§ 506 — Remedies of bondholders

(a) The rights and the remedies conferred upon or granted to the bondholders in this section shall be in addition to and not in limitation of any rights and remedies lawfully granted to such bondholders by the resolution or resolutions providing for the issuance of bonds or by any deed of trust, indenture or other agreement under which the same may be issued. In the event that the authority shall default in the payment of principal of or interest on any of the bonds after the principal or interest shall become due, whether at maturity or upon call for redemption, and such default shall continue for a period of 30 days, or in the event that the authority shall fail or refuse to comply with this chapter or shall default in any agreement made with the holders of the bonds, the holders of 25 percent in aggregate principal amount of the bonds then outstanding by instrument or instruments filed in the office of the recorder of deeds of the county, and proved or acknowledged in the same manner as a deed to be recorded, may appoint a trustee to represent the bondholders for the purpose provided in this section.

(b) Such trustee and any trustee under any deed of trust, indenture or other agreement may, and, upon written request of the holders of 25 percent or such other percentages as may be specified in any deed of trust, indenture or other agreement, in principal amount of the bonds then outstanding, shall, in the trustee’s own name:

(1) By mandamus or other suit, action or proceeding at law or in equity enforce all rights of the bondholders, including the right to require the authority to collect rates, rentals or other charges adequate to carry out any agreement as to or pledge of the revenues or receipts of the authority, and to require the authority to carry out any other agreements with or for the benefit of the bondholders, and to perform its and their duties under this chapter;

(2) Bring suit upon the bonds;

(3) By action or suit in equity require the authority to account as if it were the trustee of an express trust for the bondholders;

(4) By action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the bondholders;

(5) By notice in writing to the authority declare all bonds due and payable, and, if all defaults shall be made good, then with the consent of the holders of 25 percent or such other percentage as may be specified in any deed of trust, indenture or other agreement, of the principal amount of the bonds then outstanding, to annul such declaration and its consequences.

(c) The Court of Chancery in and for the county wherein the authority is located shall have jurisdiction of any suit, action or proceedings by the trustee on behalf of the bondholders. Any trustee when appointed or acting under a deed of trust, indenture or other agreement, and whether or not all bonds have been declared due and payable, shall be entitled as of right to the appointment of a receiver, who may enter and take possession of the facilities of the authority or any part or parts thereof, the revenues or receipts from which are or may be applicable to the payment of the bonds in default and operate and maintain the same and collect and receive all rentals and other revenues thereafter arising therefrom, in the same manner as the authority or the board might do, and shall deposit all such moneys in a separate account and apply the same in such manner as the Court shall direct. In any suit, action or proceeding by the trustee the fees, counsel fees and expenses of the trustee and of the receiver, if any, and all costs and disbursements allowed by the Court shall be a first charge on any revenues and receipts derived from the facilities of the authority, the revenues or receipts from which are or may be applicable to the payment of the bonds in default. The trustee shall, in addition to the foregoing, have and possess all of the powers necessary or appropriate for the exercise of any functions specifically set forth in this section or incident to the general representation of the bondholders in the enforcement and protection of their rights.

(d) Nothing in this section or any other section of this chapter shall authorize any receiver appointed pursuant to this chapter for the purpose of operating and maintaining any facilities of the authority to sell, assign, mortgage or otherwise dispose of any of the assets of whatever kind and character belonging to the authority. It is the intention of this chapter to limit the powers of such receiver to the operation and maintenance of the facilities of the authority as the Court shall direct, and no holder of bonds of the authority nor any trustee shall ever have the right in any suit, action or proceedings at law or in equity to compel a receiver, nor shall any receiver ever be authorized or any court be empowered to direct the receiver, to sell, assign, mortgage or otherwise dispose of any assets of whatever kind or character belonging to the authority.

Legislative History

48 Del. Laws, c. 369, § 7 ; 22 Del. C. 1953, § 506; 70 Del. Laws, c. 186, § 1