Chapman v. Comstock

Hardin, P. J. Under chapter 611 of the Laws of 1875, the American Dairy Salt Company, Limited, was organized. In the eighteenth section it is provided that “every such corporation shall annually, within twenty days after the first day of January, make a report, which shall state the amount of capital, and the proportion actually paid in, the amount, and, in general terms, the nature of its existing assets and debts, and the name of its then stockholders, and the dividends, if any, declared since the last report. * * * And, if any such corporation shall fail so to do, all the directors thereof shall be jointly and severally liable for all the debts of the corporation then existing, and for all that shall be contracted before such report shall be made.” There was a failure to make a report according to the provisions of the section in January, 1882. The defendant was then a trustee of the corporation. The corporation became indebted to the plaintiff on the 11th of 922 February, 1882. As soon as the corporation created the debt, the defendant, as one of its directors, became liable for the same. In Boughton v. Otis, 21 N. Y. 261, a similar provision, found in chapter 40 of the Laws of 1848, authorizing the formation of manufacturing corporations, and a similar section, is found. In the course of the opinion delivered in that Case, it was said: “The liability, when it has once attached, and upon whomsoever it has attached, remains fixed and unaltered.” Plaintiff is seeking to enforce a liability that arises by reason of the provisions of the statute already quoted. As was said in Bank v. Bliss, 35 N. Y. 416. “The action depends wholly upon the statute. There never was any such remedy, or cause of action,-in whole or in part, at common law.” In dealing with the liability of directors similarly situated in Jones v. Barlow, 62 N. Y. 202, the court said: “They are only liable for an action for debts actually due, and for which a present right of action exists against the corporation.” And it was further held in that case that “the short statute of limitations only begins to run from the time a cause of action accrues, not from the time of default in making the report. ” That decision was made while section 92 of the Code of Procedure was in force. The rule remains the same under section 383 of the Code of Civil Procedure. It becomes important, therefore, to inquire how and when the “debt” that the American Dairy Salt Company, Limited, contracted by and with the plaintiff, became due and payable. In considering this question, -it may be observed that no written instrument was delivered to the plaintiff evidencing an indebtedness in clear and exact terms. This case is therefore unlike Smilley v. Fry, 100 N. Y. 262, 3 N. E. Rep. 186, which was an action upon an instrument in the following words: “Due S. K. Ashton, M. D., trustee, four thousand dollars, returnable on demand. It is understood this sum is especially deposited with us, and is distinct from the other transactions with said Ashton. ” In considering that instrument, the court held that it was in the nature of a certificate of deposit, and therefore no cause of action arose thereon until a demand was made for the sum deposited. We fail to find in the words “special account,” appearing in the pass-book which was delivered to the plaintiff, when read in the light of the oral testimony given upon the trial, any explicit agreement for forbearance. The circumstance that the word “cash” appears opposite the amount of money for which the corporation became indebted is entitled to some consideration in determining ■the question of whether or not there was any agreement for time, but it has , no controlling force. After a careful perusal of the evidence given upon the trial, we are not able to say that it contains any express, explicit agreement obligating the plaintiff to allow his moneys to-remain for any definite period of time. It is all consistent with the idea that if he did leave his money he would receive certain specified interest thereon;.if he did not leave it, he could, at his own pleasure, obtain a recall of the same. Flor do we regard the circumstance that the plaintiff received on different occasions partial payments upon the sum of money which the corporation was indebted tb him as indicative of any agreement for any length of time his money should be in the possession of the corporation. We find nothing in the evidence which would necessarily defeat an action had such an one been brought the next day after the money was received by-the corporation from the previous debtor. But it is argued by the learned counsel for the respondent that the debtor corporation received the moneys on deposit, and not as a loan. It may be observed that the testimony of Malloy bears quite as strongly in the diree- . tian of establishing a loan as it does in the direction of establishing a deposit. However, it is quite fair, in considering his evidence, to bear in mind that he said, while upon the stand, that he was not familiar with the distinction between a loan and-a deposit. In considering the question whether it was a loan or a deposit, it should be borne in mind that the receiving of deposits is an incident of banking and of banking corporations. 