Purcell v. Baker
| Decision Date | 30 November 1937 |
| Citation | 270 Ky. 772 |
| Parties | Purcell v. Baker et al. |
| Court | United States State Supreme Court — District of Kentucky |
Appeal from Garrard Circuit Court.
HON. E. BERTRAM, S.F. BOWMAN and C.R. LUKER for appellant.
H.C. KENNEDY, B.J. BETHURUM, S.D. LEWIS, J.J. FELTON and LEWIS L. WALKER for appellees.
Affirming.
On April 22, 1930, the Peoples Bank of Mount Vernon, Ky., pursuant to a resolution of its board of directors, was closed, and its affairs and assets placed under the control of the state banking commissioner who appointed A.M. Hiatt, special deputy banking commissioner, to take charge of the bank and liquidate and distribute its assets.
On May 1, 1935, Ben C. Purcell instituted this action against U.G. Baker, S.D. Lewis, J.C. Griffin, F.E. Miller, and R.H. Miller, directors of the bank, and alleged that, on the date the bank suspended business and was placed in charge of the state banking commissioner, he was a depositor thereof, and the bank was indebted to him in the sum of $1,990, which he sought to recover, subject to a credit of $471 paid him by the banking commissioner in dividends, it being shown by the report of the commissioner that final distribution had been made and that the assets and resources of the bank had been exhausted and no further dividends could or would be paid. He alleged that while the defendants were directors and officers of the bank they permitted divers and sundry persons to overdraw their accounts in violation of section 583, Kentucky Statutes, and set forth the overdrafts of various persons amounting to several thousand dollars; that the directors and officers permitted excess loans to be made and took worthless notes of persons in sums and amounts set forth in the petition amounting to many thousand dollars; that F.E. and R. H. Miller were also cashier and assistant cashier, respectively, and indebted to the bank in respective sums of $13,464.42 and $5,538.95; that defendants from time to time authorized, directed, and paid dividends when in fact and in truth there was no surplus or undivided profits, and in this way destroyed the entire capital stock of the bank in violation of sections 596 and 598, Kentucky Statutes; that at the time of the payment of such dividends the defendants were permitting the bank to carry on its books as assets many thousands of dollars of notes on which no interest had been paid for a period of more than six months; that the defendants as directors and officers of the bank did not exercise ordinary care or any care or diligence in the management and operation thereof, and by reason of their failure to do so the plaintiff had sustained the loss as above indicated; that, as shown by the reports of the banking commissioner, the excessive loans and overdrafts set out in the petition were a total loss, and no part of same had been collected, and defendants knew, or by the exercise of ordinary care and diligence could have known, that they were operating the bank in violation of the law, and that the loans set out were illegal and worthless because many of them were executed by persons who were well known to be insolvent; and that the sureties on many of the notes were wives of the principals.
After evidence was heard, it was adjudged that plaintiff's petition be dismissed and that he take nothing thereby and that defendants recover their costs.
Among other things in the judgment it is said:
"And the court having heard argument of counsel and being advised is of the opinion that the plea of limitation interposed by the defendants is well taken, and upon that issue the court is of the opinion that the plaintiff has failed to make out his cause."
Plaintiff is appealing.
Counsel for respective parties are in agreement that the liability, if any, of appellees is created by statute. Section 2515, among other things, provides:
"an action upon a liability created by statute, when no other time is fixed by the statute creating the liability * * * shall be commenced within five years next after the cause of action accrued."
It is therefore manifest that section 2515 applies in cases of this character, but the controversy between counsel for respective parties arises out of their conflicting ideas as to when "the cause of action accrued." As will be noted, the action was instituted more than five years after the bank suspended business and was taken over by the state banking commissioner but, as appears from the record, it was instituted a few days less than five years from the time the banking commissioner filed his first report in the circuit court which contained a detailed audit of the bank's affairs. It is the contention of appellant that limitations did not begin to run at least until this report was filed. On the other hand, it is contended by appellees that the cause of action, if any, accrued when the alleged illegal acts complained of in the petition occurred, and in no event later than the date on which the bank suspended business and went into the hands of the banking commissioner for liquidation. All of the acts complained of, of course, occurred before that date.
Appellant relies on the case of Denny, State Banking Commissioner v. Kennedy, 229 Ky. 178, 16 S.W. (2d) 1030, 1032, which was an action by the state banking commissioner against the stockholders to enforce what is known as double liability under Kentucky Statutes,...
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