Nottingham v. Farmers & Merch.S Trust Bank.*

• Decision Date: 28 April 1938
• Court: Virginia Supreme Court
• Parties: NOTTINGHAM et al. v. FARMERS & MERCHANTS TRUST BANK.*

196 S.E. 634

NOTTINGHAM et al.

v.FARMERS & MERCHANTS TRUST BANK.^*

Supreme Court of Appeals of Virginia.

April 28, 1938.

Error to Circuit Court, Northampton County; John E. Nottingham, Judge.

Action by notice of motion for judgment by the Farmers & Merchants Trust Bank against T. H. Nottingham and another to recover on a bond which defendants and others as directors of a bank executed to the plaintiff. To review a judgment for the plaintiff, defendants bring error.

Affirmed.

Argued before CAMPBELL, C. J., and HOLT, GREGORY, EGGLESTON, and SPRATLEY, JJ.

Quinton G. Nottingham, of Eastville, W. A. Dickinson, of Cape Charles, and James E. Heath, of Norfolk, for plaintiffs in error.

Mears & Mears, of Eastville, for defendant in error.

EGGLESTON, Justice.

In the year 1932, and for some time prior thereto, there were operating in Northampton county, Va., three banks known as the Cheriton Banking Company, Incorporated (hereinafter called the Cheriton Bank), the Townsend Banking Company, Incorporated, and the Farmers & Merchants Trust Bank. In December of that year these three banks, with the approval and under the supervision of the State Bureau of Insurance and Banking, determined to merge into one institution to be known as the Farmers & Merchants Trust Bank.

Shortly before this an examination of the books of the Cheriton Bank had convinced the Bureau of Insurance and Banking that its assets had depreciated in value to such an extent as to be approximately $32,000 short of the amount necessary to meet its liabilities, other than its capital stock obligations. Accordingly, the head of the bureau notified the officers and directors of the Cheriton Bank that that institution would not be allowed to come into the merger unless its directors, or some of them, entered into a bond in the principal sum of $32,000 to cover such deficiency in its assets.

A meeting of the board of directors of the Cheriton Bank was held on December 20, 1932, at which the proposed merger agreement and necessary bond were dis cussed. There were present at this meeting T. H. Nottingham, S. T. Nottingham (both of whom had been directors for a number of years), and all of the other directors except R. Fulton Powell. Without objection it was unanimously resolved that the agreement and the required bond should be executed.

Accordingly, on December 23, 1932, there was executed the following instrument, which is the subject of the suit:

"Know all men by these presents that we, T. W. Jones, S. T. Nottingham, J. W. Nottingham, C. R. Sterling, J. Gates Goode, W. D. Nottingham, E. V. Downes, M. S. Wilson, T. Wallace Jones and T. H. Nottingham, the undersigned, in consideration of the sum of Ten Dollars ($10.00) paid to us, at and before the signing, ensealing and delivery of these presents, the receipt of which is hereby acknowledged, are held and firmly bound unto The Cheriton Banking Company, Incorporated, Its Successors or Assigns in the sum of Thirty-Two Thousand ($32,000.00) Dollars for the payment of which well and truly to be made, we and each of us bind ourselves, jointly and severally, our heirs, executors, administrators and assigns firmly by these presents, and we do severally hereby waive the benefit of our homestead exemption as to this debt, obligation or contract.

