Merrick Dairy Janesville, WI 13 Feb 1946
Court Rules on Merrick Claims Claims against the Merrick Dairy Co. of Belolt, which was assigned to creditors on Jan. 14; lS44,"were ruled Upon today'in a long opinion of Circuit Judge Jesse Earle. , Chief among the list of questions raised in connection with the closing up of the Merrick business in Beloit were those of a claim of 56,000 of the Merchants and Savings bank of Janesville, the claim of $800 each by three Derrick brothers under an alleged special dividend action, and questions concerning the assignment of their life insurance contracts to the bank as collateral for the loan to their company. '..'•' ' ' The Merrick company was formed by Earl, Roy L. and Fay L. Merrick in 1923, and later purchased the former. Beloit Milk Co. for $40,000, the court's decision showed. The original corporation had-300, share* «f *tock, 100 held-by each brother, and when the Beloit company was purchased an additional 1380 shares *f preferred were 1s- aued owners of the company taken over as part of the purchase price. The court found that claims of producers and dealer* in dairy products earned or accrued within three months of the filing of the assignment Jan. 14, 1944, and not in excess of $600 for any one claimant should be allowed as preferred claims, and that amounts in excess of 9600 will be allowed as general claims.' ' ' Net a Beeared Creditor The loan from the Janesville bank for 56,000 was negotiated Jan. 3, 1944, on a note, and on Jan. 10, the partners voluntarily deposited as collateral life insurance polices with a cash value of f7,205. Since the Beloit dairy company "had-no interest whatsoever in the life insurance policies deposited with the bank," the decision says, the bank "must be held to be not a secured creditor and its claim must be allowed .in this proceeding as a general claim." . . A claim of $2,000 by the Janes^ ville Merrick Co. against the Beloit company was allowed as a general clabn. A claim of $479.40 for wages by Luella Parish, .an em- ploye .of the Janesville unit whd was ^loaned" to the Beloit company, was disallowed. ; • "Claims of Roy L. Earl and Fay L. Merrick 'each' consists of two items, one for amounts of uncollected back salaries, and a claim of $800 made by each for cash claimed to have been loaned to the company Dec. 31, 1937," the.dei cision says. "It appears that these claims of $800 were based on the fact that on Dec. 31,1937, a special meeting of the directors (the three. Metticks) was called and that a motion' was carried that a cash dividend of $8 per share be declared and paid for, the year 1937 on all common! stock and;.checks were made to -each of the Merricks for the cum of $800. • ntoy Merrick testified that the checks issued were indorsed and turned right /back to the Merrick DauvCol«? a loan. He further testified that this /was. done as 'a case' of avoiding taxes and 'still not depleting our funds.'" • On the ground that .the statute' forbids a dividend by corporations unless "at least 50 per cent of the authorized capital stock has-been fully paid in, and then only out of net profits properly applicable thereto," the judge held that the financial condition ef the company at that time did not justify the paying of the dividend.' Surplus went from S7.3M.41 in 1W8 to J72251 in M*0, and after yearly deficits thereafter hit • «a03§7.74, deficit w 1943, the decision said. The claims for back salaries were allowed as general claims, but claim* under the life insurance deposits with the hank her* were disallowed, and the decision provides that they aujr b» liable individually to the bank for any amount in excen of the repayment which may he made on the «8,000 vbank loan not realised from the general clabn. • .. .