Osgood v. Strauss

Headnote

This was an action brought by the plaintiffs, as receivers of the Columbian Insurance Company, upon certain promissory notes known as “ security notes,” given in the years 1860 and 1861 by defendants, payable, by their terms, seven months from date. The action was commenced in 1869; the prominent defence was the statute of limitations.

The Columbian Insurance Company was a joint stock company; but the attempt had been made to engraft upon it some of the features of a mutual company by a provision (§ 13 of its charter) which provided, in substance, that when its capital stock was subscribed for and paid in, the company, as additional security to its dealers, might receive notes for premiums in advance—such notes to be drawn to the order of the company, and made payable within twelve months from date; to be deemed, as to third parties, the absolute property of the company, and to be used for any purpose connected with its business; as between the maker and the company, to be liable merely to the extent of the premiums written upon them, and for losses and liabilities after the capital and other resources of the company shall have been

first exhausted. At maturity, the company shall protect and pay the same, upon receiving from the maker the amount due for premiums written thereon, together with a new note for the difference, the new note to he for the same time and subject to the same provisions. The notes in question were given under said section; no premiums were, in fact, ever written thereon. Held, that while the charter, in the absence of other consideration, furnished aliment to support the notes, although no risks were written thereon, it also operated to limit the liability as between the makers and the company, but that, whatever was the liability, it matured and the cause of action accrued when the notes by their terms became payable; that the principles upon which the case of Howland v. Edmonds (24 1ST. Y., 307) was decided were applicable to and decisive of this case, and that the action was barred by the statute of limitations.