39 N.Y.S. 623 | N.Y. App. Div. | 1896
The. plain tiff is a stockholder of the defendant the Bank of Mount Vernon, and the defendant' G-ouverneur Rogers is the president of that corporation. The complaint alleges that the defendant Rogers, with.certain associates who hold a majority of the stock of the bank, have for years controlled its management and conduct. Such conduct and management the complaint alleges to have been illegal and fraudulent, in many respects particularly stated. The action is brought by the plaintiff for himself and all other stockholders, to obtain redress for these grievances. It will be more convenient to recite the details of these grievances as we proceed to discuss the questions of fact and the law bearing on them.
The bank was organized in June, 1885. The certificates of stock issued to the stockholders, at the time of the' original organization, bear on their face this clause :
“No transfer of the stock of this association shall be made with-, out the consent of the board .of directors by any stockholder who shall be liable to the association, either as principal debtor or otherwise.”
No provision to this effect exists in the articles of association of the bank, nor has theré been any by-law passed authorizing this restriction. It appears that at the first meeting of the directors of the bank some member of that-body suggested that, this clause would give additional security to the bank. No formal action was taken . on this suggestion. A resolution was passed that the president (the
The first complaint of the plaintiff relates to this subject. He ■ complains that this clause restricting transfers affects the value of his stock, as it impairs its negotiability, and especially its use as. collateral in obtaining loans. The first prayer for relief is that the. defendants may be restrained from issuing any certificates of stock containing this restrictive clause, and that they be enjoined to call in the outstanding certificates and eliminate therefrom such clause. It may be conceded that as the articles of association contain no provision authorizing this restriction' on the transfer of stock, the directors of the bank were without authority, either with or without a by-law, to establish it. (Driscoll v. West, Bradley, etc., Co., 59 N. Y. 96.) But, though originally unauthorized, the stockholders -might, by lapse of time and course of dealing, acquiesce in and ratify this restriction. (Kent v. Quicksilver Mining Co., 78 N. Y. 159.) A few months after the organization of the bank the question of abolishing the restriction on the transfer of stock was discussed, and advice sought as to the power of the board in the matter. Beyond this nothing further seems to have been done. The plaintiff at times urged the propriety of removing the restriction, but he acquired from time to time further stock,, and, on the transfer of such stock, received certificates in the form in use without objection. The restriction worked no injury to the bank itself, but was advantageous to it. It harmed, if any one, only the stockholders, in so far as it impaired the negotiability of their certificates. There was, therefore, no cause of action in the bank against its stockholders to recall these certificates and issue others, even assuming that the certificates issued were illegal in form. The grievance, therefore, of the plaintiff was strictly personal, and, if well founded, had no place in this action. We think that the plaintiff’s acquiesence in the issue of this form of certificate estops him from asserting any claim as to its illegality." It is not worth while, however, to pursue the discussion
The second subject of complaint was that, though the bank had continuously earned money, only one dividend had been paid from the organization of the bank to the commencement of the action, the' profits being* allowed to accumulate as a surplus. After the commencement of the action the bank commenced declaring dividends at the rate of eight per cent per annum, which has been continued up to now. Still, if the plaintiff had any' cause of complaint in this zrespect at the time he brought the action, the subsequent conduct of ■the bank would not defeat his right to maintain the action. The "broad claim is made on behalf of the plaintiff-that the accumulation ■t>f profits for the purpose of creating a surplus is a-violation of the ¿articles of association and illegal, because it is practically increasing the capital stock. That it does, in one sense, increase the capital of "the bank is unquestionable, but we have never known of such action being challenged. The propriety of accumulating some surplus is "too palpable to require extended discussion When the capital stock .of a bank is impaired the deficiency must be made good by .an .assessment on the stockholders, and in case the deficiency is not made jgood within sixty days, proceedings may be instituted against tit, as in the case of insolvént corporations. Hence, if such a •corporation should divide all its profits and accumulate no surplus, .any business loss would subject it to the hazard of a receivership and "the loss of its corporate life. This danger is so apparent that of late years it has been common, on the formation of banks or trust companies, to pay in fifty or a hundred per cent in addition to the nominal capital stock, so that the corporation may begin business •with a surplus. Some banks have accumulated so much of their
A further subject of complaint is the call loans made by the bank to the president. These loans are criticised in two respects: First, as being unauthorized by the directors; second, as exceeding the amount permitted by the statute to be loaned to one of the directors. The defendants contend that, under the by-law which conferred on ■the president and cashier the power “ to perform all such duties as
The claim is further made that some of these loans which exceeded • in amount one-third of the capital stock of the bank were illegal. By section 119, chapter 409, Laws of 1882, it is made unlawful for. the directors of any. moneyed corporation to make any loans or discounts to the directors of such corporation to an amount exceeding in the aggregate one-third of the capital stock of such corporation actually paid in and possessed. By section .214 of the act cited, the term “moneyed corporation” is directed to be construed to mean every
The question here involved is a doubtful one. We are inclined to concur in the view expressed by the Attorney-General. It would not be profitable to discuss the question at any great length, for it no longer exists, both statutes having been swept away by the legislation of 1892. Even if, as a matter of law, the construction of the act of 1882, adopted by the Attorney-General, was erroneous, still the officers of the bank could not be reproached for misconduct in acting in accordance with it. Since 1892 the law no longer imposes any such limitation. All the loans made to the president had been paid up, and no loss had occurred to the bank through such loans. The charge that the loans were made at less than the market rate of interest is not established by the evidence, and the trial court has found to the contrary. As to the wisdom of the directors of a bank permitting its officers to make loans to themselves without the express sanction of the boai’d in each particular case, we have a very clear opinion; but, if a board of directors does see fit to confer such power we cannot interfere with its exercise, unless such exercise is dishonest or fraudulent. Our opinion that these loans were neither illegal nor unauthorized, disposes of the claim that the defendant Rogers should account for the profits made by him from the moneys thus loaned.
The other subjects of complaint, the purchase of the bank lot, the
The judgment appealed from should he affirmed, with costs.
All concurred.
Judgment affirmed, with costs.