Kretschmar v. Stone

• Decision Date: 12 March 1907
• Court: Mississippi Supreme Court
• Parties: WILKS P. KRETSCHMAR, RECEIVER, v. WATT W. STONE

43 So. 177

90 Miss. 375

WILKS P. KRETSCHMAR, RECEIVER, v. WATT W. STONE

Supreme Court of Mississippi

March 12, 1907

March 1907

FROM the circuit court of Washington county, HON. A. MCC. KIMBROUGH, Judge.

In June, 1905, the Merchants & Planters Bank of Greenville Mississippi, suspended payment, and made a general assignment of its business for the benefit of its creditors. The assignee named by the bank declined to serve and one Walker was appointed receiver of the bank by the chancery court who, after qualifying, took charge of the bank's business and assets. In November, 1905, the receiver being authorized by a decree of the chancery court to institute legal proceedings for the collection of debts due the bank and to sue the stockholders for any dividends fraudulently or improperly paid them, instituted suit before a justice of the peace against the appellee, Stone, filing a written statement of his cause of action, demanding judgment for $ 110 because of payments by the bank to Stone of two dividends, $ 60 and $ 50 respectively, on stock of the bank owned by him. The written statement of the cause of action or declaration recited the appointment and qualification of the receiver and the authority to sue conferred upon him by the chancery court, and alleged that the bank was insolvent in January 1904, and January, 1905, when the respective dividends were paid to appellee and they had not been earned. The written statement or declaration further alleged that the bank was indebted to numerous creditors whose debts existed when each of the two dividends were paid. The receiver, having lost his case before the justice of the peace, appealed to the circuit court, where the appellee, Stone, filed a demurrer to the written statement of the cause of action or declaration claiming that the chancery court alone had jurisdiction of the case; that the receiver had no authority to institute the suit either at law or in equity; that the right of action existed only in the creditors of the bank who were creditors when the dividend payments were made. The circuit court sustained the demurrer, and dismissed the suit.

Walker resigned the receivership shortly after the rendition of the judgment of the circuit court, and Kretschmar, his successor appealed to the supreme court.

The action by the receiver against the appellee was based upon Code 1892, § 852, which is as follows: "No part of the capital stock in any corporation shall be withdrawn or diverted from its purpose, nor a dividend declared, when the company is insolvent, or would be rendered insolvent by such withdrawal or the payment of such dividend; and the directors who assented to such withdrawal, or declared and paid such dividend, as well as the stockholders who received it, shall be jointly and severally liable to creditors whose debts then existed, to the extent of such withdrawal or dividend and interest."

Reversed and remanded.

Shields & Boddie, for appellant.

The declaration stated a cause of action against appellee, under Code 1892, § 852. It alleged that the bank was insolvent when the dividends were paid to appellee as stockholder, and when the suit was brought, that there were creditors of the bank who were such when the dividends were paid and when the suit was brought. And in addition it distinctly stated that "on the 4th day of October, 1905, by decree of the chancery court of said county, plaintiff, as receiver of said bank, was authorized and directed to sue for all indebtedness then due, or to become due, to such bank; and was authorized and directed to sue the stockholders of said bank for the dividends improperly and fraudulently paid them by said bank in January, 1904, and January, 1905." The demurrer admitted the truth of the allegations of the declarations. It follows, then, that if at the time of the dividend payments the bank was insolvent, the payments amounted to a diversion of the capital in favor of a stockholder, and the stockholder became liable for the amount thus paid out.

It is contended by counsel for appellee that the receiver of the bank had no legal right to bring this suit; that the action existed only in favor of those creditors of the bank whose debts existed at the time of the dividend payments....