Opinion
December 23, 1907.
Richards Mott Cahoone, for the appellant.
W.B. Symmes, Jr., for the respondent.
This is an action against directors of a membership corporation upon an alleged debt of the corporation contracted while they were directors and payable within one year or less from the date it was contracted. (Mem. Corp. Law [Laws of 1895 chap. 559], § 11, as amd. by Laws of 1899, chap. 292.) Issue was joined, whereupon the plaintiff demurred to the separate defense as insufficient in law upon the face thereof. An interlocutory judgment overruling the demurrer was entered. At the trial the defendant moved for judgment on the pleadings upon the ground, among others, that neither the opinion handed down upon the decision of the demurrer ( 45 Misc. Rep. 215), nor the decision, nor the interlocutory judgment gave the plaintiff leave to withdraw his demurrer, and that it was still in the records. The court granted the motion and the plaintiff appeals from the judgment thereupon entered bringing up for review the interlocutory judgment.
I think that the court was right in its disposition of the case. ( National Contracting Co. v. Hudson River W.P. Co., 110 App. Div. 133.) But the interlocutory judgment is now under review. The plaintiff sues for the use and occupation of a building by the Woman's Aid Nursery of Brooklyn from August 1, 1902, to June 11, 1903, at the rate of $45 monthly, the agreed rental. The defendant, in addition to general denials, pleads in effect as a separate and distinct defense that the Woman's Aid Nursery made a lease with the plaintiff on or about August 31, 1899, which covered the period in question; that the indebtedness, if any, alleged in the complaint is for installments of rent due from the said corporation under said lease, and that it is not a debt payable within one year or less from the date it was contracted. The opinion of the learned court handed down upon the decision of the demurrer indicates that it took this view. The learned court said: "And rent which by the terms of such lease or agreement was to be paid or to become due three years thereafter was not such a liability within the meaning of the Membership Corporations Law as to make the directors liable therefor. ( Hardman v. Sage, 124 N.Y. 25. ) This liability for the rent due in August, 1902, and thereafter, was incurred in August of 1899, by the written lease and not by the use and occupation of the corporation." I think that the learned court is in error. ( Sanford v. Rhoads, 113 App. Div. 782, 784; Providence Steam Co. v. Connell, 86 Hun, 319.) In Sanford v. Rhoads ( supra) the action was upon two written leases made in 1892 and 1894 for twenty and ten years, respectively, and assigned to the corporation in 1896. This court held, per MILLER, J.: "No debt was contracted when the leases were assigned to the defendants' corporation. A contingent liability was incurred which only ripened into a debt as the premises were used, or, the rent being payable quarterly in advance, as the rent of each quarter fell due." Garrison v. Howe ( 17 N.Y. 458); Gold v. Clyne (134 id. 262) and Whitney Arms Co. v. Barlow (68 id. 34) were cited. In Providence Steam Co. v. Connell ( supra) the court said: "In Vernon v. Palmer (16 J. S. 231) it is said that the true doctrine is that a debt is contracted when, in consideration of value received by the corporation, a payment is to be made, no matter whether at once or at a future period." (See, also, Carr v. Risher, 50 Hun, 148.) Hardman v. Sage ( 124 N.Y. 25), cited by the learned court, is not to the contrary. That case held that the year within which an action must be begun began to run from the day that the debt became due, and that when a note is given in extension, which is sued within a year of its maturity, but more than a year after the debt became due, the stockholders cannot be charged. The principle is that the note is but a continued evidence of the first indebtedness and that its operation is to extend the time of payment until it becomes due, but the original demand is not extinguished and the liability of a stockholder cannot be thus extended or renewed. ( Parrott v. Colby, 6 Hun, 55; affd., 71 N.Y. 597; Jagger Iron Co. v. Walker, 76 N.Y. 521, cited in Hardman v. Sage, supra.)
The new matter must be regarded as pleaded as a complete defense. ( Mott v. De Nisco, 106 App. Div. 154.) The interlocutory judgment must be reversed and the demurrer sustained, with leave to the defendant to plead over. The final judgment falls within the interlocutory judgment. ( Carter v. De Camp, 40 Hun, 258.) I do not express any opinion contra to the proposition of law of the defendant that the Woman's Aid Nursery could adopt this lease.
HOOKER, GAYNOR, RICH and MILLER, JJ., concurred.
Interlocutory judgment of the County Court of Kings county reversed, with costs, and demurrer sustained, with costs, with leave to the defendant to plead over upon payment.