June 15, 1912, or for other claims established against one or And in addition the amount of interest due thereon to Sep- 2. For each $1,000 of indebtedness represented by debenture (a) New first preferred stock (50 per cent.). .$1,000.00 3. For each $1,000 of claims against or established against the Motor Company only (whether principal or interest to Sep tember 12, 1912): (a) Cash (25 per cent.)...... And voting trust certificates representing: (b) New first preferred stock (25 per cent.)... 4. For each share $100 par value of preferred stock of the Motor $ 500.00 500.00 400.00 250.00 250.00 250.00 150.00 (a) New first preferred stock (24 per cent.) 24.00 25.00 30.00 5. For each share of $100 par value of common stock of the Mo- 24.00 17.50 30.00 Under this plan of reorganization, then, creditors of the subsidiary companies, such as the Maxwell-Briscoe Motor Company, were to receive payment in full; claimants against the United States Motor Company were to receive 25 per cent. cash and the remainder in stock; the debenture bondholders were to receive stock for their bonds; holders of the preferred and common stock of the United States Motor Company and the Columbia Company, upon payment of an assessment of $24 per share, new preferred and common stock. So far as the stockholders are concerned, this plan was carried out. With respect to creditors the terms of participation were described in the plan as follows: "Holders of notes made or indorsed by the Motor Company, or made or indorsed by one or more of the subsidiary companies, may become parties to the plan and agreement of reorganization by depositing their notes indorsed in blank without recourse with the depositary at its said office. Holders of other obligations of or claims against the Motor Company or the subsidiary companies may become parties to the plan and agreement of reorganization by depositing with the depositary at its said office their obligations and claims if evidenced by an instrument in writing, or if not evidenced by an instrument in writing by depositing a statement of such claims, and in either case accompanied by an appropriate assignment or transfer thereof without recourse in such form as may be determined by the committee." By the order appointing receivers all creditors were directed to file with the receivers within 60 days "a duly sworn statement of all and any such claims as they may have or assert against the defendant companies or any of them." The time for filing claims, as finally extended by the court, expired December 15, 1917. The receivers secured an appraisal by Gunn, Richards & Co. of the real estate, buildings, and equipment of all the plants, first as a going concern and then at auction values (Plaintiff's Exhibit 26). They also had their auditors, West & Flint, prepare a statement of the assets and liabilities of all the companies on September 11, 1912, first as a going concern (Plaintiff's Exhibit 8) and then at auction values (Defendant's Exhibit H). Exhibit 8 shows an excess of assets over liabilities for all the companies of $910,309.33, (269 F.) while Exhibit H shows an excess of liabilities over assets of $5,492,658. With respect to the Maxwell-Briscoe Motor Company alone, Exhibit 8 shows an excess of assets over liabilities of $3,247,450.77, while Exhibit H shows an excess of liabilities over assets of $720,047.76. The fundamental difference between the two appraisals arises, of course, from the estimated value as part of a going concern and at their auction value; but it is quite as important to consider the nature of the liabilities. Claims were filed against the United States Motor Company to the amount of $12,750,965.54; against the Maxwell-Briscoe Motor Company alone to the amount of $2,637,788.94. This aggregate is, however, very much in excess of the actual liability. Many of the claims filed against both the United States Motor Company and one of the subsidiary companies arise out of two-name paper. In the next place, the United States Motor Company was itself a creditor of the subsidiary companies to the amount of upwards of $4,500,000; and, finally, many of the unliquidated damage claims were against more than one company. With respect to the Maxwell-Briscoe Motor Company alone, Exhibit 8 shows an excess of assets over liabilities of $3,247,450.77, while Exhibit H shows an excess of liabilities over assets of $720,047.76. The difference between the two appraisals is mainly due to the fact that the total assets of this company, other than any company accounts, are appraised at $4,270,901.32 as a going concern, and at $2,023,702.07 at auction values. On the liability side is included, however, its contingent liability to the extent of $994,713.17 as indorser on notes of one or more of the other companies. The receivers were granted leave to issue receivers' certificates sufficient in amount to enable them to embark on a plan for making cars for the 1913 market, but this plan was not carried out, and the receivers confined themselves substantially to repair work and completion of cars from materials in hand. In this way it was possible to keep the organization intact, and with this important end in view, a recognized expert, Mr. Walter E. Flanders, was