The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1922-02-11
Opinion Today Most Important
to Banks in Years.
Stockholders Not Responsible
for 5000 Assessment.
BURDEN ON GUARANTY FUND.
Banking Department Now
Looks to 1923 Legislature.
Already $25O,OOO Has Been
Paid for Failed Banks.

The supreme court today knocked
out the double liability law as applied
to bank stockholders. In an opinion
by Chief Justice Johnston, concurred
in by a majority of the court, it is
held that a constitutional amendment
adopted in 1905 abrogates the statu-
tory provision. Three justices-Burch,
Dawson and Mason-dissented.
The courts decision in the liability
case is the most vital and important
court action affecting banks which
Kansas has known in many years 1t
removes from stockholders OF state
banks the responsibility of pavn1ent
OF double the amount of their stock in
event OF loss to depositors or credi-
tors 1t puts bank stockholder on
equal footing with persons interested
IN other corporate enterprises. 1t fixes
specifically and definitely the rule
that in this state a stockhoIder's liza
bility extends merely to his invest
ment.
Today's decision brings Joy to the
bank stockholders. But it brings equal
concern 10 friends of the. bank guar
anty law. 1t mean that inability TO
collect the double liability in cases OF
Iallure OF so-called guaranteed banks
throWs an added responsibility and
burden on the guaranty fund. The
decision grew out of issues involved I'm
nj
at Salina
Chief Justice Johnston. in his opin-
ION asserts that conditions existed I'm
the state which brought about wipinc
out or added responsibilities to cor
poration stockholders. He said that
at the time the amendment was
ADOPTED, investors went to other
states in order to evade the liability
defined by the Kansas statute. The
1SOb amendment, the opinion states
clearly intended to wipe the double
HAplllty from bank well as other
stockholders Justices West, Marshall
Fofter Joined with him in the pre-
vailing opinion.
IN order to provide additional Dro-
lection to. bank creditors the court
suggests that the legislature might
provide that bank deposit a bond or
otheF security as a guarantee against
| losses. 1t is also mentioned that stat
utory requirement might be made a 3
10 payment of capital stock in setting
ASIDE OF a portion of the bank earn
lngs in creating a fund to be used as
security. 1t might also be required
to file bond of deposit. thus crestine.
| some sort of compulsory guarantv
| Iuhd- The remedy, however. must he
otnef than a personal responsibility of
individual share owners.
Ask Rchearing.
The state banking department. will
ask a reheariDg at once on the double
laoiilty case, j. II. Sandell, assistant
bank commissioner said. II a re-
nearing is denied, SandeIl said. Kansas
bankers undoubtedly viii urge lie
1873 legislature to submit a constit,,-
| t;onal amendment so as to make n
double liability law possible.
rms means there can be no bank
sion of 1925. SSS-
The state banking department has
| dI"ays considered the double liability
IaW an added safeguard to the public
ne law does not affect the solvencv
OF the banks, however. and neItbey.
does 1t prevent voluntary or fnvol,in-
! tary assessment of Stockholders IN
banks the capital of which NAV have
been impaired The banking depart
nent has in many cases recommended
| dssessTne of from 100 to 200 per
| cent and the stockholders have COM
piled in order to keep their banks In
operation and on a sound basis
am confident the bankers of the
I state would have been satisfied had
INC supreme court upheld the double
liability statute. The good bankers
believe in this law and have never
tried 10 evade it,"
Pay In s25e, 900.
sandell estimated that at least s25O.-
GOO has been paid by stockholders Of
fa1ied banks during the years in which
| the law has been in operation under
the belief that the law was good.
Sixteen failed banks with "a cor,-
bined capital of $4,000 are now in
process of liquidation. Five of these
! banks with combined capital of S95.-
| oVe are not under the guaranty law,
while twelve with a com bined ca uftai
/ OF sS2O'OOO are guaranteed. In several
! Insta nces, however, including the
Peoples State bank at SaIfna with a
capita. of 100000, it has already been
determined that no assessment of
stockholders will be necessary.
New Cabinet Member for Mex.