Evening journal., 1897-06-12

NlAhE AINOW ER.
The affairs OF the Bay State Gas
Company Of Delaware have given rise
to a good deal of litigation during the
last few months. both in Wilmington
and in the city of New York.
In October last Judge Wales appoint
ed receivers at the suit of William Bu-
chanan, and their appointment was
confirmed in this and other cities, but a
settlement was soon effected and tho
receivers were discharged.
1t turned out that $275,000 had been
paid to the plaintiff and receivers for
the settlement of the case. a note for
$4,000 having been given as a part of
the settlement. Payment Of this note
was refused by the makers, who had
been the financial agents of the COM
pany in the city of New York. and upon
suit brought the facts were developed.
Immediately after the discharge Of
the receivers another suit was brought
by Godfrey Morse and others, of Bos-
ton, in which certain Philadelphia part
les interyened. Sundry motions have
been made before Judge Dallas in this
suit, and upon the 2lst of last month
an argument was heard by Judge Dallas
in this city, upon a petition to va
cate the discharge of the receivers and
to reinstate the bill. This application
was argued by Messrs. Bartlett and
Johnson, of Boston, for the petition.
and by Mr.. Benton, of Boston, and SEN
atOr Gray in opposition The following
day, to suit the convenience of counsel,
Judge Dallas heard an argument in
Philadelphia upon the demurrer to the
Morse bill, which was argued at great
length by Mr.. Benton and Senator Gray
for the demurrer. and by Mr.. Tower. of
Boston, and Mr.. Dickson. Of Philadel-
phia, in reply.
Judge Dallas has recently disposed Of
both applications, refusing to
reopen the Buchanan suit, upon the
ground that the petitioner had become
party complainant to the Morse suit.
and Over-ruling the demurrer to the
Morse bill, and requiring the defendant
company to make anwer, filing the fol-
lowing opinion:
This suit is brought by some of the
holders of income bonds of the corpor-
alton defendant, on behalf of them
selves and all other holders of like
bonds. In and by these bonds it was
/ provided that the interest should be
paid out of the net earnings. and that
if in any year there should be no net
earnings, no interest should be paid
They also provided that such net earn
ings are to be only such part of the in
come of said company as would be APP
! plicab,e to the payment of dividends on
its capital stock. and they shall in all
! events be reserved and applied exclu-
sively to the payment ofsaid interest be-
| fore and in preference to any payment
on account of any other obligation of
the said company disposing of the said
net income, the intention of these pres
ents being TO make the payment of said
interest a first charge or lien upon the
said net earnings to the extent afore-
said.
''No interest has been paid since May
| I, 1898, and the bill alleges that the
! successive defaults which thereafter oc-
| Cured were Occasioned by certain dis
| positions of the corporations assets
which are charged to have been misap-
preparations, and by certain things
done by it which are charged to have
been done in fraud of the bOndholders
rights. 1t is not necessary to pass upon
I any question concerning the interests
of any person or persons who are moi
parties to this proceeding; but, as
against the defendant itself, the plain
tiffs have presented a case which
think entities them to discovery by an
swer and through an accounting il
equity, and their title to any other ol
further relief need not now be consider
ed. AS regards the corporation which
! issued these bonds, their NANTES
meaning is conclusive as to their effect
The undertaking not to make an!
/ payment of any other obligation dis
! posing Of net income until payment o
the interest on the bonds should frs
have been made, and the expression o
! intent to make the payment of said in
terest a first charge or lien, would b.
nugatory and delusive if, as defendan
= contends, the only remedy for any con
I traventiOn of this provision were an ac
- ton at law inasmuch as an action 70
the breach of a naked promise to pa.
would be quite as efficaciOus. Moreover
not only was it provided that the pay
ment of the bond interest should be
first charge or lien upon net earnings
but also that said interest should no
be payable except out of net earnins'
Surely, then, the holders of these bond
are entitled to know whether ther
have been net earnings, and. if ther
p have not been, whether their absenc
| IS dItIlOuldulc ~ a AdAlul0 pA thD poi
| of the defendant to discharge any dut
which it owed to the plaintiffs. Blu
" again it is contended that no duty wa
assumed with which a court CT equit
is competent to deal; that what is sc
I up amounts to but breach of contrac
{ / cannot assent to this. Those VIII
took these bonds did not, as has bee
pointed out, accept mere promises
pay. They, of course. relied, and had
right to rely, upon the fidelity OF tn
corporation for the production, proteC
tion and application Of net earning
r. and by its necessarily implied under
taking to exercise good faith in this n
gard the corporation assumed an obi
cation which was fiduciary In its ns
n ture, and which, therefore, is OF equ
n table cognizance.
y 'SMy views upon the point which wa
n mainly pressed upon the argumeI
)e have been briefly, but l think sun
le cientiy, indicated The several add
u y tional objections urged against the bi
have also been considered, but none (
n them can be sustained.
The defendants demurrer to the bi
of complaint is over-ruled."