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Watertown National Bank v. Bagley

119 N.Y.S. 592 Court N.Y. App. Div. Decision date 1909-11-17 English

Delivered by SPRING, J.

Contents

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p. 592
WATERTOWN NAT. BANK v. BAGLEY et al.
(Supreme Court, Appellate Division, Fourth Department.
November 17, 1909.)

Headnote

1. Limitation of Actions (§ 15*)—Agreement Waiving Limitations—Construction. .
Defendants were directors of a corporation, and when a receiver was appointed for it were, under Stock Corporation Law (Laws 1890, p. 1072, c. 564) § 30, personally liable for the payment of the corporate debts be
*For other cases see same topic & $ number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes
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cause of failure to make the required annual report. Laws 1901, p. 966, c. -354, § 1, effective April 16, 1901, amending Stock Corporation Law, § 30, substituted a fixed penalty for that provided by Stock Corporation Law, § 30, and section 5, p. 974, provided that the act should not affect the right of any creditor against any director under existing law, if action thereon was commenced within six months, after it took effect. Plaintiff, who held overdue notes of the corporation, and had a right of action against defendants on their statutory liability, which was then still available for three months under section 5, made an agreement with them that, ih consideration of plaintiff not suing on its claim against the directors until the receivership was closed, they thereby waived the defense of such limitation, and expressly waived the statutes of limitations as to defendants’ claim against them as directors, which waiver was intended to prevent defenses ripening by lapse of time from becoming established. Plaintiff did not enforce its claim against the directors pending the receivership, which was closed about six years thereafter, and received a dividend on its debt from the receiver, and more than a year after the receivership was closed, sued defendants upon their statutory liability for the balance of its debt. Held, that the agreement waived the so-called statute of - limitations unqualifiedly, and, if valid, suspended its operation for all time as to plaintiff’s cause of action, and not merely pending the receivership.
[Ed. Note.—Eor other cases, see Limitation of Actions, Cent. Dig. §§ 62-65; Dec. Dig. § 15.*]
2. Contracts (§ 129*)—Waiver of Statute—Validity of Agreement.
The agreement, being upon an adequate consideration and being for defendants’ benefit, was not invalid on the ground that the -unqualified waiver of the limitations was void as against public policy, whether the saving clause of section 5 be considered a statute of limitations or a condition. precedent to bringing the action.
[Ed. Note.—For other cases, see Contracts, Cent. Dig. §§ 616-632; Dec. Dig. § 129.*]
3. Exemptions (§ 89*)—Waiver—Power to Waive.
The object of the exemption statute being to preserve to indigent families household articles necessary to subsistence, a waiver of the exemp-. tion as to any part of the exempted property would be invalid as against public policy.
[Ed. Note.—For other cases, see Exemptions, Cent. Dig. § 112; Dec. Dig. § 89.*]
4. Limitation of Actions (§ 14*)—Modification—Agreement of Parties.
The parties may, by a reasonable contract founded upon a good consideration, extend or shorten the time within which an action may be brought.
[Ed. Note.—For other cases, see Limitation of Actions, Cent. Dig. §§ 59-451; Dec. Dig. § 14.*]
5. Limitation of Actions (§ 1*)—Statutes of Limitation—Conditions Precedent.
Laws 1901, p. 966, c. 354, § 1, effective April 16, 1901, amending Stock Corporation Law, § 30, by substituting a fixed penalty for the failure of corporate directors to make report in place of that provided by Stock Corporation Law, § 30, and section 5, p. 974, saved any right of creditors against directors under the existing law, provided action thereon be commenced within six months after the act took effect. Held, that the six months’ time for the commencement of the action was a condition precedent to its maintenance, and not a statute of limitation.
[Ed. Note.—For other cases, see Limitation of Actions, Dec. Dig. § 1.*]
♦For other oases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes
p. 594
6. Limitation of Actions (§§ 177, 195*)—Pleading—Evidence.
If a clause In a statute, saving a cause of action accrued under a repealed statute and requiring it to be brought within a certain time, is a condition precedent to bringing the action, compliance therewith must be alleged and proved by plaintiff. ,
[Ed. Note.—For other cases, see Limitation of Actions, Cent. Dig. § 663; Dec. Dig. §§ 177, 195.*]
7. Limitation of Actions (§§ 182, 195*)—Pleading Statute—Pleading by Defendant—Proof—Necessity.
' If a clause in a statute, saving a cause of action accrued under a repealed statute and requiring it to be brought within a certain time, is a statute of limitations, it must be alleged and proved by defendant.
[Ed. Note.—For other cases, see Limitation of Actions, Cent. Dig. §§ 678,, 713; Dec. Dig. §§ 182, 195.*]
“For other cases see same topic & § numbeb in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes
Appeal from Special Term, Jefferson County.
Action-by the Watertown National Bank, of Watertown, N. Y., against George A. Bagley, impleaded with others. From a judgment for plaintiff at Special Term (62 Mise. Rep. 380, 116 N. Y. Supp. 772 ), defendant Bagley appeals.
Affirmed.
Argued before McLENNAN, P. J., and SPRING, WILLIAMS, ICRUSE, and ROBSON, JJ.
Kellogg & Reeves, for appellant.
Henry Purcell, for respondent.

