Yorkville Business Protective Corp. v. Friedman , 256 N.Y.S. 552 ( 1932 )

Sulzberger, J.

Plaintiff is a business corporation organized under article 2 of the Stock Corporation Law (as added by Laws of 1924, chap. 441). The action is on an unpaid note against the maker and indorser. The maker is a stockholder of the plaintiff. The substance of the transaction was a loan by the corporation to one of its stockholders. Payment is resisted on the ground that in engaging in this transaction plaintiff violated section 140 of the Banking Law, and, hence, the note is void.

The conscience of the court is not stirred by this defense. Indeed, as was stated in Phelan v. Granite Bituminous Paving Co. (227 Mo. 666, 711, per Lamm, J.): “ It is a sad bird that befouls its own nest.” As I read the precedents, I do not think that I am constrained to hold that the consummated transaction of the loaning of money by a corporation to its own stockholders, who received the benefit therefrom, comes within the purview of the prohibition contained in section 140 of the Banking Law. (Meserole Securities Co. v. Cosman, 253 N. Y. 130; Businessmen’s Mortgage & Credit Corp. v. Dobjinsky, 135 Misc. 628.)

Judgment for the plaintiff as claimed in the complaint.