James v. Railroad Company - 73 U.S. 752 (1867)
U.S. Supreme Court
James v. Railroad Company, 73 U.S. 6 Wall. 752 752 (1867)
James v. Railroad Company
73 U.S. (6 Wall.) 752
1. Where, under the laws of Wisconsin, a mortgage by the La Crosse and Milwaukee Railroad Company upon its railroad and appurtenances had been foreclosed, a sale made and confirmed, and a new company under the name of the Milwaukee & Minnesota Railroad Company had been organized by the purchasers, being the directors who made the mortgage and others holding the bonds secured thereby, this Court, upon a creditor's bill filed by judgment creditors of the mortgagor, held, on the facts of the case, that the sale was fraudulent, and that it should be set aside and the new company perpetually enjoined from setting up any right or title under it, the mortgage to remain as security for the bonds in the hands of bona fide holders for value, and that the judgment creditors (the present complainants) be at liberty to enforce their judgments against the defendants therein, subject to all prior encumbrances.
2. Where the notice of the sale of a railroad under mortgage to secure railroad bonds set forth that the sum due under the mortgage for the principal of bonds was $2,000,000, with $70,000 interest, when in fact less than $200,000 was outstanding in the hands of bona fide holders for value, the remainder of the $2,000,000 being either in the hands of the directors or under their control, such a notice was fraudulent and of itself sufficient to vitiate the sale.