Lapsley v. Merchants Bank of Jefferson City
| Decision Date | 15 February 1904 |
| Citation | 78 S.W. 1095,105 Mo.App. 98 |
| Parties | J. S. LAPSLEY, Respondent, v. MERCHANTS BANK OF JEFFERSON CITY, Appellant |
| Court | Kansas Court of Appeals |
Rehearing Denied 105 Mo.App. 98 at 103.
Appeal from Osage Circuit Court.--Hon. W. A. Davidson, Judge.
REVERSED AND REMANDED (with directions).
Judgment reversed and cause remanded.
W. S Pope and W. L. Vaughan for appellant.
(1) Defendant contends that a dividend of five per cent could not have been paid out of the net earnings of the previous year after setting aside ten per cent thereof as required by law; that the directors did not pretend to set aside anything to the surplus fund before declaring the dividend, and that such dividend was declared contrary to the provisions of sec. 1293, R. S. 1899; and that the court by refusing declaration of law numbered 6, asked by defendant, ignored the fact that the directors had not complied with said section of the statute and had declared a dividend that could not be paid out of the net earnings of the preceding year, after deducting ten per cent thereof and setting it aside for the surplus fund. Hall's Bank Laws, secs. 26-7-8; 1 Morse on Banks and Banking, sec. 66, sec. 172b, sec. 128a; Brown's National Bank cases, 493; Insurance Co. v. Page & Richardson, 56 Ky. 412, 17 B. Monroe; Ball on National Banks, 19. (2) "Losses and bad debts must be deducted in arriving at net profits." May hold dividend for debt of shareholder. Ball on National Bank, 200; Cleveland's Bank Laws, 5, secs. 2, 3, 4, 5; Balles on National Banking, section 107; R. S. 1899, sec. 1288. (3) The refusal of the court to give instructions 8, 9 and 10, asked by appellant, clearly indicates that the court did not take into consideration the question as to whether the respondent complied with the terms of his employment. The court took the view that he was entitled to the six months' salary regardless of the manner in which he performed his duties.
Ryors & Vosholl and Silver & Brown for respondent.
(1) The objection that the directors before declaring the dividends omitted to set apart ten per cent of the net profits to the surplus fund, and therefore plaintiff can not recover the dividends sued for was rightly overruled. (a) Because no defense of this character was set up in the answer. Christian v. Ins. Co., 143 Mo. 461; Musser v. Adler, 88 Mo. 445. (b) Because section 1293, R. S. 1899, is directory in its character and the consequence contended for by appellant does not attach because of its non-observance. Wolf v. Brown, 142 Mo. 612. (c) Because the observance of said section 1293 by banks is properly enforcible by the Secretary of State under the State banking laws. R. S. 1899, secs. 1304-5. (d) Because it appears from the evidence that after deducting from the earnings the dividend of five per cent declared on defendant's capital, there remained in said earnings a sum largely in excess of ten per cent thereof as the same stood before the declaration of the dividend.
The plaintiff was president of the defendant bank and was likewise a stockholder and director. He charges in the first count of his petition that the bank owes him a dividend of five per cent on his stock; and in the second count, that it owes him for six months' salary as president. On trial before the court judgment was rendered for plaintiff on each count.
It appears that the defendant bank was in such condition as to alarm the Secretary of State who has in charge, as a department of his office, the supervision of all banks with State charters. It had loaned to plaintiff and two others associated in the grocery business with him and also directors in the bank sums aggregating largely more than the capital stock. It was in such condition on that and other important matters as to cause the Secretary to advise the directory that if the indebtedness was not reduced and the affairs of the institution quickly put into a more satisfactory condition, he would be compelled to adopt stringent measures under the law. It appears that an examination had been made by one of the Secretary's bank examiners in the first part of January, 1900, and that from thence on till the 29th of that month the Secretary was demanding that the institution be put upon a more businesslike footing. On the 15th of that month, the directors, including this plaintiff and his two associates in business, made and entered the following dividend order:
Defendant contends that this order was made without first...
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