Birn v. Childs Co.
New York Supreme Court
37 N.Y.S.2d 689 (1942)
Facts
Childs Co. (defendant) issued debentures. Childs delivered unissued debentures to the indenture trustee in lieu of cash or marketable securities, thus violating the indenture’s sinking-fund provision. A debenture holder provided the trustee with written notice of Childs’s default and requested that the trustee bring suit against Childs. The trustee declined to act on the request. The indenture’s no-action provision placed several limitations on the ability of a bondholder to bring suit against the issuer, including a requirement that 25 percent of the debenture holders make a written request for the trustee to bring legal action. The debenture holder was unable to locate other debenture holders. Nevertheless, the debenture holder brought her own suit against Childs in the New York Supreme Court.
Rule of Law
Issue
Holding and Reasoning (Walter, J.)
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