(after stating the facts as above). Appellee has moved that the appeal be dismissed on the grounds: (1) That the decree is not final, and (2) that appellants by offering to meet Griffiths’ bid released the alleged errors.
[1] A decree setting aside a sale on foreclosure and ordering a resale confessedly does not end the case. That continues with all the. parties in that were in before the sale. But- the bidder at the sale becomes a new party; the acceptance of his bid gives him the rights of a purchaser unless legal objections to confirmation can be shown; and the decree which puts him out of court as a party and terminates his asserted rights as a purchaser appears to us very clearly a final decree as to him. No difference is perceived by reason of the fact that the purchaser may have been a party to the foreclosure issues. In the capacity of a purchaser he certainly first became a party when the property was struck off to him at the sale. And here, the Reorganization Committee, representing only depositing bondholders, is not the same party as the complainant trustee, representing all the bondholders. To say that the successful bidder at the first sale may become the puixhaser at the second or subsequent sales seems to us no answer. He may not. And the finality of a decree is to be determined by its own force, not by contingencies outside the record. We find nothing in Butterfield v. Usher, 91 U. S. 246, 23 L. Ed. 318, McLish v. Roff, 141 U. S. 661, 12 Sup. Ct. 118, 35 L. Ed. 893, and Doyle v. London Guaranty Co., 204 U. S. 599, 27 Sup. Ct. 313, 51 L. Ed. 641, relied on by appellee, to require a different conclusion; and the numerous cases respecting confirmation may rightly be taken to indicate the general
[2] If one accepts by his acts a decree against him, he may be estopped from prosecuting an appeal. In this case the sale was set, aside because suppression of competition resulted in one inadequate bid. If there was no stifling of intending bidders, the sale should have been confirmed, for a bid of 50 to 60 per cent, of the after-opinion’ value of property offered at public auction is not shockingly inadequate. By offering to raise their bid, appellants, in our judgment, did not waive their right to insist that they had not chilled the sale. Their conduct was not a confession of wrongdoing; riot even, as we regard it, an admission of the inadequacy of their first bid; but amounted at most only to this, that if the objections were withdrawn and the sale confirmed they would pay into court for appellee and other non-depositing bondholders their part of the'increase rather than have the estate suffer the expense and loss by delay from a resale, which expense and loss might well exceed the nondepositing bondholders’ proportionate share of the increase. Appellants’ offer neither advantaged them nor prejudiced appellee with respect to the validity and full oper-ativeness of the decree, and is not, we believe, a sufficient basis for an estoppel against the appeal. The motion to dismiss is overruled.
[3] On the other hand, appellants seek to relieve us from taking up the merits by asserting that appellee was not in a position to object to confirmation. Through a representative appellee had cause to believe that the Reorganization Committee had planned to suppress competition, was present at the sale, and neither bid nor objected to the proceedings. Appellee could not know in advance that the wrongful intent would be acted on. She was under no obligation to bid. And objections should be presented, as she did promptly, to the court, not to the court’s salesman. It is also said that Griffiths and appellee had an ulterior purpose to better Griffiths’ position as a bondholder of the Wisconsin corporation. We are not now concerned with the Wisconsin case. In the record of these Illinois proceedings we find nothing to impugn the motives of appellee or of Griffiths. But if there has to be a resale or other disposition of the Illinois property, the money of Griffiths or of appellee, even if they were wrongdoers, should be as acceptable as that of the Reorganization Committee whose acts rendered confirmation impossible. At all events, the sale was the court’s and we are of the opinion that the court, on the motion of the master or of any outsider or on its own motion, could investigate allegations of actual or constructive fraud in the sale.
[4] Our conclusions respecting the facts may be disclosed most briefly’by saying that we approve generally the finding of the trial court and by answering the material objections of appellants to that finding.
It may be true that the Milwaukee Traction Company was eliminated as a prospective bidder when it disavowed the action of Beggs as its president. But Beggs, associating Pfister in the plan, continued the purchase of Illinois bonds and the negotiations for entry into' Chicago over the Elevated Railroad until they made their contract with
We cannot accept the contention that the Assisting Syndicate’s purchase of the 1,647 Dutch bonds destroyed the ability and intention of Beggs and Pfister. That purchase gave the Assisting Syndicate a total of 1,900 bonds. Beggs and Pfister through their ownership of 401 bonds and control of 1,100 by virtue of their agreement with the Illinois Committee, had 1,500 bonds at command. Before the Dutch purchase the Assisting Syndicate therefore had only about 250 bonds. Instead of being a death blow to Beggs and Pfister, the action of the Assisting Syndicate in forestalling Beggs and Pfister in' the purchase of the Dutch bonds was necessary to prevent an opposing bidder from having 3,150 bonds against their 250. After the Dutch purchase the two intending bidders were on nearly an equal footing.
