis & L. R. R. R. Co. v. Dow, 120 U. S. 287. 804. 1 Canada Southern R. Co. v. Geb- hard, 109 U. S. 527. 2 Same language used in Gilfillan v. Union Canal Co., 109 U. S. 401, 403.
