Nassau Bank v. Jones

Headnote

Ultra vires.—Contract by director to make in Ms own name investment beyond power of bank—when not enforceable.

Appeal by plaintiff from a judgment at Special Term, dismissing the complaint.

The action was to hold the executors of David Jones, deceased, liable for profits alleged to have occurred from an investment in bonds of a certain railroad company, for which-said Jones agreed with the officers of the plaintiff to-subscribe, in his own name, but as agent of the Bank, and for its benefit.

The trial judge held that the transaction was not in any aspect a banking loan or within legitimate banking powers, as specified in chapter 360 Laws of 1838, page 249. Appellants claimed that the objection that the subscription for the bonds of said railway company was beyond the powers of the bank, was not open to Jones or Ms executors.

No money was paid out by plaintiff and no loss was incurred.

The court at General Term distinguished Pratt v. Short ( 79 N. Y. 437 ), in which a deposit and savings institution had discounted a note payable to the order of defendant, the corporation being authorized by law to loan its capital and funds, but not on the security of commercial paper, and it was held that, although the security taken on the discount was void, the money loaned could be recovered.

The court at General Term, further, said: “This, however, is not the position of the case at bar. Here, the effort . of the plaintiff is to enforce an illegal contract, not to recover money paid under it, which the borrower is bound in equity to repay. There is no analogy between the cases.”