Case ID: ad_113/html/0375-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Jenks, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The People’s Trust Company, Respondent, v. William R. Pabst, Appellant.
    Second Department,
    May 9, 1906.
    Bills and notes — note given by teller of bank to secure loan made without consent of directors — note not invalid by statute—bank may recover thereon against maker.
    Subdivision 4 of section 35 of chapter 689 of the Laws of 1893, added by chapter 939 of the Laws of 1895, which prohibits officers, clerks, etc., of banks from borrowing money from the bank with which they are officially connected, without the consent of a majority of the directors, and provides a forfeiture to the State for a violation thereof, imposes no other penalty on such a loan than that expressly stated.
    Hence, a promissory note given by the teller of a bank for a loan by the bank, made without the consent of the directors, is enforcible by the bank against the maker and indorser.
    Appeal by the defendant, William R. Pabst, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 31st day of May, 1905, upon the decision of the court rendered after a trial at the Kings County Trial Term, a jury having been waived.
    
      Francis A. McCloskey, for the appellant.
    
      John D. Fearhake, for the respondent.
   Jenks, J.:

The action is upon a promissory note and against an indorser. The note is for a.renewal of $2,500 of a noté for $3,000.- '

Cross-examination óf a witness for the plaintiff elicited that the. maker of the note was a teller in the employ of the predecessor of the plaintiff when the original note .was made,- and that the consideration was a loan of $3,00Q made to him by that bank. Thereupon, the witness, on redirect examination, testified that the loan was approved by the directors or a majority thereof, under- objection and exception that liis answer was á conclusion. On recrqss exam'ination it was developed that this bit of testimony was hearsay, and'a motion was made to strike it out. The court reserved' its. decision, hut. never made it. The defendant made no other motion ■ , or request save that at -the close of the plaintiff’s case he moved for a dismissal oirthe grounds óf failure of proof, that the note was void, and ’ the plaintiff was not the holder in due course. The court reserved its decision on the motion, and finally filed' its decision for the plaintiff. If the trial had been before a jury the remedy of the defendant as to the incompetent testimony received was. to ask‘the court to instruct 'the jury to disregard it, (Holmes v. Moffat, 120 N. Y. 163.) But as in this case the jury was waived and the court in its decision wholly disregards the question now presented, I will discuss it on the theory that there-was no evidence that the loan was authorized by the directors. The contention is that the note was void for failure of proof that there was complh an.ee with subdivision 4 of section 25 of chapter 689 of the Laws of 189-2, added by chapter 929 of the Laws of 1895 and amended by chapter 452-of the Laws of 4896, which provides as follows: “ LTo ( officer, director, clerk or agent of any bank or savings bank shall borrow from the corporation with which he' is officially connected any sum of money without'the consent and.approval of a majority of the board of' directors or trustees thereof. Every person- violating this provision shall, for each offense, forfeit to the People .of the State twice the amount which he shall have borrowed.”' The com tract is but malura ¡prohibitum. The general rule is stated in Pratt v. Short (79 N. Y. 445),- as follows : “ So, also, a prohibitory statute may itself point out the consequences of its- violation, and if, on a consideration of the whole Statute, if appears that the Legislature intended to define such consequences, and to exclude any other penalty or forfeiture than such as is declared in the statute itself, no other will be enforced, and if an action can be maintained on the transaction of which the prohibited transaction ivas a part, without sanctioning the illegality, such action will be entertained.” (See, too, McBroom v. Scottish Investment Co., 153 U. S. 323 ; Harris v. Runnels, 12 How. [U. S.] 79, 84.) The subdivision quoted supra does not prohibit such transaction or declare it void and it does provide an express penalty which is imposed on the borrower alone. If the Legislature had intended to impose any forfeiture or other penalty, I think that it would have so declared in express terms. The provision quoted supra is subdivision 4 of section 25 of the Banking Law, entitled Restrictions.” By subdivision 1 of that section (as amd. by Laws of 1896, chap. 452) the Legislature absolutely prohibits certain loans and discounts. If the Legislature intended to prohibit or declare void the loans within the purview of subdivision 4, it is but reasonable to infer that it would have made a declaration similar to that made in subdivision 1 of the same section with reference to certain other loans or discounts.

Hone of the other questions raised requires comment. I advise affirmance of the judgment, with costs.

Hirschberg, P. J., Woodward, Gaynor and Rich, JJ., concurred.

Judgment affirmed, with costs.