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deeds, second, thirds and fourths and by chattel mortgages crops, livestock, etc. And badly mixed with much past due papers and loans generally in bad shape. accounts overdrawn dicates very lax method in this department. On August 11, 1921, the Commisof Finance wrote the president the bank calling the attention the bank to the fact that loans were past due, that of borrowers of the bank were indebted excess of the limit allowed by law, that "you cannot be permitted violate the law in this way. insist that those loans be promptly brought legal limits." He called the bank's attention to the loans of the 15 borrowers the report where was stated that the security for the loans either undesirable or insufficient and that large loss was quite probin connection with most of them and the fact that 103 accounts were overdrawn, and stated that the report "Your notes are lightly and insufficiently secured. and it will take determined effort on the part of your officers and Board bring your bank to standard condition. All of your loans which protected by second, third and fourth loans should be liquidated in some manner promptly as is possible. Whatever loss appears should be chargto the Milan Bank Guaranty Fund. Until such time as you can get your bank in more standard condition, you cannot be of proper service to your community. Further delay, in my opinion, will not only embarrass your own bank but will result more loss to the stockholders of the Milan Bank." As the result of this letter from the commissioner $46,000 of the loans these parties was charged off charged to the guaranty fund. On August 25th, 1921, in reply the bank the of Finance it is well known fact that the last six or nine months has been very bad time to liquidate or force collection on full loans stock or second or third mortgages on land, and wish to state in this connection that many heavy loans were takover when without any security This was given as an excuse for failure to make collection of the notes. Referring to the $60,000 past due letter "This excess amount is brought about by our having so many large real estate loans where the parties were unable the interest, and will not unthey can realize on this year's crop or until the loan is foreclosIn most every such case we hold chattel on crops and are in position to protect ourselves. reference to the difficulty in col lecting loans the letter statesthe land foreclosed now there will be big loss, not that land is not worth what is against it. but buyers cannot raise money to buy this land with when it offered for sale. There have been four foreclosures recently in which bank held the second and third mortgages and in each case was complete On August 13, 1921, the Commissioner of Finance replying to the ter of the bank my letter of August pointed out the undesirable features of your bank you as found by mv Examiner and your Board proceed towards the correction these ditions. must be evident all concerned that present ditions cannot permitted continue indefinitely on the hope of realizing on second, third and fourth mortgages on real estate inflated values." Beginning with September 17. 1921, down to the time the bank closed. was without the required legal reserve for nine days the deficiency constantly growing. On October 10. 1921, the Board of Directors passed resolution three its to visit the city dent banks and arrange for "further loan of credit thought necesto do These directors went Kansas City but were unable raise further money and when they returned the Board upon receipt this information closed the bank and turned it over to the Commissioner Finance. Defendants insist that their instruction the nature demurrer to the should have been given and in this connection state that no evidence tending to show that the deposits sued for were made the bank was and that were there is dence that the directors knew time the deposits made such Of course, statute, section 11764, the bank time facie such insist that the evidence such prima admitted that shows of showing sufficient ficiency the security to equal the amount capital surplus, undivided profits and guaranty fund; that the Bank Examiner and the Commissioner Finance did not think that the bank was insolvent: that on 14, 1921, the cashier ascertained that the Kansas City banks would lend the bank more money if necesand that the bills payable would that there was no reason for the directors' believing that the bank would not be able to during the time the deposits sued for made and that under the facts and circumstances there was no insolvency. Insolvency as applied to banks defined to its debts pay the usual and course (State vs. Burlingame, Mo. State Darroh, 152 Mitchell Bradstreet Co., 116 240.) "Solvency implies as well the present ability of the debtor pay out of his estate all as also such condition of his property as that may be reached and subjected by process of law, without his consent, the payment of such son be insolvent, although he may be able to pay his debts at some future time settlement and winding up of his affairs." R. 628, 629.) "An ability to pay in the future or an cess of assets over liabilities without present ability to pay debts they become due the usual course of business, not (Eads Orcutt, 79 Mo. App. 511, 524.) solvency that condition of affairs in which merchant or business