employed as manager. On the application of the receivers for directions, various hearings were had before the court, and it was finally decided to sell the property. The decree of sale, dated November 18, 1912, provided for the conveyance and transfer of the property purchased to the purchaser, his successors, assigns or nominees who "shall be let into the possession of any or all of said property, and shall thereafter hold, possess, and enjoy the said property free from any and all estate, right, title, claim, demand, interest, or equity of redemption of in or to the same of the defendants herein, their respective creditors and stockholders, and any and all persons, firms, or corporations claiming by, through, or under them or any of them, subject only to the right of the court, as herein especially reserved, to retake possession of and resell such property in case the said grantee or grantees shall fail to comply, after due order, with any of the terms and conditions of sale." The decree of sale further provided as follows: "The purchaser or purchasers, his or their successors, assigns or nominees, shall be allowed the period of 60 days from the date of delivery of possession to him or them by the receivers within which to elect whether or not to adopt or assume any lease, agreement, or other contract which may be included in the property sold or which may constitute an incident or appurtenance thereof, and such purchaser or purchasers, his or their successors, assigns, or nominees, shall not be held to have accepted or assumed any such lease, agreement, or other contract which he, it, or they shall not so elect to accept or assume. Such election shall be made by an instrument in writing subscribed by the purchaser or purchasers, his or their successors, assigns, or nominees, and filed in the office of the clerk of this court, and no conduct or use of rights by any purchaser or purchasers, his or their successors, assigns, or nominees, within said period of 60 days, unaccompanied by the filing of such written instrument, shall be deemed to conclude such purchaser or purchasers, his or their successors, assigns, or nominees, in respect of such election." On December 12, 1912, the committee's plan of reorganization was declared effective. Pursuant to this plan a new company, called the Standard Motor Company, was organized January 2, 1913. Its name was soon afterward changed to the Maxwell Motor Company, Incorporated. At a meeting of the reorganization committee held January 6th for consideration of the bid to be made for the property, the minutes show this entry: "Mr. Rathbone made a statement to the meeting with reference to the auction values of the properties of the United States Motor Company and subsidiary companies, and suggested that bids based upon such values be made therefor in the alternative; i. e., bids for the properties themselves, or bids by way of an offer to pay the outstanding claims which have been filed, a certain per cent. of their amount." A resolution was then passed: "Resolved that bids for the properties of the United States Motor Company, Alden-Sampson Manufacturing Company, Brush Runabout Company, Columbia Motor Car Company, Dayton Motor Car Company, and Maxwell-Briscoe Motor Company be made in the alternative as follows: A written bid was accordingly submitted in the names of Henry C. Holt and William McAllister, Jr., two employees of the central Trust Company. This bid (the only bid made) was considered by Judge Hough, and on January 11th he filed a memorandum approving the percentage bid in terms which show on their face that he considered values at forced sale only. Thereafter Holt and McAllister transferred and assigned all their rights in the sale to Charles W. Hill and Leicester C. Collins. A contract was drawn between Hill and Collins, on one side, and the Standard Motor Company (afterwards the Maxwell Motor Company, Incorporated), on the other, which draft was submitted to the directors of the new company at the meeting on January 11th and duly approved. By this contract the company issued for the property bid in at the sale: "Fully paid, nonassessable stock of the Delaware Company (Maxwell Motor Company), namely: (a) 110,000 shares of first preferred stock of the par value of $100 each; (b) 90,000 shares of the second preferred stock of the par value of $100 each; (c) 109,950 shares of the common stock of the par value of $100 each-or $30,995,000 worth of stock." This contract, which is set out in the minutes of the directors' meeting of the new company on January 11th (Plaintiffs' Exhibit 16), recites: "It is understood that the properties offered for sale under the decree of sale Exhibit A above referred to, and to be acquired by the vendors in pursuance of the bid and of the assignment thereof, and of the contract, Exhibit B, above referred to, between the purchasers and the committee, will be acquired by the vendors at the scrap or auction value thereof, as the same was appraised by appraisers appointed or approved by the United States District Court for the Southern District of New York, no allowance being made for the value of the plants included in said property, as plants which might be used for the