Thomas v. Penniman

Boyd J., delivered the opinion of the Court. It will not be necessary for us to express our views at length on the demurrers of Wm. B. Thomas to the bill in this case as the opinion filed in the previous case of Thomas et al v. Penniman et al sufficiently states them, as to the most of the questions raised. The principal difference between this bill and that in the other case is the charge against these directors, who served during the year 1902, that they declared two div ⁴⁷⁶ idends, which impaired the capital stock, contrary to sec. 5 of the charter of the company.

They are referred to in paragraphs (10) and (11) of the bill, which are especially demurred to. Paragraphs (14) and (15) are also especially demurred to, and they refer to alleged illegal loans made to officers of the company. (1.) Mr. Thomas was present at the meeting of directors on June 26th, 1902, at which a dividend was declared, and although he was not at the meeting on December 10th, 1902, at which the other dividend complained of was declared, the bill alleges that the directors who were not present received the dividends upon the stock held by them, assented thereto and ratified the same. The mere fact that directors declared dividends, when subsequent developments show they ought not to have done so, does not, of course, make them liable under such a provision as that in this charter.

Some of the acts relied on in this bill, as reasons for not declaring dividends, would not of themselves reflect much, if any, upon the question. For example, it is difficult to see how the failure of officers of the company to make the reports required by chap. 109 of the Acts of 1902 (now sec. 94 of Art. 23 of the Code), can properly be used against the directors, to show negligence or that they, were not informed as to the company’s condition. That Act requires such officers as the State Treasurer may designate to make the report to him, and unless he brings it to their attention it would not be fair to draw any inference of neglect on the part of the directors, from the failure of officers to make such report, and surely the directors are not expected to go to the Treasurer of the State to ascertain the condition of the company with which they are connected. But in paragraph (11) there are such charges of negligence on the part of the directors in failing to inform themselves of the condition of the company before declaring the dividends, as demand some explanation from them, and we therefore think the demurrers to paragraphs (10) and (11) were properly overruled. 2.

The demurrers to paragraphs (14) and (15) present