MAYER, District Judge
(after stating the facts as above). The number of writings in evidence and their considerable detail have made necessary the foregoing extended statement.
The petitioners insist that $870,000 was the value of the assets sold; that the respondent in effect gave his consent to the decree by his writing of April 10, 1912, and by his subsequent conduct. The respondent, with equal insistence, contends that the sale of November 2 and 13, 1912, was merely a step in a reorganization, and that the true value of the property was that which the depositing creditors themselves placed on the property in their organization of the Richmond Radiator Company and the declaration as to the value of the stock issued. Other propositions are advanced but these lie at the bottom of the controversy.
It is plain beyond controversy that the $870,000 bid at the sale in the court in Pennsylvania was not any test of the value of the property and was simply a step in the plan of reorganization. The course taken by the Wiggin committee was the only feasible and practical solution of a difficult situation.
To sell the property disassociated from a plan of reorganization, stripped of its organization, its mechanics and salesmen scattered and its plants shut down, would have been to sacrifice it as scrap. Such a disposition was not to be expected of the experienced men who constituted the Wiggin committee, and this they, as well as the receivers, made clear to the creditors in the circulars explaining the desirability of coming into the reorganization plan. The problem was not an unusual one.
In the busy jurisdictions, the question is constantly presented of selling a business as a going concern or letting it go under the hammer as so much land or merchandise. Even though the liabilities exceed the assets, substantial value may be attained with the addition of working capital and good management. That was the case here, [980]*980as everybody realized and as the expert Strong (selected by the receivers at the request of the Wiggin committee) ’ in due time reported.
It is said, however, that the $870,000 must be accepted as the purchase price; that so the decree of the court in Pennsylvania declares; and that to place any other construction on the decree is to attack it collaterally. It is true that for some purposes and between certain parties $870,000 must be regarded as the price of the property. Por instance, the Wiggin committee and the receivers are, as to each other,‘bound by the decree, as it reads on its face, on the same principle as would be bondholders and stockholders under a reorganization contract as discussed in Northern Pacific Railway v. Boyd, 228 U. S. at page 502, 33 Sup. Ct. 554, 57 L. Ed. 931, or as would be consenting parties to a judicial sale accomplished by a consent decree.
[ 1 ] But, if the decree be a consent decree and obviously an instrument in a plan of reorganization, it cannot cut off nor impair the rights of one who was not brought under its operation, either individually or through some other acting for him in a representative capacity and who has neither waived nor otherwise, in legal effect, foregone his rights.
[2] What was the status of Howell as an indorser after the reorganization had been effected? In conjunction with McCrum he had transferred certain property in March, 1912, in trust to apply to his and their debts if ultimately necessary; this done at a time when no one could foresee the results to come. Next he waived demand of payment, protest, and notice of protest of any of the company notes indorsed by him and consented that the holders might extend time of payment without impairment of his obligation to them as indorser. It is contended by Howell that this is all he did; but such a construction would put a highly technical meaning on the McCrum-* Howell addendum tp the agi-eement of April 10, 1912; and his letter of April 29, 1912, to Mr. Calwell (although referring only to the Telling transfer) is illuminating as to his mental attitude, and that mental attitude discloses his own practical construction negativing the meaning now contended for. The addendum clearly consents to everything in the agreement.
Paragraphs cannot, however, be isolated. The agreement must be read as a whole, and, so read (omitting the usual formal provisions), paragraphs fourth and eleventh bear an important relation to each other. Concededly the claims against the maker could not be assigned and the rights against the indorser reserved without impairing the obligation of the indorser in the absence of the latter’s consent. Spies v. National City Bank, 174 N. Y. 222, 66 N. E. 736, 61 L. R. A. 193. To have sued and obtained judgment against the indorsers at that time for the principal of the debt might inadvisedly have opened up complications, legal and practical. The intent of the agreement, therefore, was to exhaust first the estate of the principal debtor, meanwhile preserving any rights against those secondarily liable.
[981]*981Paragraph fourth empowered the Wiggin committee to choose between alternatives (1) to formulate a reorganization plan and agreement, or (2) to collect, compromise, or otherwise adjust the claims without a reorganization. Until the committee determined which alternative to select, it was impossible to fix the basis of the secondary liability.
II the property went to absolute public sale without a reorganization plan, the decree of the court would fix the purchase price in the first instance, and after that, in due course, the dividend and the indorser under paragraph eleventh (consented to by, the addendum) would be held for the balance. If the committee formulated a reorganization plan and agreement and filed and published the same as required under paragraph fourth, all depositors not dissenting were to he hound by such plan and agreement. In such event, a judicial sale might and probably would be a mere step to the final result, more especially if the sale price were an arbitrary figure designated by the committee, not fixing value as between assenting depositors and the indorsers but necessary to the termination of the receivership, to divesting the receivers.of such right, title, or possession as they might have, and to furnishing a winding up fund for the purposes of the receivership.
