US SUPREME COURT DECISIONS

A majority of the stockholders and creditors of a railroad company which had several mortgages on the road, agreed to sell it for a price offered and to divide the proceeds among all the stockholders and creditors in a way settled on by those agreeing to the plan. Other stockholders and chanrobles.com-red

Page 83 U. S. 447

creditors refusing to agree, in order to get around their opposition, a sale was effected through the action of the majority, by an amicable foreclosure of mortgage, the trustees in one of the mortgages being complainants, and those in other mortgages, with the corporation whose road was intended to be sold, the defendants. The dissatisfied stockholders and bondholders then filed a bill against the purchaser and the railroad corporation whose road had been sold, but not making any of the trustees or any of the consenting stockholders parties, charging collusion in this sale, and praying that it might be set aside, a resale made, and the money arising from the sale be applied primarily to their benefit. Held that the bill was fatally defective for want of proper parties.

Ribon and several others, bondholders and stockholders in the Mississippi & Missouri Railroad Company, filed a bill against the Chicago, Rock Island & Pacific Railroad Company, to set aside as collusive and fraudulent a sale which had been made of the road of the former company (one which had numerous stockholders, and also numerous bond creditors, secured by five different mortgages) to the latter company, through means of an amicable foreclosure and decree, in which certain persons, trustees in one mortgage given by the latter company, were complainants, and certain other persons, trustees in four other mortgages given by the same company, along with the company itself, were defendants.

The bill alleged an agreement between a company called the Chicago & Rock Island Railroad Company, and a majority of the bondholders and stockholders of the Mississippi & Missouri road, by which this latter road should be sold to the former company, and the proceeds divided among the bondholders and stockholders of the latter, in a way fixed upon; that there being several stockholders and bondholders in the latter company who dissented from this arrangement, a scheme was devised by the majority of the stockholders, to which the different trustees under the different mortgages were parties, to carry the thing out in the way above named, and so cut off those who dissented, and the execution of the scheme through a sale of the Mississippi & Missouri Railroad to the old Chicago & Rock Island Company, with a somewhat chanrobles.com-red

Page 83 U. S. 448

different organization, and a name so far changed as to have the addition of "Pacific."

The bill was filed by the complainants for themselves and such other dissenting bondholders and stockholders as should choose to become parties and contribute; and it prayed, as already stated, that the sale might be set aside; praying further that the property might be resold under the decree; that the money arising from the sale be applied, first, to the payment of the bonds of the complainants and of any dissenters who might come in, and be afterwards applied upon the stock of the complainants and of any dissenters who might come in, and praying for other and further relief.

It made both the Chicago, Rock Island & Pacific company (the company purchasing), and the Mississippi & Missouri Company (the company whose road had been sold), defendants; but it did not make any of the stockholders through whose assent the trustees had acted, nor the trustees through whose act the scheme was charged to have been actually consummated, parties.

For these omissions, as of indispensable parties, the defendants demurred, and the court below sustained the demurrer and dismissed the bill. Ribon and his co-complainants appealed.