Laughlin, J.:
The defendant is a domestic banking corporation, and on the 15th day of December, 1896, it duly issued to one Charles 0. [9] Clausen a certificate for ten shares of its capital stock, and on the 18th day of May, 1910, said Clausen pledged the same with the Hudson Trust Company as collateral security for the payment of a note' discounted by said trust company for him, on the security thereof by signing a blank power of attorney for the sale, assignment and transfer of said stock, indorsed on the back of said certificate, and. delivering the same to said trust company. The maker of the note defaulted in payment, and thereupon and on the 25th day of November, 1910, the trust company duly sold, assigned and transferred the stock to the plaintiff, who the submission shows became the lawful holder and owner thereof. After thus acquiring the stock the plaintiff demanded of the defendant that it transfer the same upon its books to his name and issue a new certificate to him therefor, which demand was refused, upon the ground that there was then due and owing to the defendant from said Clausen the sum of $8,033.36, with interest thereon from the 19th day of September, 1910, on account of an indebtedness for moneys loaned and advanced to said Clausen by the defendant on discounting his paper in February and March, 1897, while he was the owner of said stock, which after payments made thereon was renewed by his note of April 12, 1909, while he was still the owner of said stock. Clausen, from the time said stock was issued, has been the registered holder thereof on the books of the defendant, and he was elected one of its directors on the 9th day of December, 1896, and continued to be a director until the 6th day of October, 1910.
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 [10] agreement restricting such right of transfer. The Bank shall be under no duty to accept any such surrender, or make such transfer, until all claims, obligations and demands of every kind existing and contingent in its favor against the registered holder of such shares, or with respect to the right of the person demanding such transfer to deal'with such shares, shall have been first discharged to its satisfaction, and every stock certificate of this Bank shall have printed or written on it as a condition of its issue, that if the registered holder thereof shall be or become indebted to the Bank, the Directors may refuse to consent to a transfer of the stock appearing in his name until such indebtedness is satisfied, and that so long as he be so indebted the stock represented by the certificate shall not be transferable. ” This section of the. by-laws remained in force until the 1st day of March, 1909, when it was duly amended by omitting, that part of the last sentence which required that every certificate should have, printed or written thereon, as a condition of its issue, that if the registered holder thereof should be or become indebted to the bank the directors might refuse to consent to a transfer of the stock until such indebtedness was satisfied, and that the stock should not be transferable while such indebtedness existed. The submission shows that no other change relating to this question was made in’the by-laws and that they contained no other provision bearing thereon. It does not appear what the purpose of the corporation was in thus aménding the by-laws, but it is not claimed' by the plaintiff that his rights were affected by said amendment and the case has been •argued as if no change had been made in the by-laws. In accordance with the requirements of the original by-law the certificate of stock issued to Clausen, on its face, contained a provision to the effect that it was only transferable on the books of the company on the surrender of the certificate, “upon the condition, however, that if the. registered holder of this certificate shall be or become indebted to the Company, the Directors may refuse to consent to a transfer of the stock appearing in his name until such indebtedness is satisfied, and, so long as he be so indebted, the stock represented by this Certificate shall not be transferable. ” The certificate contained this provision at the time it was acquired by the plaintiff, [11] although prior to the time the stock was pledged to the Hudson Trust Company by Clausen, the requirement that this be printed on the certificate had been repealed; but since the purpose of such repeal has not been discussed in the points, and no claim is based thereon, we do not deem it necessary to consider it.
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.”
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Laughlin, J.:
The defendant is a domestic banking corporation, and on the 15th day of December, 1896, it duly issued to one Charles 0. [9] Clausen a certificate for ten shares of its capital stock, and on the 18th day of May, 1910, said Clausen pledged the same with the Hudson Trust Company as collateral security for the payment of a note' discounted by said trust company for him, on the security thereof by signing a blank power of attorney for the sale, assignment and transfer of said stock, indorsed on the back of said certificate, and. delivering the same to said trust company. The maker of the note defaulted in payment, and thereupon and on the 25th day of November, 1910, the trust company duly sold, assigned and transferred the stock to the plaintiff, who the submission shows became the lawful holder and owner thereof. After thus acquiring the stock the plaintiff demanded of the defendant that it transfer the same upon its books to his name and issue a new certificate to him therefor, which demand was refused, upon the ground that there was then due and owing to the defendant from said Clausen the sum of $8,033.36, with interest thereon from the 19th day of September, 1910, on account of an indebtedness for moneys loaned and advanced to said Clausen by the defendant on discounting his paper in February and March, 1897, while he was the owner of said stock, which after payments made thereon was renewed by his note of April 12, 1909, while he was still the owner of said stock. Clausen, from the time said stock was issued, has been the registered holder thereof on the books of the defendant, and he was elected one of its directors on the 9th day of December, 1896, and continued to be a director until the 6th day of October, 1910.
