compensation depends largely on the terms of the agreement.98 However, claims for services and expenses in connection with the reorganization plan are matters strictly between the committee and the parties benefited, i. e., the participants in the reorganization agreement; and hence the committee have no right to share in the proceeds of the judicial or execution sale where all the bondholders entitled to share in such proceeds were not parties to the reorganization agreement.99 Sometimes the reorganization agreement itself provides that if it is modified, bondholders may withdraw upon payment of their share of the expenses incurred, in which case, of course, bondholders who do so withdraw are required to pay only their share of the expenses incurred in furtherance of the old plan as distinguished from the expenses of the modified plan.1 Payment of the committee for moneys expended by them is governed by no particular rules other than those relating to the payment of any trustees or agents.2 Payments by a committee of the bondholders of an insolvent company of a commission for the sale of new bonds, to a firm, one of the members of which is a member of the committee, are not necessarily to be disallowed.3 The expenses incurred by a committee in a former attempt to reorganize are not chargeable to bondholders who did not join in the first plan but only in the subsequent plan. Operating expenses of a railroad, while a committee representing bondholders and stockholders are in charge, are entitled to priority over the mortgage debt.5 The reorganization committee are not entitled to the issuance to them by the new company, as an individual payment, of preferred stock at less than the par value thereof to be paid in cash, where the new company is not indebted to the committee and all the securities of the new corporation were issued to the reorganization committee for certain purposes. 98 Mills v. Potter, 189 Mass. 238, 75 N. E. 627. 99 Trust & Deposit Co. of Onondaga v. Spartanburg Waterworks Co., 97 Fed. 409. The chairman of a bondholders' protective committee is not entitled to be paid for services and expenses, out of the fund, where there was no contract between him and the bondholders as a whole. Trust & Deposit Co. of Onondaga v. Spartanburg Waterworks Co., 97 Fed. 409. The bondholders impliedly agree to It would seem divide expenses. 1 Kennedy v. Kennedy, 70 Hun (N. Y.) 257, 24 N. Y. Supp. 424. 2 See Carver v. Southern Iron & Steel Co. (N. J. Ch.), 78 Atl. 240. 3 Mills v. Potter, 189 Mass. 238, 75 N. E. 627. 4 Van Sielen v. Bartol, 95 Fed. 793. 5 Scott v. Queen Anne's R. Co., 162 Fed. 828. 6 Carver v. Southern Iron & Steel Co., 78 N. J. Eq. 81, 78 Atl. 240. that where the committee necessarily pay out their own money in connection with the trust, in buying in the securities of the new company which had been pledged, they are entitled to be repaid the money advanced by them before they will be required to distribute such securities.7 After a foreclosure sale, the organization of a new company and the conveyance of the property to the new company, the committee may sue in equity to obtain an allowance of their accounts for moneys paid and expenses incurred and services rendered, and an order directing the distribution of the stock of the new corporation and a discharge from their trust.8 VIII. RIGHTS OF STOCKHOLDERS § 4928. In general. A few rules are stated in this subdivision which are peculiar to the rights of stockholders. Other rules applicable both to stockholders and creditors, in connection with reorganizations, such as the right to participate in a reorganization as conferred by statute or the reorganization agreement, and what constitutes, and the effect of, joinder in a reorganization agreement,10 are stated in preceding subdivisions. § 4929. Right to combine to procure, or purchase at, judicial or execution sale--General rule. A majority of the stockholders of a corporation cannot combine to procure a foreclosure and sale, and a reorganization, to the prejudice of the other stockholders, since the majority occupy a fiduciary relation towards the minority, and it is their duty to see that the best possible price is obtained at the sale. Collusion on their part will entitle an injured stockholder to sue to set the sale aside.11 A majority of the stockholders, however, may purchase at the sale, by themselves or through an agent, and reorganize, if they do so in good faith, and without taking any undue advantage.12 Thus, in one case, where part of the stockholders com 7 Coppell v. Hollins, 91 Hun (N. Y.) 570, 36 N. Y. Supp. 500. 