p. 328to be deemed, as they were deemed, true upon the trial. The answer of the defendant alleges that “said corporation was not organized for or authorized to do the business of banking, or to receive deposits of money, but, on the contrary, was forbidden by law from so doing or receiving the same, and the said alleged deposit was void as a deposit.” And, as a further defense, he alleges “that the plaintiff ought not to have or maintain this action, because the same was not commenced within three years next after the accruing of said cause of action.” The principal question of fact submitted to the jury upon which a verdict was made to turn by the learned trial judge, was whether or' no the American Dairy Salt Company, when it acquired the money from the Onondaga Coarse Salt Association, so paid and delivered upon the assent of the plaintiff, received and held the same as “ a loan or a deposit.” Exceptions were taken to several rulings had upon the trial and to the charge as delivered, and to several refusals to charge as requested.
Andrew H. Green, for the appellant.
Kna/pjo, Nottingham dk Andrews, for the réspondent.
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 names 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 February, 1882. As soon as the corporation created the debt, the defendant, as one of its directors, became liable for the same.
p. 329In Boughton v. Otis ( 21 N. Y., 261 ), where a similar provision found in chapter 40 of the Laws of 1848, authorizing the formation of manufacturing corporations, was under examination, 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 unalterable.” Plaintiff is seeking to enforce aTiability that arises by reason of the provisions of the statute already quoted. As was said in Merchants’ 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 to 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 questipn, 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 Smiley v. Fry ( 100 N. Y., 262 ), which was an action upon an instrument in the following words: “ Due S. K. Ashton, M. D., trustee, $4,000 returnable on demand. It is understood that this sum is specially 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
p. 330opposite the amount of money for which the coi’poration 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. Nor do we regard the cir-' cumstances that the plaintiff received on different occasions partial payments upon the sum of money for which the corporation was indebted to him, as indicative of any agreement that 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 a 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 Molloy bears quite as strongly in the direction 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 familar with the distinction between a loan and a deposit. In considering the question whether it was a loan or deposit, it should be borne in mind that the receiving of' deposits is an incident of banking and of banking corporations. 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 corporations. (See sections 3 and 4 of the Revised Statutes [7th ed.], vol. 3, p. 2124; N.
Y. State Loan, and Trust Co. v.
Helmer, 77 N. Y., 64 ;
Pratt v.
Short, 79 id., 445; and my opinion in
Pratt v.
Short, 53 How., 506 ; and the opinion of Andrews, J., in the same case sustaining the decision made at Special Term, 79 N. Y., 440 ; 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
p. 331borrow 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.” (Session Laws of 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 of Civil Procedure, § 383;
Duckworth v. Roach, 81 N. Y., 49 .)
Plaintiff is not advantaged by the fact that there were several other defaults following those of 188,1 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, Sapallo, L, 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 w&s 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 The Rector, etc., v. Vanderbilt ( 98 N. Y., 175 ) a similar question arose, and Judge Danforth, speaking for the court, said: “ Neither the continuance of the default nor subsequent omissions on the part of the company to make a report couldj 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
p. 332of 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.
Pullard (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.”
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 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 occurred 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.
The judgment and order should be reversed upon the exceptions and a new trial ordered, with costs to abide the event.
Martin and Merwin, JJ., concurred.
Judgment and order reversed upon the exceptions and a new trial ordered, with costs to abide the event.