Tietjen v. United Post offices Corporation

• Decision Date: 22 June 1933
• Citation: 19 Del.Ch. 343,167 A. 846
• Court: Court of Chancery of Delaware
• Parties: GEORGE M. TIETJEN, v. UNITED POST OFFICES CORPORATION, a corporation of the State of Delaware

167 A. 846

19 Del.Ch. 343

GEORGE M. TIETJEN, v. UNITED POST OFFICES CORPORATION, a corporation of the State of Delaware

Court of Chancery of Delaware, New Castle

June 22, 1933

BILL FOR RECEIVER on the ground of insolvency (Revised Code 1915 § 3883). The complainant alleges himself to be the holder of three thousand dollars of the five and one-half per cent. first mortgage bonds of the defendant. There are over four million dollars of such bonds outstanding. The interest due on them last February 15th was not paid and remains in default. The bill alleges that the defendant lacks funds with which to pay the interest and that it is insolvent. Six persons holding an aggregate of twenty-one thousand dollars of said bonds have intervened on the side of the complainant and a bondholders' committee representing one million five hundred and forty-three thousand dollars of said bonds has intervened on the side of the defendant in opposition to the bill.

The defendant has filed a plea in bar of the bill. The complainant has caused the plea to be set down for hearing upon its sufficiency in law.

Plea sustained.

John Biggs, Jr., for complainant.

Christopher L. Ward, Jr., of the firm of Marvel, Morford, Ward & Logan for defendant.

OPINION

THE CHANCELLOR:

The plea sets up the defense that the complainant holds bonds which were issued under an indenture of mortgage whose terms are such as to forbid the maintenance of the pending bill. The plea sets out Section 1 of Article 7 of the indenture, which is as follows:

"Section 1. All rights of action in respect of this indenture shall be exercised only by the Trustees, or either of them, and no holder of any bond or interest coupon issued hereunder shall have any right to institute any suit, action or proceeding at law or in equity for the foreclosure of this indenture, or for the appointment of a receiver, or for any other remedy hereunder, unless and until the Trustees shall have received the written request of the holders of twenty-five per cent. (25%) in principal amount of the bonds then outstanding hereunder and shall have been offered indemnity satisfactory to them and shall have refused or for thirty (30) days thereafter neglected to institute such suit, action or proceedings and it is hereby declared that the making of such request and the furnishing of such indemnity are in every case conditions precedent to the execution and enforcement by any bondholder or bondholders of the powers and remedies given to the Trustees hereunder, and to the institution and maintenance by any bondholder or bondholders of any action or cause of action for foreclosure or for the appointment of a receiver or for any other remedy hereunder, but the Trustees may in their discretion and, when thereunto duly requested in writing by the holder or holders of twenty-five per cent. (25%) in principal amount of the bonds then outstanding hereunder and furnished indemnity satisfactory to them against expenses and charges and liability, shall forthwith take such appropriate action, by judicial proceedings or otherwise, in respect of any existing default on the part of the Corporation hereunder as they may deem expedient in the interests of the holders of bonds issued hereunder."

The plea then avers that the trustees have not received...