64 N.Y.S. 888 | N.Y. App. Div. | 1900
This action, brought to recover the loss sustained by the plaintiff through an alleged breach of duty on the part of the defendant, has been fully tried and elaborately argued upon the appeal to this court, and we have reached the conclusion that the judgment
There does.not seem to be any question of ultra vwes involved in this action; it was clearly within the legal capacity of the defendant, as the general manager of the affairs of the bank, under the pro-' visions of its by-laws, to loan the funds of the bank in excqss of one-fifth of its capital and surplus, provided he took collateral worth at least ten per cent more than the amount of the loan, and the question presented is thus one of fact. Did the collaterals which he took on the occasion of this loan meet the requirement of the law; were they worth at least ten per cent more than the amount of the loan? Or, as the question was submitted to the jury, did the defendant; exercise reasonable care and diligence in determining the value of the securities; did he have a right to suppose that the collateral was worth the amount prescribed by the statute ? The defendant in this ease was the agent of the corporation, upon whom duties devolved of management and of care; and for a failure in the performance of these duties he will be held liable at law for the damages which the corporation may be shown to have suffered. (Dykman v. Keeney, 154 N. Y. 483, 491.)
It seems clear that the statute having prescribed the rule of conduct for the officers of banking institutions, the board of trustees could not ratify the acts of this defendant in such a manner as to. deprive the plaintiff of a right of action to recover for a neglect of duty. “It is plain,” say the court in A. C. Nellis Co. v. Nellis (62 Hun, 63), “ that a board of trustees cannot ratify an act which they could not lawfully do in the first instance. The statute says : ‘ No loan of money shall be made by any such company to any stockholder therein.’ The principal object of that provision is to prevent a reducing of the capital under cover of loans to stockholders. It is intended for the protection of creditors. Now, if Howland, the treasurer, was forbidden to make these loans to defend.
If the board of trustees or directors could not ratify the acts of the defendant, neither could they adopt his acts,, nor could their judgment as to the worth of the securities become conclusive as against the plaintiff in this action. The one question, clearly stated to the jury, was whether the .securities were, in fact, worth ten per cent more than the loan, or had the defendant a right to • assume that they were worth that amount from the inquiries which he had made % The learned trial court charged the jury upon this point as follows : “ Now, decide that one question first, and if you decide that these securities were not worth ten per cent more than the amount of this loan, then you go further and you apply to that fact this measure of the duty on the part of the plaintiff (defendant) of fidelity, conscience and ordinary skill and care on his business, and inquire whether he knew that that was the case as to their value, or whether by the exercise of ordinary care and attention he would or should have known that that was the case, because under the law that is the same thing.” The board of directors had made no inquiry in so far as the evidence goes; they had taken no part in making the.loans; the acts complained of were the acts of the defendant in making the loans in excess of the "statutory rule without securing proper collateral, and the bank could not be estopped from holding the defendant liable for a neglect of that statutory duty There is clearly no legal presumption that the board of - director's ■ constitutes all of the stockholders of a banking corporation, and it is the duty of the bank, in its corporate capacity, to protect those who may be interested, either as stockholders or creditors, against the negligence or unlawful conduct of its officers. The case of Holmes v. Willard (125 N. Y. 15) does not assert a contrary doctrine, nor is the reasoning in that case ' inconsistent with the conclusion which we have reached in tire ■ case at bar-. ' In the Holmes Case (supra) the corporation was organized for the purpose of manufacturing and dealing in brass 'and other metallic products. It subsequently entered into <a contract with an Ohio company to handle the carbons produced by. that cor
The appellant urges that the sole right of action for the wrongs here alleged, if they are wrongs, is in the non-consenting stockholders, if any, or in the State; but we are of the opinion that the ■defendant is mistaken upon this point. In such actions as these the defendants are not proceeded against strictly as trustees, but as ■agents acting for a principal, and for any damage caused by their neglect and violation of dijty the remedy at law is adequate. (Dykman v. Keeney, 154 N. Y. 483, 491.)
. The difficulty in sustaining the judgment is not found, therefore, in the law applicable to the questions at issue, but in the rulings of the court upon objections taken to the exclusion of evidence upon the trial. Accepting the law as laid down in the charge of the learned court, quoted above, that the defendant was bound to use ■ordinary skill and care in the conduct of the business of the bank,it was competent for him to show that others engaged in the banking business, and who are presumed to know the value of securities, had been receiving the same collaterals as security for loans from this firm of Coffin .& Stanton. Mr. Talcott, a director in the Manhattan Company, was asked : “ Did you, Mr. Talcott, make any loan to Coffin & Stanton, secured by collateral security, any part of which collateral consisted of the first mortgage bonds of the New York City Suburban Water Company ? ” To this there was a general •objection, sustained by the court, the defendant excepting. The
The judgment should be reversed and a new trial granted, costs ' to abide the event.
All concurred, except Jenks, J., taking ho part.
Judgment reversed and new trial granted, costs to abide the event,