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 [10] agreement restricting such right of transfer. The Bank shall be under no duty to accept any such surrender, or make such transfer, until all claims, obligations and demands of every kind existing and contingent in its favor against the registered holder of such shares, or with respect to the right of the person demanding such transfer to deal'with such shares, shall have been first discharged to its satisfaction, and every stock certificate of this Bank shall have printed or written on it as a condition of its issue, that if the registered holder thereof shall be or become indebted to the Bank, the Directors may refuse to consent to a transfer of the stock appearing in his name until such indebtedness is satisfied, and that so long as he be so indebted the stock represented by the certificate shall not be transferable. ” This section of the. by-laws remained in force until the 1st day of March, 1909, when it was duly amended by omitting, that part of the last sentence which required that every certificate should have, printed or written thereon, as a condition of its issue, that if the registered holder thereof should be or become indebted to the bank the directors might refuse to consent to a transfer of the stock until such indebtedness was satisfied, and that the stock should not be transferable while such indebtedness existed. The submission shows that no other change relating to this question was made in’the by-laws and that they contained no other provision bearing thereon. It does not appear what the purpose of the corporation was in thus aménding the by-laws, but it is not claimed' by the plaintiff that his rights were affected by said amendment and the case has been •argued as if no change had been made in the by-laws. In accordance with the requirements of the original by-law the certificate of stock issued to Clausen, on its face, contained a provision to the effect that it was only transferable on the books of the company on the surrender of the certificate, “upon the condition, however, that if the. registered holder of this certificate shall be or become indebted to the Company, the Directors may refuse to consent to a transfer of the stock appearing in his name until such indebtedness is satisfied, and, so long as he be so indebted, the stock represented by this Certificate shall not be transferable. ” The certificate contained this provision at the time it was acquired by the plaintiff, [11] although prior to the time the stock was pledged to the Hudson Trust Company by Clausen, the requirement that this be printed on the certificate had been repealed; but since the purpose of such repeal has not been discussed in the points, and no claim is based thereon, we do not deem it necessary to consider it.
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 [12] changes in phraseology, subdivision 8 of section 27 of the Banking Law (Consol. Laws, chap. 2 [Laws of 1909, chap. 10], as amd. by Laws of 1910, chap. 126), was in conflict therewith, and that by virtue of the provisions of section 33 of the General Corporation Law (Gen. Laws, chap. 35 [Laws of 1890, chap. 563], as revised by Laws of 1892, chap. 687), now section 321 of the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28), said subdivision 5 of section 25 of the Banking Law must prevail. Said section 33 of the General Corporation Law provided as follows: “If in any corporate law there is or shall be any., provision in conflict with any provisions of this chapter - or of the Stock-Corporation Law, the provisions so conflicting shall prevail, and the provisions of this chapter or of the Stock Corporation Law with which it conflicts shall not apply in such a case. If in any such law there is or shall be a provision relating to a matter embraced in this chapter or in the Stock Corporation Law, but not in conflict with it, such provision in such other law shall be deemed to be in addition to the provision in this chapter or in the Stock Corporation Law relating to the same subject-matter, and both provisions shall, in such case, be applicable.” .
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[13] ant since it was issued- to him, and it does not appear that there was any agreement to redeliver it. The statute, we think, plainly relates to security taken and held, upon which the bank obtains a lien, which it may enforce in the event of a default in the payment of the indebtedness. If there were a conflict between the provisions of the Banking Law and the Stock Corporation Law it is quite clear that the provisions of the former would prevail; but in the absence of such conflict the provisions of the Stock Corporation Law are applicable. The provision of the Stock Corporation Law in question does not give, or purport to give, to the corporation issuing the stock a lien on the shares of the capital stock owned by a stockholder who is indebted to it, hut merely provides that the directors may refuse to consent to a transfer of his stock until the indebtedness is paid. It is a provision for the coercion of the payment of an indebtedness by a stockholder, to the corporation as a condition of his being able to effect a sale of the stock which will be recognized by the corporation and transferred on its books. It was, therefore, competent for the defendant to claim the benefit of said section 26, now section 51, of the Stock Corporation Law. The remaining question to be decided is whether it has effectively done so.
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.
[14] Ingraham, P. J.:
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.