244 A.D. 391, Longley v. Coons

Citation244 A.D. 391
Party NameFREDERICK J. LONGLEY and Others, as Trustees for Certain Depositors and Creditors of THE FIRST NATIONAL BANK AND TRUST COMPANY OF HUDSON, Appellants, v. HAROLD J. COONS and Another, Respondents.
Case DateMay 08, 1935
CourtNew York Supreme Court Appelate Division, Third Department

Page 391

244 A.D. 391

FREDERICK J. LONGLEY and Others, as Trustees for Certain Depositors and Creditors of THE FIRST NATIONAL BANK AND TRUST COMPANY OF HUDSON, Appellants,

v.

HAROLD J. COONS and Another, Respondents.

Supreme Court of New York, Third Department.

May 8, 1935

Page 392

APPEAL by the plaintiffs from an order of the Supreme Court, entered in the office of the clerk of the county of Columbia on the 13th day of December, 1934, denying the plaintiffs' motion for summary judgment.

COUNSEL

Coffin, Coffin & Inman [George C. Inman of counsel], for the appellants.

R. Monell Herzberg, for the respondents.

BLISS, J.

The defendants say that the note on which they are being sued and of which Harold J. Coons is maker and Sidney R. Coons payee and indorser, is the last of a series of renewals of a note originally given by them to the bank under an agreement with its president by which Harold J. Coons as agent for the bank purchased at public auction and held in his own name certain shares of the capital stock of the bank until the bank could conclude its then pending negotiations with a prospective purchaser of the stock.

The defendants urge as a preliminary objection that the motion is not made upon the affidavit of a person having knowledge of the facts. They do not rest upon this objection and have in their answering affidavits set forth in full their version of the transaction. They have thus elected to go forward with their proof and the court must now decide the motion upon all the facts.

Plaintiffs' predecessor is a National bank. It is vested with only such powers as are granted, and subject to the restrictions imposed, by statute. One of these restrictions is found in section 83 of title

Page 393

12 of the United States Code Annotated. [a1] This section is contained in chapter 2 which deals with National banks and is commonly called the National Banking Act. It reads: 'No association 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 should be necessary to prevent loss upon a debt previously contracted in good faith.'

In construing this statute we must follow the rulings of the Federal courts. ( Duncomb v. N.Y. , H. & N. R. R. Co., 84 N.Y. 190.)

The agreement which the defendant Harold J. Coons claims he had with the bank was clearly within the statutory prohibition and illegal and beyond the authority of the bank to make. The learned Special Term held to the contrary and stated that the bank had a right to purchase this stock for a customer. Block v. Pennsylvania Exchange Bank (253 N.Y. 227) is cited as an authority for this holding. An examination of the opinion and record on appeal in that case reveals that the bank was there purchasing not its own capital stock but stock of other corporations. The prohibition of section 83 of the National Banking Act refers to a bank's own capital stock and not to the stock of other corporations. Consequently that case is not in point.

It will be presumed that the transaction between the bank and the defendants was legal and not one in violation of law. Ordinarily parties do not intend to make illegal agreements. This...

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