purposes for which they were built, nor for any value arising from the value of the property as constituting a complete organization, with its personnel, organization, established business, and good will as a going concern, and that the vendors were enabled to obtain said property by reason of the agreement, Exhibit B, between the purchasers and the committee above referred to, which said agreement was assigned to the vendors, as hereinbefore set forth, said committee acting on behalf of and as agent of creditors who had submitted their claims to the plan and agreement of reorganization, dated October 10, 1912, Exhibit C (hereinafter called the reorganization plan), aggregating upwards of 96 per cent. in amount of the creditors of the several defendant companies in the suit instituted in the United States District Court for the Southern District of New York above referred to; and it is understood that the purchase of said property was made under arrangement whereby creditors who have not assented to the reorganization plan will receive a dividend representing only what they could expect from the sale and liquidation of said property as a closed-down and disrupted property, sold at forced sale; and (269 F) it is understood that the price at which the vendors are to acquire the property and business aforesaid does not represent the real value of the property as a going concern with its good will and organization, and that the price named by the vendors in this contract is greatly in excess of the price at which they are to acquire the property offered for sale under the decree of sale, Exhibit A above referred to." ne contract also set forth that "the board of directors of the Delaware Company (Maxwell Motor Company) have by resolution duly adopted by said board determined that the value of the property hereinafter mentioned is at least as great as the par value of the stock to be delivered hereunder therefor." A decree confirming the sale was entered January 11, 1913, and the property was delivered forthwith to the Maxwell Motor Company. The charter of the United States Motor Company was forfeited January 18, 1916, for nonpayment of the state tax of the state of New Jersey. Meanwhile rent due under plaintiffs' lease had been paid in advance on September 10 and December 10, 1912, and March 10, 1913. On March 11th the Maxwell Motor Company, pursuant to power given in the final decree of sale, filed in court notice of intention not to assume the Maxwell-Briscoe Motor Company's guaranty of the plaintiffs' lease. The lessee defaulted in payment of the rental falling due June 10th. Thereupon the plaintiffs, on June 15th, attempted to distrain for rent on the property of the United Motor Chicago Company. On June 24, 1913, a voluntary petition in bankruptcy was filed by the United Motor Chicago Company, which was adjudicated a bankrupt June 27, 1913, and, after paying a small percentage on claims, was duly discharged. On August 11, 1913, the plaintiffs brought suit in the Supreme Court of this state against the Maxwell-Briscoe Motor Company upon its guaranty. After issue had been joined in 1914, notice was served on the plaintiffs that they were barred from proceeding by an injunction issued by the United States District Court for the Southern District of New York in the equity action. The plaintiffs thereupon filed a petition in the latter court for leave to proceed or for instructions. Judge Learned Hand decided that, inasmuch as the property had been sold and turned over, intervention in the equity suit would be unavailing, and permission was granted to continue the suit. Thereupon the plaintiffs amended their complaint, so as to show the amount of rentals which had fallen due at that time, the premises being still unrented. Thereafter it was agreed by counsel that, inasmuch as the building had been rented meanwhile under a clause giving the landlord the right to re-enter and rent, but for a rental below the stipulated rate in the original lease, a stipulation should be entered into between the parties whereby, if the motion for judgment which had been made by the defendant should be held against the defendant, a judgment might be entered upon the stipulation for an amount to be fixed by stipulation. A stipulation was accordingly entered into between the parties, whereby, after crediting upon the lease all moneys obtained either in the bankruptcy proceeding or from subtenants before their leases expired, and taking into account all the damages which had accrued up to the time of the stipulation through the failure to pay rent and other payments required by the lease as rental, and also taking into consideration the difference between the rate at which the building was rented for the balance of the term and the rate of rent under the lease with the Maxwell-Briscoe Chicago Company, the amount due was fixed at $132,000 with interest at 6 per cent. from the date of the stipulation. The trial court found against the defendant on its motion for judgment, holding that "on the last day fixed by the federal court for the filing of claims against the receivers of the defendant, the plaintiffs' claim had not matured, and was therefore not provable, because the principal debtor