As between the assenting creditors and the indorsers, however, the secondary liability could only he determined after the true value of the property had been ascertained, because clearly such a reorganization contemplated a valuation of the res for reorganization purposes as a going concern as distinguished from a purchase price after competitive bidding or an arbitrary figure in a judicial decree decided on without relation to the value of the property but as a necessary incident to the process of reorganization. That such was the view which must be attributed to the Wiggin committee (and, of course, its depositors) and to Howell is well confirmed by the situation.
Why should the creditors in April, 1912, delay suing the indorsers unless they wished first to ascertain the ultimate result? At that time the outlook was by no means gloomy, and Gunn, Richards & Co. were already estimating and appraising on a basis which short!}' thereafter justified the receivers in reporting a probable surplus for creditors exclusive of patents, patent rights, trade-marks, and good will. A successful reorganization might mean a hundred cents on the dollar, a consummation equally desired by creditor and indorser.
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MAYER, District Judge
(after stating the facts as above). The number of writings in evidence and their considerable detail have made necessary the foregoing extended statement.
The petitioners insist that $870,000 was the value of the assets sold; that the respondent in effect gave his consent to the decree by his writing of April 10, 1912, and by his subsequent conduct. The respondent, with equal insistence, contends that the sale of November 2 and 13, 1912, was merely a step in a reorganization, and that the true value of the property was that which the depositing creditors themselves placed on the property in their organization of the Richmond Radiator Company and the declaration as to the value of the stock issued. Other propositions are advanced but these lie at the bottom of the controversy.
It is plain beyond controversy that the $870,000 bid at the sale in the court in Pennsylvania was not any test of the value of the property and was simply a step in the plan of reorganization. The course taken by the Wiggin committee was the only feasible and practical solution of a difficult situation.
To sell the property disassociated from a plan of reorganization, stripped of its organization, its mechanics and salesmen scattered and its plants shut down, would have been to sacrifice it as scrap. Such a disposition was not to be expected of the experienced men who constituted the Wiggin committee, and this they, as well as the receivers, made clear to the creditors in the circulars explaining the desirability of coming into the reorganization plan. The problem was not an unusual one.
In the busy jurisdictions, the question is constantly presented of selling a business as a going concern or letting it go under the hammer as so much land or merchandise. Even though the liabilities exceed the assets, substantial value may be attained with the addition of working capital and good management. That was the case here, [980]*980as everybody realized and as the expert Strong (selected by the receivers at the request of the Wiggin committee) ’ in due time reported.
It is said, however, that the $870,000 must be accepted as the purchase price; that so the decree of the court in Pennsylvania declares; and that to place any other construction on the decree is to attack it collaterally. It is true that for some purposes and between certain parties $870,000 must be regarded as the price of the property. Por instance, the Wiggin committee and the receivers are, as to each other,‘bound by the decree, as it reads on its face, on the same principle as would be bondholders and stockholders under a reorganization contract as discussed in Northern Pacific Railway v. Boyd, 228 U. S. at page 502, 33 Sup. Ct. 554, 57 L. Ed. 931, or as would be consenting parties to a judicial sale accomplished by a consent decree.
[ 1 ] But, if the decree be a consent decree and obviously an instrument in a plan of reorganization, it cannot cut off nor impair the rights of one who was not brought under its operation, either individually or through some other acting for him in a representative capacity and who has neither waived nor otherwise, in legal effect, foregone his rights.
[2] What was the status of Howell as an indorser after the reorganization had been effected? In conjunction with McCrum he had transferred certain property in March, 1912, in trust to apply to his and their debts if ultimately necessary; this done at a time when no one could foresee the results to come. Next he waived demand of payment, protest, and notice of protest of any of the company notes indorsed by him and consented that the holders might extend time of payment without impairment of his obligation to them as indorser. It is contended by Howell that this is all he did; but such a construction would put a highly technical meaning on the McCrum-* Howell addendum tp the agi-eement of April 10, 1912; and his letter of April 29, 1912, to Mr. Calwell (although referring only to the Telling transfer) is illuminating as to his mental attitude, and that mental attitude discloses his own practical construction negativing the meaning now contended for. The addendum clearly consents to everything in the agreement.
Paragraphs cannot, however, be isolated. The agreement must be read as a whole, and, so read (omitting the usual formal provisions), paragraphs fourth and eleventh bear an important relation to each other. Concededly the claims against the maker could not be assigned and the rights against the indorser reserved without impairing the obligation of the indorser in the absence of the latter’s consent. Spies v. National City Bank, 174 N. Y. 222, 66 N. E. 736, 61 L. R. A. 193. To have sued and obtained judgment against the indorsers at that time for the principal of the debt might inadvisedly have opened up complications, legal and practical. The intent of the agreement, therefore, was to exhaust first the estate of the principal debtor, meanwhile preserving any rights against those secondarily liable.
