132 N.Y.S. 130 | N.Y. App. Div. | 1911
The defendant is a domestic banking corporation, and on the 15th day of December, 1896, it duly issued to one Charles 0.
Section 1 of article 10 of the by-laws of the defendant, adopted at about the time of its organization and prior to the issuance of said certificate of stock to Clausen, provided as follows: ‘ ‘ The shares of the Bank shall be transferable only on its books, and subject to such regulations as are contained in these by-laws as to the closing of the books for the purpose of the annual election or other meetings of stockholders. The transfer, when made, shall be in person or by attorney upon surrender and cancellation of the outstanding certificates for the shares so transferred, and upon proof satisfactory to the Bank that the person presenting such certificate for transfer is legally entitled to transfer the same, and that he has entered into no
It. is conceded by the learned counsel for the defendant that, in the absence of a statute authorizing such restriction, it was not competent for' the bank to restrict the transfer of its stock by a stockholder who was indebted to it; and it has been so ■adjudicated by controlling precedents. (Bank of Attica v. M. & T. Bank, 20 N. Y. 501; Driscoll v. West Bradley & Cary Mfg. Co., 59 id. 96; Buffalo German Ins. Co. v. Third Nat. Bank, 162 id. 163; affd., sub nom. Third Nat. Bank v. Buffalo German Ins. Co., 193 U. S. 581.) At the time the original by-law was enacted, and when this certificate of stock was issued, it was provided in section 26 of the Stock Corporation Law (Gen. Laws, chap. 36 [Laws of 1890, chap, 564], as amd. by Laws of 1892, chap. 688), now section 51 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61), as follows: “If a stockholder shall be indebted to the corporation the directors may refuse to consent to a transfer of his stock -until such indebtedness is paid, provided a copy of this section is written or printed upon the certificate of stock.”
It is contended on the part of the defendant that this provision of the Stock Corporation Law was applicable to banking corporations, and that although a copy of the section was not written or printed upon the certificate, the substance thereof was printed on the face of the certificate pursuant to the requirement of the by-law, and that this was a substantial compliance with the statute. The learned counsel for the plaintiff contends that this statutory provision was not applicable to a banking corporation, and that, if it were, it was not complied with. The theory upon which it is claimed that it is not applicable is that subdivision 5 of section 25 of the Banking-Law (Gen. Laws, chap. 31 [Laws of 1892, chap. 689], as added by Laws of 1895, chap. 929, and amd. by Laws of 1896, chap, 452), now (as amd. by Laws of 1905, chap. 456; re-numbered subd. 8, and amd. by Laws of 1908, chap. 169), with some
Said subdivision 5 of section 25 of the Banking Law, so far as material, provided as follows: “No such corporation shall make any loan or discount on the security of the shares of its own capital stock nor be the purchaser or holder of any such shares unless such security or purchase shall be necessary to prevent loss upon debt previously contracted in good faith; and stock purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale.”
We are of opinion that the discount of Clausen’s paper by the bank,' upon which it made the loan to him which was unpaid, as already stated, did not constitute a loan or discount on the security of the shares of its capital stock then owned by him, within the intent and meaning of the provisions of said subdivision 5 of section 25 of the Banking Law herein quoted. It does not appear whether or not the discount and loan were made ' on collateral security, nor does it appear that the transaction contained any reference to his ownership of capital stock in the defendant. Clausen’s stock was never redelivered to defend
The question as to .whether the provisions printed on the face of this certificate, if authorized by defendant at the time, would constitute a substantial compliance with the requirements of said section 26 of the Stock Corporation Law is not free from doubt; but we are of opinion that the purpose of the statute was to give notice to the purchaser of stock that the directors might refuse to consent to a transfer thereof until the indebtedness owing by the stockholder to the corporation was paid, and in that view the provisions printed on the face of this certificate gave the purchaser such notice quite as effectively as if a copy of the statute had been written or printed upon the certificate instead.
It follows, therefore, that the defendant should have judgment to the effect that it is not obliged to transfer the stock upon its books until the indebtedness of Clausen to it is paid.
McLaughlin, Clarke and Miller, JJ., concurred.
I concur with Mr. Justice Laughlin, except in so far as he holds that by printing the substance of the statutory provisions on the certificate of stock pursuant to a requirement of a by-law of the defendant bank there was a -compliance with section 26 of the Stock Corporation Law (Gen. Laws, chap. 36; Laws of 1892, chap. 688), now re-enacted as section 51 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws-of 1909, chap. 61). That section authorizes the directors of a banking corporation to refuse to transfer a stockholder’s stock until any indebtedness M the stockholder to the corporation is paid, “provided a copy of this section is written or printed .upon the certificate of stock. ” I think the object of the provision is to require a copy of the section itself in reference to the law of which it was a part to be written or printed upon the certificate of stock, and a mere statement on the face of the certificate that the bank assumed power to' refuse to transfer the stock until the indebtedness was paid, was not a compliance with this provision of the statute.
I, therefore, dissent.
Judgment ordered for defendant as stated in opinion. Order to be settled on notice.