On appeal from the Hudson County Circuit Court.
For the plaintiff-respondent, John H. Sheridan.
For the defendants-appellants, Sylvan S. Cohen.
The opinion of the court was delivered by
CASE, J. The appeal is from a judgment in the Hudson County Circuit Court entered upon a verdict in favor of the plaintiff directed by Judge Brown. Defendants appeal alleging error in the direction.
The Steneck Trust Company, a corporation, was organized under the provisions of an act entitled "An act concerning trust companies (Revision of 1899)," 4 Comp. Stat., p. 5654. After the transaction sued upon, but before the suit was begun, the commissioner of banking and insurance had, under the authority of that act, taken possession of the property and business of the company. The suit is for the collection of a promissory note given by the defendants to the company. It is admitted that the plaintiff, if entitled to anything, is entitled to the amount of the judgment, namely, $5,185.45.
It is said on behalf of the appellants, however, that the note was given for the purchase price of certain shares of capital stock of the plaintiff company, that those shares of stock were held by the bank as collateral security for the payment of the note and that the jury should have been permitted to determine the fact thereon because the transaction, if found to be as alleged, was in violation of section 18 of the cited statute, which provides:
"No trust company shall make any loan 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 a debt previously contracted in good faith; and stock so purchased or acquired shall within one year from the time of its purchase be sold or disposed of at public or private sale; provided, that nothing in this section contained shall apply to any loan made before the passage of this act."
It is further contended that if the arrangement was, in effect, the making of a loan by the trust company upon the security of its own shares, the whole transaction, including the note sued upon, was ipso facto void.
The trial judge considered, first, that the stock was simply being withheld from delivery until paid for and, second, that if there had been a violation of the statute such violation was to be noticed only by the state and did not constitute a defense to an action on the note.
The evidence would support a finding that the trust company did make sale of certain of its own shares to the defendant, John Minervini, and that the note sued upon was in payment therefor; that the certificate for the shares was duly executed; that an instrument, in form and by specific wording a pledge "as collateral security," was executed and delivered by John Minervini to the trust company and was held by the latter together with, and with respect to, the certificate for the shares of stock; and that an officer of the bank stated to Minervini and another ...