It is made upon a division
of the profits--so much to the stockholders and so much to the surplus
fund. If the law had intended that losses might be charged to surplus
fund in order to leave the other earnings available for dividends it is
to be presumed that care would not have been taken to use the words
"undivided profits," in the connection in which they are used, as stated
above.
Furthermore, if losses may be charged to surplus when at the same time
the other earnings are used for dividends to shareholders, a bank may go
on declaring dividends, and never accumulate any surplus fund whatever
if losses be sustained, as they are in the history of nearly every bank.
A construction of the law which would render inoperative the requirement
for the creation of a surplus cannot be sound; and as the only way to
insure that a surplus shall be accumulated and maintained is to charge
losses against other earnings as far as may be before trenching upon the
surplus; it must be that the law intended that the "undivided profits"
which are not in the surplus fund shall first be used to meet losses.
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