had not yet defaulted." This conclusion was affirmed by the Appellate Division and by the Court of Appeals, without opinion. Finally, on November 1, 1917, judgment was entered against the Maxwell-Briscoe Motor Company in the Supreme Court of New York County in accordance with the stipulation for $142,560. Execution was thereafter issued and returned no property found December 27, 1917, and this suit was begun July 12, 1918. The principles applicable to corporate reorganizations were formulated by the Supreme Court in the case of Northern Pacific Railway Co. v. Boyd, 228 U. S. 482, 33 Sup. Ct. 554, 57 L. Ed. 931, and reaffirmed in Kansas City Southern Railway Co. v. Guardian Trust Co., 240 U. S. 166, 36 Sup. Ct. 334, 60 L. Ed. 579. Reorganization of a financially embarrassed corporation, pursuant to a contract whereby the corporate property is transferred by stockholders from themselves to themselves in a new company, cannot defeat the claim of a nonassenting creditor. As against such creditor the sale is void in equity, regardless of the motive with which it was made. If purposely or unintentionally a single creditor was not paid or provided for in the reorganization, he can assert his superior rights against the subordinate interests of the old stockholders in the property transferred to the new company. Any device, whether by private contract or judicial sale under consent decree, whereby stockholders are preferred before the creditor, is invalid, and the transaction is void, even in the absence of fraud in the decree. The property is a trust fund charged primarily with the payment of corporate liabilities, and in the hands of the former owners under a new charter is as much subject to any existing liability as that of a defendant who buys his own property at a tax sale. Unsecured creditors need not necessarily be paid in cash. Their interest can be preserved by the issuance, on equitable terms, of income bonds or preferred stock. If creditors decline a fair offer, they are left to protect themselves as other creditors of a judgment debtor, and, having refused to come into a just reorganization, they will not thereafter be heard in a court of equity to attack it. If, however, no such tender was made and kept good, such a creditor retains the right to subject the interest of the old stockholders in the property to the payment of his debt. If their interest is valueless, he gets nothing. If it be valuable, he merely subjects that which the law had originally and continuously made liable for the payment of corporate liabilities. In the application of these principles to the case in issue, the various allegations of actual fraud with which the complaint is replete may be put aside. None has been proved. Actual fraud, however, is not essential to a recovery. Where such a transaction is consummated without offering to an unsecured creditor a fair share of the benefits to be derived from the vesting of the title in the purchaser, the intent or purpose to deprive him of recourse to the property to collect his debt becomes immaterial; the fact that it has that effect charges the purchaser with liability. Central Improvement Co. v. Cambria Steel Co., 210 Fed. 696, 701, 127 C. C. A. 184. The specific defenses asserted in this, as in the state court action by the same plaintiffs, are that the reorganization plan provided for fair participation to the plaintiffs, of which they failed to avail themselves, that the guaranty of the plaintiffs' lease was disclaimed pursuant to the terms of the decree of sale, and that having complied with the terms of the decree the purchaser is free from liability. It is clear that the reorganization plan did not provide for fair participation by the plaintiffs. It made no provision whatever for them, and they were in fact effectually prevented from any participation. At no time within the period available for filing claims did the plaintiffs have a provable claim on the guaranty. The rental under the lease was duly paid until the sale and transfer of the corporate property. Then the purchaser disclaimed the guaranty and the lessee went into bankruptcy. There cannot be an absolute guaranty of payment, unless there be a principal liability. If there be no debt or default of a third person, there can be no guaranty. Pennsylvania Steel Co. v. New York City Railway Co., 198 Fed. 721, 738, 751, 117 C. C. A. 503. Here there could be no default until the debt matured; the undertaking in question was a contingent, not an absolute, promise. It became effective in creating an absolute liability only upon default by the lessee. The guarantor was therefore under no obligation to pay, and there was no debt to be paid, until the contingent liability had matured into an absolute liability. People v. Metropolitan Surety Co., 205 N. Y. 135, 98 N. E. 412, Ann. Cas. 1913D, 1180. The plaintiffs are, then, in a position to assert their superior rights. Inasmuch as they were not parties to the record in the equity sale, that decree is not binding on them. Northern Pacific Ry. Co. v. Boyd, 228 U. S. 482, 505, 33 Sup. Ct. 554, 57 L. Ed. 931. What they are required to prove is indicated by the following passage from the opinion of the Supreme Court in the Boyd |