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People v. Knapp

Supreme Court of New York, Appellate Division

November 29, 1911

THE PEOPLE OF THE STATE OF NEW YORK, Appellant,
v.
CHARLES J. KNAPP, Respondent.

Page 437

[Copyrighted Material Omitted]

Page 438

APPEAL by the plaintiff, The People of the State of New York, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Broome on the 1st day of April, 1911, allowing the defendant's demurrer to an indictment.

COUNSEL

Frederick J. Meagher, for the appellant.

Mangan & Mangan, for the respondent.

HOUGHTON, J.:

The defendant was copartner with three other individuals carrying on the business of private banking under the firm name of Knapp Brothers, and was also one of the directors of the Binghamton Trust Company, which at the time of the transactions in question had a capital of $300,000 and a surplus of like amount.

The indictment charges the defendant with having violated section 297 of the Penal Law, which prescribes that every director of a moneyed corporation who 'wilfully does any act as such director which is expressly forbidden by law, or wilfully omits to perform any duty imposed upon him as such director by law, is guilty of a misdemeanor if no other punishment is prescribed therefor by law.'

The indictment contains four counts. The first count charges the defendant with the crime of violating section 297 of the Penal Law by willfully omitting to diligently and honestly

Page 439

administer the affairs of the Binghamton Trust Company, which was a duty imposed by law upon him as a director thereof. The acts charged constituting the crime are that the defendant failed, omitted, neglected and refused to honestly and diligently administer the affairs of such trust company in that he did on the 3d day of April, 1909, order, direct, permit, advise, counsel and procure such trust company to lend without sufficient collateral $2,500 to the copartnership of Knapp Brothers at a time when such copartnership already owed such trust company more than $350,000, and while such copartnership was insolvent and unable to meet its obligations, all of which the defendant well knew.

The second count charges the defendant with violating the same section in willfully omitting to perform the duty imposed upon him by law as a director of the trust company by willingly permitting it to violate the provisions of section 27 of the Banking Law (now Consol. Laws, chap. 2; Laws of 1909, chap. 10), in knowingly permitting the liability of the copartnership of Knapp Brothers to exceed forty per cent of the capital stock and surplus of the Binghamton Trust Company, in that said trust company did lend to said copartnership, on the 3d day of April, 1909, the same $2,500 mentioned in the first count, while such copartnership was already indebted to such trust company for moneys loaned in an amount exceeding $240,000 (forty per cent of capital and surplus), and that he, the 'said Charles J. Knapp, then and there being such director, did then and there wilfully, knowingly and unlawfully order, direct, permit, advise, counsel and procure' the said trust company to make such loan.

The third count charges the defendant with violating the same section in willfully omitting to perform a duty imposed upon him by law in willfully permitting the trust company to violate the provisions of subdivision 11 of section 186 of the Banking Law, by permitting it to make the same loan to defendant as director, by loaning such money to the copartnership of which the defendant was a member, without the consent of a majority of the board of directors of such trust company, all of which was done through the direction, permission, advice and procurement of the defendant.

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The fourth count charges the defendant with violating the same section of the Penal Law by transgressing the same subdivision of section 186 of the Banking Law, in practically the language of the third count, and with the same allegation as to what the defendant did, in that the defendant willfully permitted the trust company to make a loan exceeding in amount one-tenth of its capital stock, to the defendant, a director thereof, by loaning said $2,500 to such copartnership, making the aggregate amount so loaned more than $30,000.

The last three counts of the indictment close with the allegation that it was the duty of the defendant as director of the Binghamton Trust Company not to willingly permit such trust company to violate any of the provisions of law applicable to it, and that the defendant willfully and knowingly omitted to perform his duty in that regard, and that such willful omission is one for which no punishment is prescribed by law other than is prescribed by section 297 of the Penal Law.

On arraignment the defendant demurred to all the counts of the indictment and to the entire indictment on the ground that the acts constituting the crime were not sufficiently stated, and that none of the counts stated facts constituting a crime, and that if they did more than one crime was improperly stated therein. The demurrer was sustained, and the People appeal from the judgment entered thereon.

The first count is based upon the theory that it being the duty of the defendant upon assuming the office of director of the trust company to take an oath to diligently and honestly administer the affairs of such trust company and not to knowingly violate or willfully permit to be violated any of the provisions of law applicable to such company, a willful omission to honestly and diligently discharge such duties by not preventing the loan of the funds of the company without sufficient security, to an insolvent copartnership was a violation of duty imposed by law upon the defendant which made him amenable to the provisions of section 297 of the Penal Law. In other words, the defendant is charged with the commission of a crime because he willfully omitted to do what he said he would do when he took his oath of office as director. This same theory was evidently in the mind of the pleader in the

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drafting of the other counts of the indictment although the language used is quite different.

It was a duty imposed by law upon the defendant to take an oath of office as director in a prescribed form. That duty he performed. While he swore that he would honestly and diligently administer the affairs of the trust company and not knowingly violate or willingly permit to be violated any of the provisions of law applicable to such company, yet in order to charge him with a crime under section 297 of the Penal Law it would be necessary to ascertain, not whether he had violated his oath but whether he had done any act as such director expressly forbidden by law, or willfully omitted to perform any duty imposed upon him by law. The language employed by section 297 manifestly refers to any act forbidden or imposed by statute, and does not include those acts which might impose civil liability upon a director of a moneyed corporation. The expressions 'required by law,' 'allowed by law,' 'limited by law' and the like, employed in a statute, refer to statutory law. ( Brinckerhoff v. Bostwick,99 N.Y. 190.) If the ...


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