Delaware gazette and state journal., 1897-06-17
BAY STATE GAS COMPANY
The Decision in the Famous
Morse Suit.
RENDERED BY JUDGE DALLAS
Demurrer to Complaint over
ruled. ~
None of the Objections Urged Against the
Bill Sustained-The Defendant Requirsd
to Make Answer-A Copy OF the Opinion
Filed in the Philadelphia Court,

The affairs Of the Bay State Gas Go.
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 an
pointed receivers at the suit of William
Buchanan, and their appointment was
confirmed in Philadelphia and other
cities, but settlement was soon effected
and the receivers were discharged. II
1t turned out that s275, 600 had been
paid to the plaintiff and receivers for
the settlement of the case, a note for
500. 600 having been given as 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 de-
veloped.
Immediately after the discharges Of
the receivers another suit was brought
by Godfrey Morse and others, of Boston.
in which certain Philadelphia parties
intervened. Srndry motions nave been
made before Judge Dallas in this suit
and upon the 21st of last month an
argument was heard by Judge Dallas,
IN Wilmington, upon petition to
yacate the discharge of the receivers
and to reinstate the bill. This appli-
cation was argued by Messrs Bartlett
and johnson of Boston, for the petf-
tion. and by Mr.. Benton OF Boston, and
Senator Gray in opposition. The fol-
lowing day, to suit the con nveniencs Of
counsel, Judge Dallas heard an arqu-
ment in Philadeiphia upon the de-
murrer to the Morse bill, which was
argued at great length by Mr.. Benton
and Senator Gray for the demurrer, and
by MIR. Tower of Boston. and Mr.. Dick
son of Philadelphia, in reply.
Judge Dallas has recently disposs,, Of
both applications. refusing to reopen
the buchanan suit. upon the ground
that the petitioner had become, party
complainant to the Morse suit, and
overruling the demurrer to the Morse
bill, and requiring the defendant com
pany to1make answer, filing the follow
| ing opinion:
This suit is brought by some of the
holders of income bonds OF the cor
| poration defendant. on behalf of them
selves and all other holders of like
bonds. In and by these bonds IL 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 4
come of said company MS would be an
plicable to the payment of dividentis
on its capital stock, and they shall in
all events be reserved and applied eS-
clusigely to the payment of said interest
before and in preference to any payment
on account of any other obligation Of
the said company disposing of the said
not income, thB intention of these
presents being TO make the payment Of
said interest iirst charge or lien upon
the said net earnings to the extent
aforesaid.
mo interest has been paid since May
1st, 1893, and the bill alleges that the
successive defaults which thereafter
occurred were occasioned by certain
dispositions of the corporations assets
which are charged to have been misap-
preparations, aId by certain things
done by it which are charged to have
been done in fraud of the bond holders
rights. 1t is not necessary to pass upon
any question concerning the interests =
OF any person or persons who are not
parties to this proeeedings but, as
against the defendant itself, the plain-
titfs have presented case which /
think entities them to discovery by
answer and through an accounting 10
equity, and their title TO any other or
further relief need not now be consid-
cred. rs regards the corporation which
issued these bonds. their manifest
meaning is conclusive as to their effect.
The undertaking not to make any pay
ment of any pther obligation disposing
of net income until payment of the
interest on the bonds should first have
been made, and the expression of intent
to make the payment of said interest
first charge or lien, would he nugatory
and delusise if as defendant contends,
the only remedy for any contravention
OF this provision were an action at law,
inasmuch as an action for the breach of
a naked promise to pay would be quite
as etticacious. Moreover, not only was
ii provided that the payment of the
bond interest should be a first charge
or lien upon net earnings. but also that
said interest should not be payable
except out of net earnings. Surely,
then, the holders of these bonds are
entitled to know whether there have
been net earnings, and, If there have
not been, whether their absence is
attributable to a failure on the part of
The defendant to dischage any duty
which it owed to the plaintiffs. But
again it is contended that no duty was
with which a court of equity
is competent to deal that what is set
up amounts to but breach OF contract.
cannot assent to this. Those who took
these bonds did not, as has been pointed
,ut, accept mere promises to pay.
They, of course, relied, and had
light to rely, upon the fidelity of the
for tine production, pro-
lection and application of net earnings,
Ind by its necessarily implied under.
aking to exercise good faith in this
egard the corporation assumed an OBJ
igation which was fiduciary in its
nature, and which, therefore, is OF
'quitable cognizance.
My views upon the point which was
mainly pressed upon the argument have
leen briefly, but I think sufficiently,
indicated. TheRseveral additional OBJ
ectiors urged against the bill have
lso been considered, but none of them
an be sustained.
1.-THE defendants demurrer to the
ill OF complaint is oyerruled. ="
Two COWS owned by Nat Slaughter