Whether the Assisting Syndicate was merely buying bonds or was additionally paying Beggs and Pfister to refrain from bidding, and to aid the syndicate and its successors in interest in obtaining the property without competition is to be judged by the contract they made at the time rather than by their subsequent protestations. In the contract Beggs and Pfister gave two things: First, 401 of the 1922 bonds and 530 of the underlying bonds;, and second, their agreement that they and their associates “shall, to the extent of their power and influence and information, in every reasonable way, aid and assist the purbhas-ers in becoming the purchasers of the Chicago & Milwaukee Electric Railroad property (both divisions) and in making effective their plan of reorganization,” and in consideration thereof the purchasers gave in money and in undertakings to pay $1,122,636. Before this contract went into effect, the Assisting Syndicate apportioned the consideration by obtaining a contract from the Wisconsin Committee that the Assisting Syndicate should be liable for only 65 cents- on the dollar of the 401 bonds (which was approximately their value tested both by market price and the worth of the property) and that the Wisconsin Committee should be liable for the excess above that amount. How does the consideration stand when so apportioned by the Assisting Syndicate ? Subtracting $538,244 (the highest value of the underlying bonds, and accrued interest) and $260,650 (the amount apportioned to the 401 bonds of 1922) leaves $323,742 as the amount apportioned by the Assisting Syndicate to the other element of the Beggs and Pfister contract, namely, their agreement not only to refrain from bidding but also to use their power and influence and information in aiding the purchasers of their bonds to suppress competition. In percentages these figures mean that 145 per cent, of the face of the 401 bonds was paid, 65 per cent, for the bonds and 80 per cent, for absence and influence.
A further contention in this connection is made that the $323,742 was paid to end litigation. This is but a'nother way of denying that that sum was paid for the absence and influence of Beggs and Pfister, and, as such, is answered by reverting to the only possible meaning-of the written bargain and by considering that in fact the outcome of
Appellants say that, although the issue respecting the West Line was not ended in court, it was by a provision in their reorganization agreement to the effect that if appellants should be confirmed as purchasers of the Wisconsin property and also of the Illinois property, then appellants should be judges of the issue. Plainly the issue is not settled. At most, the provision is a conditional substitution of appellants as judges for the judges appointed by law. An indispensable condition is that appellants be confirmed as purchasers of the Illinois property. And when we inquire how they were to become purchasers, we are at once brought back to the $323,742 for the absence and influence of Beggs and Pfister. But even if appellants, by becoming the purchasers, should enter upon their judgeships, they could determine the issue only as between the Illinois and Wisconsin bondholders whose bonds were in their hands. Nondepositing Illinois bondholders, on the question of distribution, would have the right to insist that the court decide whether the proceeds from the sale of the West Line are subject to the alleged claim of the Wisconsin bondholders. Therefore we cannot find, that any part of the 80 per cent, premium on the 401 bonds was paid to end the only issue in court.
Although the Beggs and Pfister contract plainly covers two elements of bargain, and although the Assisting Syndicate apportioned 65 cents 'on the dollar to the 401 bonds, it is claimed that the remainder of the consideration, $323,742, is not to be attributed to the remaining element of the bargain, but to a reimbursement of Beggs and Pfister for services, expenses, and interest on money expended in and about their purchase of the bonds. Beggs and Pfister made no profit, the insistence is, therefore the $323,742 cannot be applied to the second ele
That appellants with open eyes stepped into the shoes of the Assisting Syndicate seems to us very clear. The Wisconsin Committee took over the obligation, and therefore the benefit, of the $323,742 part of the Beggs and Pfister contract. When appellants became the Reorganization Committee that was to bid, the Assisting Syndicate and the Wisconsin Committee did not deposit their Illinois bonds as individual holders of Illinois bonds were required to and did deposit theirs, but they bargained with appellants that they would give appellants control .of their Illinois bonds if appellants, among other things hereafter considered, would assume the obligation and take the advantages of the existing arrangements. It is unnecessary to weigh the inferences of fact that might be drawn from the record to show that appellants, as intelligent men, with eight out of ten of them taken from previous committees, must have had actual knowledge of every circumstance we have stated; the contents of the papers put in their' hands are enough.
$4,500,000 was the value of the Illinois property as found by the court. Detailed estimates of competent engineers, some of the highest valuers being employed by appellants, varied from $3,800,000 to $5,600,000. As the trial judge heard the witnesses in open court,, we are in no position to question his finding of value. Subtracting prior liens from the lowest valuation leaves at least $2,600,000 as the value of the Illinois bonds in suit, or 65 cents on the dollar.
From this review we conclude that the court was right in the ultimate finding that the solitary bid was inadequate and that it was solitary on account of suppression of competition.
[5] Against the decision that equity would not tolerate a confirmation of the sale as made by the master, appellant’s strong insistence is that the rule in respect to chilling applies only to intending bidders who have no lien or interest in the property. No authority of which we are cognizant goes to that extent. If that were the test, an intending bidder who found competitors in the field with cash in hand could learn how much they wanted for withdrawing and say, “Go get a lien
“On the other hand, the mere possession of a right to protect one’s own interest will not be permitted to cloak a violation of the rule under color of such right. Between these two exhibitions of the law lies its true application, which in the nature of things must often turn upon a question of fact.”
