220 A.D. 515 | N.Y. App. Div. | 1927
Defendant was the principal stockholder, director and president of the plaintiff bank. He is sued on his promissory note, made payable to the plaintiff, for the sum of $2,377.17.
His answer is, first, .that the note was made by him without consideration, and second, that the note was one of twenty-one notes each for a like amount and made by the twenty-one directors of the bank including himself to make good an impairment of about $50,000 of the bank’s assets; that it was agreed amongst the several directors that payments on these notes should be made by the makers “ in equal proportion to the amounts of the note or notes signed by each director;” that none of the directors made any payments on account of said notes at their maturity with the exception of interest charges and ten per cent of the amount of each note, and that the 'defendant has offered to pay on account of his note “ any sum in proportion to the amount paid by the other directors,” but plaintiff has declined to receive any payment from him other than the amount of the note in full.
Trial by jury was had, and a single question submitted to them for answer, namely: “ At and prior to April 6th, 1925, the time of the making of the original notes by the defendant and the other directors of the plaintiff bank, was an agreement for the payment of such notes as testified to by the defendant entered into between the directors and the bank? ” To this question the jury answered, “ Yes.” The learned trial justice thereupon made an order holding “ that the said agreement found by the jury as having been entered into between the plaintiff and the defendant is invalid and has no significance in law because the same is indefinite, vague and uncertain,” and directed judgment in favor, of the plaintiff for the amount of the note with interest, and judgment accordingly was thereupon entered. From it the defendant appeals.
There is no dispute but that, up to the time of the commencement of this action, the directors other than the defendant had paid into the bank on account of their notes ten per cent of the amount thereof, as the defendant alleged.
The so-called agreement upon which the appellant relies has for its basis only his own testimony, from which it appears that the bank was in process of examination by the Federal bank examiner who, on April 6, 1925, while the examination was about completed,
Assuming that this testimony made out an agreement amongst the directors of this bank that the notes of each were to be obligated only to the extent of proportionate payments on account from time to time, I am of the opinion that such agreement was wholly ineffectual to defeat the bank’s claim against the makers of the notes. The contention that this note was without consideration cannot prevail.' The vital interest which this appellant, as principal stockholder, director and president of the bank, had in its success or continuance in business was in and of itself a sufficient consideration for the giving of his note for a one-twenty-first proportion of the total of the bank’s impaired assets. It is apparent from the defendant’s testimony that the ruling of the Federal bank examiner was that these “ doubtful assets ” or “ losses ” could not be carried as bank assets. Moreover, the testimony expressly shows that these directors “ would take up the losses, with the distinct understanding that they would be reimbursed either from one or two sources; that is, liquidation of the bad accounts or from other resources of the bank or earnings as they came in.” It was the clear intention of all of the makers that their notes were to be looked upon by the bank’s depositors as well as the public as five and liquid funds, and that these notemakers were to be regarded as creditors of the bank out of specific sources, namely, when the “ bad accounts ” were liquidated or the resources or earnings of the bank would permit of reimbursement. The notes were not only good but were based upon a fair legal consideration.
Moreover, I think that, under well-settled authority, this arrangement of the directors, assuming it to have been made and further assuming it to be entitled to the dignity of being called an agreement, was illegal. Daly, Chief Judge of the New York Common Pleas, General Term, in Sickels v. Herold (15 Misc. 116, 118), learnedly discusses the proposition, as follows: “ It thus appearing that the notes in question were delivered by the directors to the bank to make up an impairment of its assets, in order to satisfy the Superintendent of Banking and secure his sanction to continue the business of the bank and to give it credit with the public for the receiving of deposits and doing its general business, the makers of the notes are estopped, as against the receiver, who represents the creditors of the bank, from alleging want of consideration. They are also estopped from contesting their liability on the ground of the alleged agreement between them and the cashier of the bank, that the notes were not to be enforcible until the deficiency upon the rejected securities should be ascertained. Hurd v. Kelly,
That opinion was adopted on the appeal in the same case by the Court of Appeals in Sickles v. Herold (149 N. Y. 332, 335). And the New York view of the law was approved by the Supreme Court of Pennsylvania in State Bank of Pittsburg v. Kirk (216 Penn. St. 452, 455), where in a discussion of the defense of want of consideration, it was said: “ This court has not heretofore been called on to pass upon the exact question now raised, but similar questions have frequently been before the courts of New York, and the rule laid down in that State is so consonant with good conscience, wise public policy, and natural justice, that we feel impelled to adopt and follow it. In the New York cases it was held that where the directors of a bank in order to take up certain bad loans held by the bank, which impaired its capital, had executed their own notes to the bank in like amount, pursuant to án agreement
It seems to me that nothing more need be added to show that the judgment directed by the learned trial court was founded on sound law and is salutary in its result.
I advise that the order directing judgment for plaintiff, and the judgment entered thereon, be affirmed, with costs.
Present — Kelly, P. J., Young, Kapper, Lazansky and Hagarty, JJ.
Order directing judgment for plaintiff, and judgment entered thereon, unanimously affirmed, with costs.