"The condition of this obligation is such that; whereas upon an examination of the books of The Cheriton Banking Company, Incorporated, by M. E. Bristow, Commissioner of Insurance and Banking, there was ascertained a depreciation in the value of the assets of The Cheriton Banking Company, Incorporated, in the sum of Thirty-two Thousand ($32,000.00) Dollars, more or less, and; whereas this Bond is given in the nature of a reserve by which any loss or damage to the assets of said bank may be reimbursed or made good during it period of two (2) years from the date of the. bond, and; whereas said bond shall not be surrendered or cancelled nor shall the makers thereof be relieved of their liability thereunder unless and until the whole of said depreciation is made good or eliminated, and; whereas the obligors herein being the officers and directors of The Cheriton Banking Company, Incorporated, and as such charged with the administration of the business of the said Bank and the protection of its interests and liabilities, are desirous, so far as their financial ability will permit, of assuring and guaranteeing the assets of said Bank, and; whereas as such we are familiar with all the terms and conditions^ of the joint agreement to merge Farmers & Merchants Trust Bank, The Townsend Banking Company, Incorporated, and The Cheriton Banking Company, Incorporated, and; whereas we are willing to guarantee the assets of The Cheriton Banking Company, Incorporated, to the extent of the amount of this obligation:

"Now, therefore, if the assets of any nature and kind whatsoever of The Cheriton Banking Company, Incorporated, shall be sufficient to take care of, pay and fully discharge all the liabilities of The Cheriton Banking Company, Incorporated, under and by virtue of the joint agreement or merger aforesaid and appraisals made thereunder, then this obligation is to be void; otherwise to remain in force and virtue.

"And the said obligors herein hereby expressly agree that in case of a breach of the foregoing condition, that the said bank its successors or assigns shall have a joint or separate right of action hereunder, at its election.

"Witness the following signatures and seals at Cheriton, Virginia, this 23rd day of December, 1932.

                --------------------------------
                |"T. W. Jones         |[Seal]  |
                |---------------------|--------|
                |"M. S. Wilson        |[Seal]  |
                |---------------------|--------|
                |"T. Wallace Jones    |[Seal]  |
                |---------------------|--------|
                |"Thos. H. Nottingham |[Seal]  |
                |---------------------|--------|
                |"J. Gates Goode      |[Seal]  |
                |---------------------|--------|
                |"W. D. Nottingham    |[Seal]  |
                |---------------------|--------|
                |"S. T. Nottingham    |[Seal]  |
                |---------------------|--------|
                |"C. R. Sterling      |[Seal]  |
                |---------------------|--------|
                |"J. W. Nottingham    |[Seal]  |
                |---------------------|--------|
                |"E. V. Downes        |[Seal]."|
                --------------------------------
                

On December 23, 1932, the necessary formal resolutions were passed by the board of directors of the Cheriton Bank authorizing the execution of the merger agreement. There were present at this meeting the same ten directors who had executed the bond. The remaining director, R. Fulton Powell, was not present. Subsequently, on January 10, 1933, a meeting of the stockholders formally approved the merger agreement and ratified the action of the board of directors in authorizing its execution by the necessary officers. Both T. H. Nottingham and S. T. Nottingham were present at this meeting. Each of the directors of the Cheriton Bank, including T. H. Nottingham and S. T. Nottingham, then executed the merger agreement.

All of the statutory requirements having been complied with, the merger became effective on January 13, 1933, and the bond was delivered to the merged institution.

Under the terms of the merger agreement the liabilities of the Cheriton Bank, exclusive of its liabilities to its stockholders by virtue of stock ownership, were assumed by the merged corporation. The Cheriton Bank, in turn, agreed to deliver to the merged bank a sufficient amount of assets or cash to equal the amount of the liabilities thus assumed.

It is undisputed that the total amount of assets delivered by the Cheriton Bank to the merged institution, and appraised in the manner required by the merger agreement, was more than $32,000 short of the total amount of liabilities of the Cheriton Bank assumed by the merged institution. Thereupon demand was made by the merged bank upon those parties who had signed the $32,000 bond for payment thereof. Seven of these parties paid the total amount of $25,200. To recover the balance of $6,800 the Farmers & Merchants Trust Bank (hereinafter called the plaintiff) instituted the present suit against T. H. Nottingham and S. T. Nottingham (hereinafter called the defendants), who had declined to pay anything on account of the bond.

After issue had been joined there was a trial by a jury, which resulted in a verdict of $6,800 against the defendants. This writ of error has been...