In legal effect, we believe, Beggs and Piaster were always outsiders. They were confessedly such when, the receivership being under way, they first conceived the plan of becoming purchasers of the Illinois property. Their action began, and continued until they sold out, as a movement, not to protect an existing interest, but to acquire an interest to aid them as intending bidders. When Beggs and Pfister and the Illinois Committee, on the one hand, and the Assisting Syndicate, on the other, were confronting each other as practically equal antagonists, each at a sale was prepared to pay less than half .the purchase price in tokens (bonds usable only as advance receipts for their distributive shares) and would have been compelled to produce more than half in money. In the light of the law we see no difference between buying off an intending bidder who has all his money in hand and one who has converted a part of his money into counters.
[6] Another aspect of the matter supports our conviction that the court did equity in refusing to confirm the sale as made by the master. -At execution sales and at foreclosure sales of ordinary farms or town lots, 'the general public may ,in fact be interested as intending bidders because of their separate financial ability to purchase. It was in the consideration of such sales that the ancient and familiar rule arose. _Buf in modern times, when vast railroad and industrial enterprises áre financed by selling millions of bonds payable to bearer through the world’s exchanges, a different class of sales has appeared. Courts have had • to recognize that separate individual ability is not equal to the purchase and rehabilitation of a broken-down railroad. “Reorganization” has become familiar. This means, usually, that the equity of the stockholders, if any ever existed in actual value, has vanished; that the property virtually belongs in equity to the bondholders ; and that, if the bondholders will combine for the mutual protection of their equal interest, they will have a practical monopoly of the bidding. This last is so because, if all the bondholders are in the combination, it is utterly immaterial to them whether they bid the full amount of the decree or a sum that will pay only one cent on the dollar of their bonds; and therefore, by creating that masterful situation, they can force any Outside combination to offer the full amount of the decree without danger or expense to themselves. Most commonly the controversy over the sale arises when there are nonassenting bondhold-
■ “That a court of equity owes a duty to the creditors seeking its assistance in subjecting property to the payment of debts, to see that the property brings something like its true value in order that to the extent of that value the debts secured upon the property may be paid; that it owes to them something more than to merely take care' that the forms of law are complied with, and that the purchaser is guilty of no fraudulent act.”
In Starkweather v. Jenner, 216 U. S. 524, 30 Sup. Ct. 382, 54 L. Ed. 602, 17 Ann. Cas. 1167, the right of a representative of the majority of co-owners to become the purchaser is recognized, provided, among other conditions, “he took no undue or unfair advantage of his co-owners.” If, in Northern Pacific Ry. Co. v. Boyd, 228 U. S. 482, 33 Sup. Ct. 554, 57 L. Ed. 931, an outside combination, in competition with the reorganization committee, had been confirmed as the purchaser at $61,500,000, we can hardly conceive that Boyd would have been permitted to go behind the sale. But, because'the purchaser had .created the masterful situation of controlling • the sale,' because the purchaser was not a stranger but the virtual owner of the property exposed for sale, neither the principle of the “stability.of judicial sales” nor “compliance with the forms of law” nor the intent to commit “no fraudulent a'ct” was sufficient to stop a court of equity from inquiring whether an “undue 'or unfair advantage” had been taken. Courts of equity should be deemed no less powerful to-day than when the first chancellor looked to his conscience for guidance, to make fair dealing between man and man the test. And from what other source came,' or could come, the recognized practice, in sales of this class, of the court’s ascertaining in advance of sale the minimum value of the property and thereupon fixing a minimum selling price?
When a nondepositing bondholder objects to confirmation solely on the ground that the reorganization committee?s bid, though not grossly'inadequate, was substantially short of the fair value, the answer is that his co-owners of the common mortgage and the common decree offered him the opportunity to deposit his bonds and to share equally with them the benefits of the. purchase. But, in sales of this class, we never have observed or heard of a case where the minority were turned away without having been given by the majority a fair opportunity to share equally with them the benefits of the purchase — where, for example, 95 per cent, of the bondholders of a vast railroad or.industrial enterprise have combined and then shut the door upon the scattered 5 per cent. And no just distinction can be drawn, we believe, ■ whether the door be shut or unconscionable conditions of em trance be imposed.
A reorganization plan is somewhat like an insurance policy or a bill of lading, against which there is no protection except through legis
No matter what the plan, it does not matter whether the committee bids much or little if all the bondholders are in. Here, some $160,000 of bonds were outstanding. And the temptation to use the monopoly of bidding for the purpose of recouping partially the outside expenses and losses of the majority at the expense of the minority seems to have been too strong. .
Our conclusion at this point is that the court was warranted in refusing to confirm the sale as made by the master.
[7] When the court had determined to vacate the sale as made by the master, what was to be done? In the case of an original sale the statute seems to be mandatory as to the method. But when a court of equity finds that it cannot confirm a sale as made by its master, we are inclined to believe that the course approved in Blanks v. Farmers’
The decree is:
Affirmed.