923 The American Dairy Salt Company, Limited, was not authorized to carry on a banking business; indeed, it fell within the general provisions of the Statute which prohibited that kind of business to such corporation's. See sections 3, 4, Rev. St. (7th Ed.) p. 2124; Trust Co. v. Helmer, 77 N. Y. 64; Pratt v. Short, 79 N. Y. 445; and my opinion in Pratt v. Short, 53 How. Pr. 506; and the opinion of Andrews, J., in the same case, sustaining the decision made at special term, (79 N. Y. 440, and Id. 449.) So it-may be observed in considering the question that the American Dairy Salt Company, Limited, was, by the thirteenth section of chapter 611 of the Laws of 1875,- expressly authorized to borrow money. That, section contains the following words: “It shall be lawful for all such corporations to borrow money for the legitimate purposes of such corporation.” Sess. Laws 1875, p. 758. It is more reasonable to suppose that the corporation kept within its authorized powers than to believe that it transgressed the provisions of the prohibitive laws to which we have alluded. These views lead to the conclusion that the moment the corporation created the debt the defendant, as one of its directors, became liable to pay the same. He had incurred the statutory penalty, and he- remained liable during the next three years ensuing. At the end of the three years, the short statute of limitations became a bar to the plaintiff’s right of recovery. Code Civil Proc. § 383; Duckworth v. Rach, 81 N. Y. 49. Plaintiff is not advantaged by the fact that there were several other defaults following those of 1881 and 1882 in making the annual reports. The subsequent defaults, after the liability was completed, did not aid the plaintiff. This question is put at rest by Losee v. Bullard, 79 N. Y. 406. In that case Rapallo, J., said: “The appellants claim that the failure to file the certificate in each year after 1868 created a new liability on the part of the defendant, and that consequently the default in 1873, and the subsequent years, can be resorted to for the purpose of maintaining this action and avoiding the effect of the statute of limitations. We think this position untenable, for two reasons. In the first place the statute requires, that the action be brought within three years from the time the cause of action accrued. The action was for a statutory penalty. This penalty, if it ever was incurred, was completely incurred in 1868, and the testator of the plaintiffs could then have brought his action therefor. We do not think that the continuance of the default in successive years had the effect of renewing the liability of the respondent, as would a new promise or a payment on account, in the case of a liability founded on contract.” In Rector, etc., v. Vanderbilt, 98 N. Y. 175, a similar question arose, and Judge Danforth, speaking for the court, said: “Heither the continuance of the default nor subsequent omissions on the part of the company to make a report could, as to the debt in question, either renew the old liability or create a new right of action. The statute operates upon the remedy, and the omission of the creditor to pursue it cannot stop its running. The liability of the trustee was imposed by statute, and the benefit and suit therefor are limited to the creditor as the one aggrieved. In such a case, when the statute of limitations begins to run, nothing subsequent will stop it. But the question now before us is directly within the principle of the decision of this court in Losee v. Bullard, supra, and permits no further discussion. It can make no difference that the company ■in this case continued to transact business. The plaintiffs were not required to sue the trustee, but could not, by omitting to do so, prevent the application of the statute. ” 2. If it be assumed that the transaction amounted to a deposit on the part of the plaintiff with the American Dairy Salt Company, Limited, and that such deposit was a violation of the restraining acts, and that the corporation became indebted for money had and-received, and liable to an action therefor, in accordance with the doctrine of Pratt v. Short, supra, it may be observed that the corporation, under such circumstances, had no valid agreement for 924 time entitling it to set up a defense. It may be further observed that the defendant, if he became, by reason of the transaction, liable under the statute as for a debt of the corporation, or for the money had and received by the corporation, that liability accrued more than three years preceding the commencement of this action, and was therefore barred. The foregoing views lead to the conclusion (1) that the verdict ought to have been directed in favor of the defendant, or a nonsuit granted; (2) that the verdict is against the evidence; (3) that the several exceptions taken to the refusals to charge present error. Judgment and order reversed upon the exceptions, and anew trial ordered, with costs to abide the event. All concur.