The E. S. Stiles Press Company was a domestic stock corporation located and doing business in the city of Watertown until its voluntary dissolution and the appointment of a receiver upon the petition of its directors in January, 1900. The defendants Bagley, Knowlton, and one Fish were three of its directors, and Knowlton was an officer of the plaintiff, which held two promissory notes, aggregating about $4,000, against said corporation. The directors of the corporation had neglected to file the annual report for the month of January, 1899, required by section 30 of the stock corporation law and were, therefore, personally liable for the payment of all the existing debts of the corporation. Section 30 of the stock corporation law (Laws 1890, p. 1072, c. 564).

By chapter 354 of the Laws of 1901 a fixed penalty liability was -substituted for the failure to make and file the report prescribed in section 30, instead of the payment of all the outstanding debts of the corporation by the delinquent director. Section 30, c. 354, p. 966, Laws 1901. Section 5, p. 974, of this amending act, which became a law April 16th of that year, provided as follows:

“This act shall take effect immediately, but shall not affect any action or • proceeding pending in any court at the time it takes effect or any right of any creditor of any corporation or of any stockholder against any director under existing law, provided action thereon be commenced within six months after this act takes effect, except as in this act otherwise'provided.”

On the 23d of July, 1901, the plaintiff, as a creditor of the Stiles Company, apparently had a cause of action, saved by the amending statute quoted, against the defendants by reason of their failure to

p. 595
make and file the annual report referred to, and that cause of action would be available to it for nearly three months. In that situation, on the day named, the directors, evidently desiring the corporation, through the receivership, to pay its notes as far as possible before enforcing the statutory cause of action against them, entered into an agreement with the bank. The agreement recited the outstanding claim against the Stiles Company, and that the bank requested the waiver by the directors of all “statutes of limitation” affecting their liability, and it then proceeds as follows:
“Now, therefore, in consideration of the said Watertown National Bank holding said claim until the receivership of the E. S. Stiles Press Company is closed without taking any action thereon, we, the undersigned, hereby waive any defense by way of said statute of limitations, * * * and also expressly hereby waive the statute of limitations as to the claim of said Watertown National Bank of Watertown, N. Y., against the B. S. Stiles Press Company, or any claim of said Watertown National Bank against us as directors. This waiver shall not be construed as a waiver of any defense to the said claim which has at this date become established, and is intended» to prevent defenses which are now ripening by lapse of time from becoming established.”

The bank withheld the' enforcement of its cause of action pending the receivership, which was closed up March 23, 1907, and received a dividend from the receiver; and on the 14th of September, 1908, 18 months later, commenced this action against two of the directors to recover the full sum unpaid on the notes, by reason of their failure to make and file the annual report provided for in section 30 of the stock corporation law.

It is the claim of the appellant, among other things, that the saving clause in section 5, c. 354, p. 974, of the Laws of 1901, and already quoted, is a statute of limitations, and a waiver off its operation for all time would be counter to public policy,' and that it was the intention of the parties merely to suspend the operation of the statute during the receivership, and when that relation was formally ended the statute commenced running again, and effectually barred the cause of action before suit was commenced.

The defendants were asking a favor of the bank. They desired the commencement of any action to be deferred until the receivership ended. In this way whatever payment was made on the notes by the receiver would, to that extent, reduce their liability. The bank was willing to yield to the wishes of these directors, by getting whatever was possible from the primary debtor before resorting to the statutory action against the directors. It insisted, however, as a c'onsideration for the forbearance, which in all likelihood would be extended for a considerable period of time, that the directors should waive any defense of the statute of limitations. The cause of action was saved only for six months, and the bank evidently intended by the agreement to make certain that this limitation would not be in the way of recovering of the directors.

There is nothing in the agreement to indicate that the operation of the statute was to be suspended pending the receivership. It is not so expressed, and much need be read into it to permit that construction. The waiver is unqualified, and there is no suggestion of a revival of

p. 596
the running of the limitation after the discharge of the receiver. The appellant was not an indorser on the notes, and the only defenses which it was "intended to prevent * * * from becoming established * * * by lapse of time” were to the action inuring to the plaintiff by reason of violations of statutes. The parties, as the findings of fact show, knew precisely to what the waiver applied. If it had been expected to suspend the running of the statute in question for a definite time, the agreement would have so provided.

