In Knox v. Baldwin, supra, Judge DANFORTH says: "A director cannot be permitted, either alone or with his associates, to pursue a remedy which, if enforced, would enable him to profit by his own wrong or negligence."Summary of this case from Schout v. Conkey Ave. Sav. Loan Assn
Submitted March 17, 1880
Decided April 6, 1880
C.W. White, for appellants.
A.W. Tenney, for respondent.
There are no merits in this appeal. "The Brooklyn Gas Savings Company," was organized in March, 1868. On the 5th of June, 1868, it bought of Stephen Van Dresar, Isaac Knox, and William B. Williams the right to use a certain patent for generating gas, and in payment therefor issued to them $250,000 of the capital stock of the company and gave its promise to pay to them $3,000 in money within thirty days. At that time the defendant was one of the trustees, and the said Stephen Van Dresar was on that day made a trustee of the company "and neither has either resigned, nor his place been filled by a successor." Van Dresar, Knox, and Williams sued the company upon the above promise, and on the 11th of May, 1869 recovered judgment against it for the full sum and interest. An execution, issued for its enforcement, was returned unsatisfied December 14, 1869. In July, 1876 Van Dresar transferred his interest in the judgment to Knox and Williams, and they on the 27th of August, 1876, commenced this action, seeking, first to charge the defendant as a trustee for the omission of the company to make the report called for by section twelve of the manufacturing act (Laws of 1848, chap. 40), and second, as a stockholder, on the ground that the capital stock was not paid up or a certificate filed by the trustees as required by section ten. In view of the fact that Van Dresar, one of the creditors, and in whose place the plaintiffs stand, was equally with the defendant charged with the duty of calling in the capital stock, and filing the certificate of its payment, and also of seeing to it, that the company made its annual report, and was therefore chargeable in both instances with the defaults on which this action depends, it would seem difficult upon any theory to maintain it. That Van Dresar could not, either alone, or with his associates, pursue a remedy which if enforced would enable him to profit by his own wrong or negligence, is too plain for argument. ( Briggs v. Esterly, 62 Barb., 51; Bronson v. Dimock, 4 Hun, 614.) It is equally clear that he could confer by assignment no better right than he himself had. It is also conclusive against the plaintiff's right to maintain an action for this cause, that the provision contained in section twelve of the act of 1848, requiring a report in January of each year after the organization of the company, was repealed in 1875, (Session Laws of 1875, chap. 510), and no report was after that time required until the company had been organized at least one year. The action was commenced after this law took effect, and the plaintiffs are therefore without remedy on the statute as it stood in 1869. The saving clause relates only to actions pending at the time of its enactment.
But if these objections could be overcome, it is apparent that the action was not commenced in time. The report called for by section twelve as it stood, should have been made in January, 1869, and on or prior to the 20th day of that month. On that day, therefore, if at all, a cause of action under this section accrued against the defendant as trustee. ( Miller v. White, 50 N.Y., 137.) And as this action was not commenced, within three years thereafter the statute of limitations was properly pleaded, and furnishes a complete defense. (Code of Procedure, § 92, sub. 2; The Merchants' Bank of New Haven v. Bliss, 35 N.Y., 412; Wiles v. Suydam, 64 id., 173.) Next, in respect to the cause of action against the defendant as a stockholder: whether it accrued at the expiration of the two years within which by section ten ( supra), the whole capital stock was to be paid in ( Phillips v. Therasson, 11 Hun, 141), or upon the recovery of judgment, or after judgment and execution, § 24 of the act aforesaid, it cannot in this case be material to determine. No action can be maintained against a stockholder for a liability under this section, after the expiration of six years from the time it is incurred, and more than that time expired since the last of the events above referred to, and before the action was commenced. The statute of limitations, therefore, presents a bar to this cause of action also. ( Wiles v. Suydam, supra.) I have not overlooked the contention of the learned counsel for the appellants, that this statute has no application, and that the stockholder's liability can be discharged only in the mode pointed out by section ten. The last assertion may be conceded. It is the remedy on which the statute of limitations operates, declaring that no action shall be commenced except within the time specified. The stockholder remains liable, but only to a pursuer against whose claim, the statute has not run.
The judgment should be affirmed, with costs.