New-York tribune., 1896-06-03
THE DIRECTORS SUED.
.,,,rRcrAL BANK DIVIDENDS IN DIS
PUTE.
,sr BROUGHT BY THE RECEIVER OF THE
,yrxcT INSTITUTION. w. N DYKMAN.
.,xs7 '. KEENEY. E. sNEDIKER
Avn LANES LOCKE.

.cA1NsT s :. KEENEY. f. sNEDIKER
AND JAMES LOCKE.
IL, ras begun yesterday afternoon in the
Court before Justice Osborne and
tn the suit Of William n. Dykman. as re-
r - the Commercial Bank against Seth L.
80 E-lbert Snedker and James Locke. d.
~ the defunct bank, TO recover the amount
.,,.,derd declared on June 2S, 1892. on the
that the directors had no right to declare
.. Nv,dend. and that their action was illegal
-. o,her suits are pending against the directors
,.,s hank for dividends declared In January and
E - 1893 the allegation in each case being
ma Mr. Dykman has been the receiver
-" hank since II collapsed In 1893. and he
.,rsc,ed BY the Supreme Court 10 bring the
'... against the directors. James c. Bergen
,,, mariner. is his counsel. and appears for
M 4, tho actions. Jesse Johnson appears for
"..r Keenev. who was the president Of the
~. and Adolph Sims for Ebert Snediker
,.,as 1ocke Is dead and The Court has not yet
,a",ssa whether it will allow the action against
s,,, n he maintained. George F. Elliott appears
,or ,hs depostors' association.
u,,.r the suits were called yesterday morn
Inc IN Part l Of the Supreme Court. where
rns,ce Keogh is presiding. Jesse johnson. on be-
..v NJ the defendants. moved TO dismiss the
.,r,Iants on the ground that they did not con-
, facts sufficient to constitute causes Of action.
v, p.reen said that the actions were brought
,,- the direction Of the Court and the very
which Mr. Johnson raised were then dis
r.d The Court decided that the creditors
,sn take care Of themselves, and directed the
-ssiyer to 20 on with the actions Justice
ysogh denied the motions. and sent the case
h,re Justice Osborne for trial. jury was I'M
raneIled and in the afternoon Mr.. Bergen opened
The case for the plaintiff.
He quoted the act Of 1925, in which he said II
was provided that the directors OF corporations
should not declare or pay dividends except from
the surplus Of profits II they did so they were
liable 10 the corporation and the creditors. Mr.
Bersen then recited the various acts which were
asstd after 1875 making the directors liable 10
the corporation and the stockholders for dlVi-
dsnds not declared out of the surplus profits. but
he said that by the act of 1892 the law OF lS2o
vas practically re-enacted. and the directors
were made liable as they were before.
Mr. Bergen said that 1t was not alleged that
The directors of the Commercial Bank declared
dividends knowing that they would reduce the
csptal and that they could not come out Of a
surplus profit. but that was no defence to the ac-
tim The statute deemed them 10 have such
knoxledge because they were directors OF
bank They were there in a position or trust and
II was their business to inform themselves how
thA business was being carried on and not 10
rely on statements made to them by others 1t
was provided in the statute that any directore
who wire not present at a meeting when fraudu-
lent dividends were declared or those who were
present and who caused their disapproval II be
spread on the minutes could not De held liable.
but the defendants In the present action had
been present and had not expressed any disap-
proval
The Commercial Bank was Incorporated in
1868 following the provisions OF the law or 'S1>.
It's capital at first was 100000. In 1878 the
capital was increased to SlSO.OOO and five years
later II was reduced t. Sl0SVO Business was
carried on with that capital until June y. lS9Z,
when a meeting f the directors was held In the
morning before the opening Of the bank The
defendants were those who were present The
regular monthly statement had been presented
10 them and on that they had declared a divi-
dend OF something over $4,000. The statement
showed that the bank had a surplus Of SJI To-,
when the fact was that there a deficiency
Of S109712 0S The difference arose from vari-
Gus methods Of ase financiering. which included
the reckoning OF notes held as assets, when NJ
interest had been paid on them In more than ii
year, In direct violation Of the provisions OF the
statute. The directors had also accepted other
notes for interest due on notes and with others
had added the amount Of the interest TO the face
Of the note in granting renewals Mr.. Bergen
said that on this account the directors were
liable for the amount Of the dividends declared.
The trial OF the case was continued
The other two actions which will follow the one
trial are against the iire,tors who declared
dividends in January and July. 1915
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