[981]*981Paragraph fourth empowered the Wiggin committee to choose between alternatives (1) to formulate a reorganization plan and agreement, or (2) to collect, compromise, or otherwise adjust the claims without a reorganization. Until the committee determined which alternative to select, it was impossible to fix the basis of the secondary liability.
II the property went to absolute public sale without a reorganization plan, the decree of the court would fix the purchase price in the first instance, and after that, in due course, the dividend and the indorser under paragraph eleventh (consented to by, the addendum) would be held for the balance. If the committee formulated a reorganization plan and agreement and filed and published the same as required under paragraph fourth, all depositors not dissenting were to he hound by such plan and agreement. In such event, a judicial sale might and probably would be a mere step to the final result, more especially if the sale price were an arbitrary figure designated by the committee, not fixing value as between assenting depositors and the indorsers but necessary to the termination of the receivership, to divesting the receivers.of such right, title, or possession as they might have, and to furnishing a winding up fund for the purposes of the receivership.
As between the assenting creditors and the indorsers, however, the secondary liability could only he determined after the true value of the property had been ascertained, because clearly such a reorganization contemplated a valuation of the res for reorganization purposes as a going concern as distinguished from a purchase price after competitive bidding or an arbitrary figure in a judicial decree decided on without relation to the value of the property but as a necessary incident to the process of reorganization. That such was the view which must be attributed to the Wiggin committee (and, of course, its depositors) and to Howell is well confirmed by the situation.
Why should the creditors in April, 1912, delay suing the indorsers unless they wished first to ascertain the ultimate result? At that time the outlook was by no means gloomy, and Gunn, Richards & Co. were already estimating and appraising on a basis which short!}' thereafter justified the receivers in reporting a probable surplus for creditors exclusive of patents, patent rights, trade-marks, and good will. A successful reorganization might mean a hundred cents on the dollar, a consummation equally desired by creditor and indorser.
Having given the Wiggin committee broad power, Howell, in any even!, so long as he remained silent, was bound by every step they took and in turn they bound themselves as to him by their acts done in pursuance of this same agreement. If they abandoned reorganization, he must take the consequences. If they accomplished reorganization, he must abide by the result for better or for worse. To assert that they could reorganize as far as affected themselves and utilize judicial procedure as a step to that end, but call the procedure something else as affecting Howell, is to ignore the intent and purpose of the document of April 10, 1912. While only those depositors [982]*982who assented to a plan of reorganization were bound, yet McCrum and Howell bound themselves by the addendum wherein they severally assented to the terms of the agreement.
It is unnecessary to determine what the situation would have been as matter of law if, at the hearings in the court in Pennsjdvania, Howell had objected to the plan and agreement of reorganization or to the sale. He was under no legal obligation to express his view nor to warn the committee of the effect in law of their acts; and it is not at all certain that they would have changed their course if he asserted to them what he does now.
Every step the Wiggin committee took relates back to April 10, 1912, and every paper they signed reads into the instrument of April 10, 1912. In the plan for reorganization of September 27, 1912, it was provided:
“The annexed agreement of reorganization * * * constitutes a part hereof.” Last paragraph.
In the “annexed agreement” of September 27, 1912, the agreement of April 10, 1912, is recited and then:
“It is intended that this agreement shall be and it is the agreement of reorganization and readjustment contemplated in the agreement dated April 10, 1912. * * * ” Paragraph seventh.
As if to say (colloquially):
“Mr. Howell, we now advise you that we have finally determined on a plan of reorganization as to the details of which we herewith inform you and this is the plan to which you have taken no objection for you gave us plenary power on April 10,1912. The indorsement creditors retain their rights against you, whatever they may be.”
The circular of September 27, 1912, places the committee’s construction upon its own procedure and shows beyond dispute that the judicial sale was to be merely a step in the reorganization. More than that, every step thereafter shows that the reorganization plan was carried out to the letter and the committee’s knowledge was Howell’s knowledge up to the last act and the last document necessary to carry into complete effect the plan of reorganization. If, throughout, it be remembered that the only rights which by waiver and consent the committee retained against Howell originated in the agreement of April 10, 1912, and that as to him every act they did in pursuance of that agreement bound both him and them, then it will be seen that he does not collaterally attack the court’s decree.
The stenographic minutes of the hearing before Judge Buffington support and do not undermine the' decree, and they are probably admissible on the facts in this case, but we may dispose of the matter without resort to these minutes.1 It is enough to read the decree in the light of the undisputed facts.
