Harper v. State Bank

Mr. John Harper was a director of the State Bank of Paw Paw. The capital assets of this bank became impaired in 1931. In compliance with the requirements of the auditor’s office, to render the bank solvent, two things were done. First, Mr. Harper and other directors placed their individual notes in the assets of the bank in lieu of certain notes therein to which the auditor objected. These objectionable assets were then removed and held for the benefit of the persons whose notes had been substituted therefor. The second step taken was a reduction of the capital stock from $100,000 to $50,000.

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