man unable to meet his obligations as they mature the usual course of busiMorse on Banks and Bank1035.) Insolvency is frequentdefined "inability to make pay ments as usual, or as they mature, according to the the ordinary course of business. (Stone Dodge, 96 Mich. The on the part of bank evidence sufficient within itself of the insolvency of the bank when nothing to rebut the evidence of solvency is conclusive. (Stone vs. Dodge, supra.) The bank was therefore insolvent October bank is in failing circumstances when in state of uncertainty whethwill be able sustain itself, pending on favorable or contingencies, which in the course business may occur, and over which officers have no control. Morse Banks and Banking, This definition of Morse of failing circumstances" somewhat different from the given in Corpus Juris, (see 32 But the definition given by Morse one that would be adopted by the Supreme Court this state, State Buck, 120 Mo. 479, 494.) the Buck case the phrase failing circumstances" treated mounting to insolvency. has been held that reques for extension of time on the part of debtor for the payment of his debts is evidence insolvency. (Moore Carr, 65 Mo. App. 70. Grocer Miller, 53 Mo. App. 107, 110.) It will be seen that an excess assets over the liabilities does not necessarily show that one not solvent. The fact, if fact, that the capital stock, surplus, undivided profits and guaranty fund of the bank amounted to more than the loss on the real estate security, does not necessarily determine the question. The fact of the matter that in addition to these heavy borrowowed the bank in excess of at the time the closed, find other indebtedness had been account of the inability to collect the same (the evidence shows that the bank was an effort collect all its loans as they became due,) bringing up the amount of loans they fell due in excess of fact the inference strong that practically the loans were not collectible as they fell due. report the Bank Examiner shows that all the loans secured by real estate made the bank were in practically the same condition. After several of the large loans the report
"Balance are small, but are all the same class of loans these listed above. Practically all are second or thirld and some them fourth deeds of trust. Believe also in some instances at least is valued high figure under present conditions.' Defendants base the loss only $116,000 on the supposition that the market value of the real estate curity was high enough that the loss would be no greater than this, but this calculation is based upon the theory that the amount of the second and subsequent exceeded by only $116,000 the equity in the real estate above the first based on the actual market value the land. There was evidence tending to show that there was practically market for real estate during about the time these deposits sued for made. As to the personal financial responsibility of the signers of the notes, not necessary for us to determine whether these borrowers were in fact insolvent. Under the definitions of insolvency supra it would seem that they not necessary for to so hold. In determining wheththe bank any specific time was look to see was able meet its obligations as they maturin the usual course of business and whether was able to meet them would not denend so much upon the insolvency of its borrowers as the availability of assets to meet matured and maturing demands against The assets represented by the notes these borrowers were not available. These debtors were unable their loans and required newals from time time without payment even of interest in most instances. Foreclosure of the deeds of trust would have resulted in great loss, much greater than the $116,000 that say the evidence shows the deficiency_in the amount the estate security. However, there is some plausibility in defendants' argument that although bank had $150,000 that had been borrowed from city banks falling due the summer of 1921 and it did not have money on hand or assets that could have at once been converted into money to meet this indebtedness, these facts would not make the bank as the had every reason to expect that the payment of these debts would not be demanded and knew that had credit or ability borrow the money to meet its obligations they matured. In this nection the evidence shows that the cashier on July 14. 1921. ascertained that money could be borrowed from the city banks that the notes would be renewed and, in fact, the evidence shows that they were renewwhen they There nothin the record to show under what circumstances the cashier obtained the consent the city banks renewal the loans made by them to the Milan State Bank. Director Higgins, being the only director or officer of the bank who testified, stated that the cashier reported "the banks would furnish the money if absolutely necessary; but was paying out anything for speculative purposes; not to be used unless was necessary. But between July 14 and the time the bank suspended, real estate continued to decrease value and the deposits of the bank The general condition of the bank grew worse. It was gradually going down from the time opened for business. We are forced to the that the only reason city banks renewthe notes that fell due in August, September and October, $138,000 and constituting all the bills payable of the bank, was they unable to make collection upon
