Topeka Savings Bank (Topeka, KS)

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SAVINGS BANK CASE. Stockholders Were Not Relieved From Liability. A mistake was made in the report of Judge Hazen's decision in the Topeka Savings bank cases and the stockholders, according to the court's ruling, are liable for their subscriptions. David Overmyer has made the following explanation of the decision on the motions: Some time ago the Topeka Savings bank which went out of business eight years ago instituted actions against several of the stockholders for their unpaid subscriptions to stock. To this the stockholders set up seven distinct defenses. The first defense in each case being a general denial need not be noticed as that might be made in any case. The second pleaded the three year statute of limitations, but the court held that as this action was upon a contract the three years' statute had no application, the plaintiff having five years in which to bring an action from the time the cause of action accrued. This became the important question, the plaintiff bank contending that the cause of action did not and could not accrue under the terms of the contract until a call was made upon the stockholder, the defendants maintaining for their third defense that the bank might have made a call earlier than it did, that it was its duty to make the call when it might have made it, and that consequently the statute of limitations would run from the date at which the call might have been made, which was alleged to have been the first day of December, 1892. The court, however, held that the bank was not obliged to make the call simply because it might have made it; that the question of time and the propriety of the call was for the bank to decide, and that as the bank could not maintain an action upon the subscription until it made the call, therefore, no cause of action accrued until the call was made, and the statute of limitations could not begin to run until a cause of action accrued. The fourth defense set up by the defendants was upon the ground that the general banking act of 1891 by its terms made all of the unpaid subscriptions of the Savings bank due. The bank, however, contended that the act had no application and that if it should be construed as applying to the Savings bank it would be unconstitutional as impairing the obligation of the contract. The court held that the act of 1891 had no application to Savings banks previously organized. The fifth defense set up by the defendants was upon the ground that as the Savings bank had ceased to do business in March, 1896, that it then became the duty of the bank to call for all unpaid subscriptions. The bank, however, contended that as no action accrued until the call was actually made, therefore, the statute of limitations could not apply, and the mere fact of the bank ceasing to be a going concern could have no effect whatever upon the right of the bank to make the call at its own discretion, and this contention was sustained by the court. The sixth defense questioned the capacity of the bank to bring an action, it being no longer a going concern, but as the court said, this was not seriously insisted upon and was easily disposed of as the statutes of Kansas make ample provisions for just such cases. The seventh defense set up the fact that the bank was no longer a going concern, that it had gone into voluntary liquidation on the 2nd of March, 1896; that it had injudicious use of its assets, and that but for such injudicious use of its assets its bills could all have been paid, and that there would be no occasion for a call upon the stockholders, and that therefore and for these reasons the stockholders became liable to pay when the bank closed its doors as a business institution, and that calls could not thereafter be lawfully made, and that the statute of limitations therefore and for those reasons ran from March 2, 1896. Again, the bank invoked the principle that the stock could not be made payable until the bank should call for payment, and that as the bank could not collect until it made a call, therefore the statute of limitations could not run against it upon the stock subscripion until the bank itself had made a call. The bank's contention as to the seventh defense was also sustained by Judge Hazen, grounding his decision upon the decisions of the supreme court of the United States, which was held in many cases that where calls are provided for in a contract between a corporation and a stockholder, there is no liability of the stockholder to pay until the call is made and consequently that the statute of limitations cannot run upon the contract of subscription until a call is made by the corporation. Thus all of the defenses except the mere general denial set up by the stockholders were denied and overruled by the court, and the contention of the Savings bank was sustained at every point. The defendant prayed an appeal to the supreme court and pending the settlement of the question in that court in the case of defendant West, it was agreed between the parties that the other cases should remain in abeyance. Judge Hazen remarked in delivering his opinion that the case was the most thoroughly argued of any case that was ever presented for his consideration. The arguments were made by David Overmyer, of the firm of Overmyer, Mulvane & Gault, for the Savings bank, defendant West was represented by Garver & Larimer and E. A. Austin. Football at Chicago.