8 See Mills v. Potter, 189 Mass. 238, 75 N. E. 627. 9 See §§ 4896-4900, supra. 10 See §§ 4901-4911, supra. 11 See Mason v. Pewabic Min. Co., 133 U. S. 50, 33 L. Ed. 524; Ribon v. Railroad Companies, 16 Wall. (U. S.) 446, 21 L. Ed. 367; Hanley v. Balch, 94 Mich. 315, 53 N. W. 954; Farmers' Loan & Trust Co. v. New York & N. R. Co., 150 N. Y. 410, 34 L. R. A. 76, 55 Am. St. Rep. 689, 44 N. E. 1043. To such a suit, the trustees and the consenting stockholders must be made parties, or the bill will be demurrable. Ribon v. Railroad Companies, 16 Wall. (U. S.) 446, 21 L. Ed. 367. 12 Pewabic Min. Co. v. Mason, 145 U. S. 349, 36 L. Ed. 732; Armour v. E. Bement's Sons, 123 Fed. 56; Olm bined to purchase the corporate property at judicial sale, the court said that "the magnitude of the property involved in the foreclosure would naturally prevent an individual (unless possessed of great wealth) from bidding on the sale. The plaintiffs, who together owned a large number of shares, had a right to enter into any arrangement for the protection of their interests not prohibited by law. This was not the case of a combination between persons having no prior interest in the property to suppress bidding at a judicial sale for speculative purposes. The arrangement made was, so far as appears, a reasonable and honest attempt on the part of the plaintiffs, to save their property from being sacrificed on the foreclosure. The other stockholders and bondholders were at liberty to bid on the sale. The mere fact that an arrangement, fairly entered into, with honest motives, for the preservation of existing rights and property, may incidentally restrict competition at a public or judicial sale, does not, we think, render the arrangement illegal." 13 So it is not per se fraudulent for the stockholders of an insolvent corporation to combine with the bondholders to purchase the property at foreclosure sale and to reorganize, although it tends to show fraud; 14 but such a combination between bondholders and stockholders is fraudulent and invalid as to unsecured creditors where the stockholders are thereby preferred over such creditors.15 § 4930. Purchase by stockholders who are directors or other officers. The managers or directors and other officers of a corporation are in a sense trustees both for its stockholders and creditors, and therefore they have no right, although they may also be creditors, to enter into any combination, the object of which is to divest the company of its property, and obtain it for themselves, directly or indirectly, at a sacrifice. They have no right to obtain any profit or advantage for themselves at the expense of the company or its stockholders, or even of its bondholders. If the company is embarrassed and there is any necessity to sell its property, it is their duty, to the extent of their power, to secure, for all those whose interests stead v. Distilling & Cattle Feeding Co., 73 Fed. 44; Carter v. Ford Plate Glass Co., 85 Ind. 180; Price v. Holcomb, 89 Iowa 123, 56 N. W. 407; Wilson V. Proprietors of Central Bridge, 9 R. I. 590. See also § 4010 et seq., chapter on Stockholders. Majority stockholders may purchase at a foreclosure sale, and minority stockholders cannot object thereto unless the sale was actually fraudulent. Rothchild v. Memphis & C. R. Co., 113 Fed. 476. 13 Marie v. Garrison, 83 N. Y. 14, 27. 14 Wenger v. Chicago & E. R. Co., 114 Fed. 34, and see § 4937, infra. 15 See § 4949, infra. are in their charge, the highest possible price which can be obtained. for it. It follows that, in equity, they will not be permitted to retain any profit or advantage which they may make by disregard or violation of this duty.1 16 This principle was applied in the Supreme Court of the United States, in a leading case, where the managers and officers of an embarrassed railroad company, holding a small portion of its bonds, of which a much greater portion was held by nonresidents, obtained an order of sale under a mortgage to secure the bonds, and proceeded in a hasty and rather secret way to sell the road and to buy it in for themselves at a price much below its value, the conditions of the sale being made such as to render it difficult for persons generally to purchase, and the whole proceeding of sale being attended also with evidences of gross disregard of the interests of the bondholders generally, and of the stockholders. Under these circumstances, the sale was set aside at the suit of the other bondholders.17 This doctrine, however, does not absolutely prohibit directors or other