It is urged that a waiver of the statute of limitations for all time is violative of public policy, and many citations are made which, it is claimed, súpport that proposition. In Shapley v. Abbott, 42 N. Y. 443 , 1 Am. Rep. 548 , relied upon by the appellant’s counsel, the waiver was by parol and without consideration, and the court held it was not sufficient. Judge Earl, in his opinion, in discussing the question of estoppel, did use expressions which, separated from the facts, are favorable to the contention of the appellant; and some of the text-books so hold. Probably an agreement, made at the inception of the liability, to the effect that the statute of limitations will never be interposed as a defense, would be flying in the face of the. statute. We are not upholding the validity of an agreement of that character. In this case the statutory liability of the defendant would soon be cut off by the lapse of time provided for in the saving clause. The directors wished the plaintiff to forbear commencing suit to enforce this liability. The plaintiff consented to this request upon the explicit agreement of the directors to waive the operation of this especial statute of limitations. The agreement was founded on an adequate consideration, was for the benefit of the appellant, and the plaintiff has performed; and performance of the agreement by the' party benefited does not offend against public policy.

We are not holding that every unqualified waiver of any statute of limitations for all time can be upheld. We simply decide that the present agreement is valid. The waiver of the statute of limitations, at least for a definite time, has frequently been upheld. Matthews v. Am. Cen. Ins. Co., 9 App. Div. 339 , 41 N. Y. Supp. 304 ; Id., 154 N. Y. 449 , 48 N. E. 751 , 39 L. R. A. 433 , 61 Am. St. Rep. 627 ; Utica Ins. Co. v. Bloodgood, 4 Wend. 652 . Woods v. Supervisors, etc., 136 N. Y. 403 , 32 N. E. 1011 ; Wilkinson v. F. Nat. F. Ins. Co., 72 N. Y. 499 , 28 Am. Rep. 166 . If a waiver for an indefinite time is contrary to public policy, then a waiver for six' months, or five years, or any other specific time, should be within the like condemnation. In either case, the effect of the statute applicable is modified from its terms, either by extending or limiting it. The waiver of any right is generally recognized to be the personal privilege of the individual. People ex rel. McLaughlin v. Bd. Police Com’rs, etc., 174 N. Y. 450 , 456, 67 N. E. 78 , 95 Am. St. Rep. 596 ; Embury et al. v. Conner, 3 N. Y. 511 , 53 Am. Dec. 325 ; Matter of Application of Cooper, etc., 93 N. Y. 507 .

There are cases where an attempted waiver of the exemption statutes for the benefit of a householder has been held to offend against public policy. Kneettle v. Newcomb et al., 22 N. Y. 249 , 78 Am. Dec.

p. 597
186 . The object of the exemption statute is to preserve to the family of the householder the furniture and other enumerated articles necessary for their subsistence. To permit families in straitened circumstances to be deprived of property intended by the Legislature to be secured for their dire needs, through the injudicious acts of the head of the household, would be contrary to public policy. The protection of the home is essential for the welfare of the state. A waiver of the exemption as to any part, of this property would also be against public policy. No such rule obtains in regard to any statute of limitations. So it has been suggested that an agreement whereby the rights of the vendee in pursuance of section 116 of the lien law (Laws 1897, p. 541, c. 418, as amended by Laws 1900, p. 1624, c. 762) may be lost' to him is not -consistent with public policy. Roach v. Curtis, 191 N. Y. 387 , 391, 84 N. E. 283 . This law was also enacted for the protection of poor people against avaricious vendors of household furniture sold on the installment plan, and its salutary purpose ought not to be frittered away by agreements of waiver.

A waiver of the statute of limitations cannot be held invalid upon the hypothesis that the protection of poor people requires such a holding. The essence of a statute limiting the time for the commencement of an action is that there should be a restriction upon the time when a cause of action may be asserted. The period is fixed arbitrarily by the Legislature. The parties may extend or shorten the period, if the contract is founded upon a good consideration and is reasonable.

It was held by the learned trial judge that the six months’ time for the commencement of the action is a condition precedent to its maintenance. While there is some doubt as to the correctness of this position, I think the weight of authority sustains it. The right to maintain the action at all is abrogated, unless in certain contingencies it is commenced within six months. This may be a limitation upon the cause of action or liability created. Rowell v. Janvrin, 151 N. Y. 60 , 45 N. E. 398 ; Colell v. D., L. & W. R. R. Co., 80 App. Div. 342 , 80 N. Y. Supp. 675 ; Winter v. Niagara Falls, 190 N. Y. 198 , 82 N. E. 1101 , 123 Am. St. Rep. 540 ; Johnson v. Phcenix Bridge Co., 118 N. Y. Supp. 88 .

It does not seem to me that the distinction in the present case is very material. If the saving clause is a condition precedent, it must be alleged and proved by the plaintiff. If a statute of limitations, it must be alleged and proved by the defendants. In either case, it is for their benefit. The parties made their agreement with particular reference to this limiting provision. Whatever term may be applied to it, or by what mode of procedure its purport may be rendered effective, is not so very significant. If it is contrary to public policy to destroy its efficiency in one case, that rule should obtain with like force in the other.

The judgment should be affirmed, with costs.

Judgment affirmed, with costs. All concur. •

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