Thoroughgood v. Georgetown Water Co.

9 Del. Ch. 330 | New York Court of Chancery | 1912

The Chancellor:

In this case, on September 19th, 1910, I filed an opinion declining to appoint a receiver of the Georgetown Water Company, as prayed for in the bill, for reasons set forth in the opinion.. These reasons were, in effect, that being a corporation for public improvement insolvency alone was not a sufficient ground for granting the relief sought, and that there were not such sufficient allegations of detriment to the stockholders or to the public shown as to justify me in taking the property and affairs of the company from the hands of its officers. Since that time, by leave, an amended bill has been filed. For want of an answer thereto a decree pro confessa is moved for by the complainant. In the amended bill the danger of loss to stockholders, creditors and the public is more strongly alleged than in the original bill. In substance, the allegations are that the annual income from the operation of the plant for supplying the town and the inhabitants thereof with water for municipal and private uses is- about $1,900, while the annual expense of operation is about $600, leaving a margin for necessary repairs and improvements of $1,300. This margin is more than absorbed by interest payable on bonds of the company and by interest payable on judgments and other liens on the property of the company. It is not stated directly that the income is in fact so expended in payment of interest, so that an actual deficiency exists. Nor is any other explanation made in the amended bill why the income is not in fact applied to such repairs as are necessary in order to maintain the efficiency of the plant, other than the statement “that there is no one in the State with authority to provide for said repairs.” This peculiar situation by itself might not be ground for appointing a receiver for the company. But the amended bill contains the further allegation, not contained in the original bill:

“That if said repairs are longer neglected it will result in the great detriment and loss of your orator and of other stockholders and creditors of said company and will leave the said Town of Georgetown without an adequate water supply for domestic purposes and for the protection of the lives and property of the inhabitants of said town from possible conflagration.”

And

“that the health, lives and property of the citizens of Georgetown will be greatly endangered, unless this Honorable Court shall, at once, intervene to protect the said creditors, stockholders and citizens and take" possession of and administer the property of the said defendant corporation.”

These new allegations justify the Court in taking some step to protect the public, according to the views heretofore expressed by me in the opinion already alluded to. There is, under the , allegations of the bill, no way by which the minority of the directors can protect the interest which the public has in the maintenance of the efficiency of the water supplying plant, other than by the intervention of an agent and officer of this Court. I should not wait to do so until by reason of deterioration the plant be disabled, but rather in some guarded way take charge of its affairs, and require that the income from its operation be applied to such repairs as insure its continued operation, for the benefit of the municipality, even if this involved delay in paying in full the interest on the bonds of the company, for the private interest must yield to the public need.

Therefore a receiver will be appointed, with powers much less in extent than those usually conferred upon receivers in this State.