officers of a corporation from purchasing at a foreclosure sale of its property brought about by others than themselves, or from being interested in such a purchase, if the transaction is free from fraud, and the property is not sold at a sacrifice by reason of their interest in the purchase.18 16 Jackson v. Ludeling, 21 Wall. (U. S.) 616, 22 L. Ed. 492; Sparrow v. E. Bement & Sons, 142 Mich. 441, 10 L. R. A. (N. S.) 725, 105 N. W. 881, 12 Det. L. N. 798, holding that the same rule applies to a judicial sale as to a private sale. Directors cannot profit by a sale of the corporate property nor obtain benefits thereby not accruing to the other stockholders. Smith v. Smith, Sturgeon & Co., 125 Mich. 234, 84 N. W. 144. 17 Jackson v. Ludeling, 21 Wall. (U. S.) 616, 22 L. Ed. 492. See also Jones, McDowell & Co. v. Arkansas Mechanical & Agricultural Co., 38 Ark. 17; Allen v. Jackson, 122 Ill. 567, 13 N. E. 840; Harts v. Brown, 77 Ill. 226; Covington & L. R. Co. v. Bowler's Heirs, 9 Bush (Ky.) 468; Raleigh v. Fitzpatrick, 43 N. J. Eq. 501, 11 Atl. 1; Wilkinson v. Bauerle, 41 N. J. Eq. 635, 7 Atl. 514; Mun- Laches may bar any right to relief. 18 McKittrick See also §§ 2291-2302, and $1396, notes 26, 27, supra; Hayden v. Official Hotel Red-Book & Directory Co., 42 Fed. 875; Credit Co. v. Arkansas Cent. R. Co., 15 Fed. 46; Hill v. Nisbet, 100 Ind. 341; Osborne's Adm'x v. Monks, 14 Ky. L. Rep. 606, 21 S. W. 101; Saltmarsh v. Spaulding, 147 Mass. 224, 17 N. E. 316; Lucas v. Friant, 111 Mich. 426, 69 N. W. 735; Foster v. Belcher's Sugar Refining § 4931. Right to participate in reorganization-In general. Whether all the stockholders have a right to participate in a reorganization depends primarily upon whether the reorganization is in connection with a judicial or execution sale, or is independent thereof and without any such sale.19 § 4932. Where reorganization is in connection with judicial or execution sale. Inasmuch as the effect of a judicial or execution sale of all the corporate property and reorganization, where not fraudulent, is to extinguish the rights of the stockholders of the old company unless otherwise provided for,20 they have no right to participate in a reorganization by bondholders in connection with a foreclosure sale unless they are given such right by the reorganization agreement and then only upon the terms and conditions imposed by the agreement,-21 or the right is secured to them by the foreclosure decree 22 or by statute.2 The bondholders, in preparing a 23 Co., 118 Mo. 238, 24 S. W. 63; Inglehart v. Thousand Island Hotel Co., 109 N. Y. 454, 17 N. E. 358; Harpending v. Munson, 91 N. Y. 650; College Park Elec. Belt Line v. Ide, 15 Tex. Civ. App. 273, 40 S. W. 64. Acts of the president and trustees of a corporation, without fraudulent intent, and after reasonable notice to stockholders, whereby a reorganization is promoted which preserves from extinguishment by foreclosure a part of the interests of assenting stockholders, are not fraudulent as to the original organization, although a large personal profit accrues therefrom to the president, who is the principal promoter of the reorganization. Symmes v. Union Trust Co., 60 Fed. 830. 19 See §§ 4857-4867, supra. 20 Thornton v. Wabash Ry. Co., 81 N. Y. 462. Independently of statute, the only interest stockholders have after a foreclosure sale of all the corporate property is in any surplus remaining after satisfying the mortgage. Vatable v. New York, L. E. & W. R. Co., 96 N. Y. 50. 21 Vatable v. New York, L. E. & W. R. Co., 96 N. Y. 50, and see § 4896, supra. Hence a provision in a reorganization agreement to which stockholders are not parties, giving them a right to exchange their stock for stock in the new company upon certain conditions, is merely an act of grace on the part of the bondholders, so that in order to be entitled to such stock a stockholder must strictly comply with all the conditions. Dow v. Iowa Cent. Ry. Co., 144 N. Y. 426, 39 N. E. 398. Stockholders are admitted into reorganization plans as a matter of favor, and since the foreclosure sale destroys all their rights in nearly every case, their only rights are those conferred by the reorganization plan, provided the foreclosure sale is a valid one. Thornton v. Wabash Ry. Co., 81 N. Y. 462. A stockholder permitted as a matter of favor to participate in a bondholders' reorganization agreement must accept the plan as an entirety or not at all. Miller v. Dodge, 28 N. Y. Misc. 640, 59 N. Y. Supp. 1070. 22 See Wood v. Dubuque & S. C. R. Co., 28 Fed. 910. 23 Statutes providing for reorgani |