In addition to those set forth, there are others of significance. Why did the decree require confirmatory deeds from the ■ McCrum- ' [983]*983Howell Company? Why was the expression used, “any other plan or method of sale ?” Why was the price fixed at $870,000 except to conform with the plan of reorganization? See testimony of Wiggin and Stettinus. Why did the cross-hill attach the agreement of April 10, 1912, and make clear that the bill was filed to facilitate a reorganization? Finally on this branch it is urged that the decree was not a consent decree because opposed by one creditor; but the recital in this regard in the final decree shows that the objection was pro forma and is particular in stating that there was “no objection to a decree directing a private sale of the assets,” and that the objecting creditor “desired to be considered as making a formal objection” on the ground of inadequacy of price.
The next question is: What was the value of the property of the company upon which the reorganization rested? Here both sides cite Northern Pacific Ry. v. Boyd, supra, as authority for their contentions. Whatever may be urged was decided in that case, it was clearly held that, as between the parties and the public generally, the sale was valid but as against creditors it was a mere form. Then the court continued:
“The invalidity of the sale flowed from the character of the reorganization agreement regardless of the value of the property, for in cases like this the question must be decided according to a fixed principle, not leaving the rights of the creditors to depend upon the balancing of evidence a's to whether, on the day of sale, the property was insufficient to pay prior incumbrances.”
The court (at page 507 of 228 U. S., at page 561 of 33 Sup. Ct., 57 L. Ed. 931) pointed out that the purchaser at foreclosure at once issued securities aggregating $345,000,000 on a property which a month before had been bought for $61,000,000.
“But there was an entirely different estimate of the value of the road when the reorganization contract was made. Bor that agreement contained the distinct recital that the property to be purchased was agreed to be ‘of the full value of $345,000,000, payable in fully paid nonassessable stock and the prior lien and general lien bonds. * * * ’ The fact that at the sale, where there was no competition, the property was bid in at $61,000,000 does not disprove the truth of that recital, and the shareholders cannot now be heard to claim that this material statement was untrue and that as a fact there was no equity out of which unsecured creditors could have been paid, although there was a value which authorized the issuance of $144,000,000 fully paid stock. If the value of the road justified the issuance of stock in exchange for old shares, the creditors were'entitled to the benefit of that value, whether it was present or prospective, for dividends or only for purposes of control. In either event it was a right of property out of which the creditors were entitled to be paid before the stockholders could retain it for any purpose whatever.”
While the facts in Northern Pacific Ry. v. Boyd differ from those in the case at bar, certain principles, it seems to me, by parity of reasoning, are here applicable. Howell was a possible debtor and not a creditor, but, before his secondary liability can now be fixed, the value of the property of the principal debtor must be ascertained. That value should be ascertained, if possible, “according to a fixed principle.” Had the sale been independent of a plan of reorganization, the value for all purposes would appear in the decree; but where the [984]*984property is dealt with in a reorganization, such as this, how shall we find the value as against this indorser? The property must be regarded as a going concern, for the purpose of the reorganization was,, of course, to keep the business alive.
“The investigations made by tlie committee have convinced it that, if tlie property be disposed of at a forced sale, the creditors can realize but a small percentage of their claims. The business, however, appears * * * to have an earning power.” Exhibit 1.
The appraisals and estimates of experts would, in this case, be, speculative at best (see estimates Gunn, Richards & Co. and Strong; testimony of Wiggin and Stettinus, especially in answer to' the court’s questions); but the valuation placed on the property by thé Wiggin committee was exact and not speculative. To carry out the reorganization, the Wiggin committee proposed to transfer, and did transfer, the property of the principal debtor and $340,000 in cash for $4,725,-000 of stock. The committee knew and were bound to know that under the laws of Delaware the property thus transferred was of the actual value of $4,725,000, else full-paid capital stock to that amount could not have been issued. If the $340,000 cash be deducted from this total, or if by some process of figuring $870,000 be deducted, the balance attributable to the value of the property is far in excess of the debts of the company.
The Wiggin committee creditors cannot be heard as against Howell to attack the value of the Delaware stock. That was their view of the value of the property for reorganization purposes, and the public, thenceforth, were entitled to deal with the stock as full paid and non-assessable and on the assumption that the property for which issued was as stated in the minutes of Richmond Radiator Company November 26, 1912, “of the actual value of $4,725,000.”
Enough has been pointed out to warrant the conclusion that, as between the petitioners and the alleged bankrupt, the latter’s liability as indorser no longer exists. Other contentions have been suggested which present persuasive considerations in support of the respondent’s view, but the limits of an'opinion (already long) preclude further discussion.
The petition should be dismissed.