Opinion
April Term, 1896.
Lyman W. Redington, for the plaintiff.
George Putnam Smith, for the defendant.
We do not see how there could be any recovery upon the evidence given on the trial for the $1,500 loaned and advanced by the plaintiff to Baylies, who was acting as receiver. The order appointing him receiver was null and void, and had been so declared by the court. He was not, therefore, a lawful receiver when the loan and advance was made. He was simply a temporary custodian appointed without authority of law; he had no authority to bind the estate in any way by the borrowing of money or the issue of certificates. Moreover, it was not proven at the trial that there was any order of the court authorizing or directing the borrowing of money or the issue of certificates therefor. Upon this state of facts the defendant could not be held liable for the $1,500 sought to be recovered as for money loaned and advanced.
The notes were concededly made or indorsed by the corporation before its dissolution. Some of the indorsed notes were duly protested, and, as to the others, there was a waiver signed by Baylies, both as secretary of the corporation and as its receiver. While he had no authority to bind the corporation as receiver, yet the corporation had not been dissolved. Baylies was its secretary, and we think he had power and authority to make the waiver, and that such waiver was sufficient to bind the corporation and charge it as indorser upon the notes, and that no protest of the notes thereafter maturing was necessary. The waiver was not a release or abandonment of a substantial right or interest of the company. It was the waiver of a technical right, which was practically formal, and really saved the company the small amount of protest fees; and, further, when the waiver was made, the company being in the hands of a receiver, it was well known that the notes were not going to be paid, and, therefore, the notice of protest would be of no value in view of the situation.
The only defense to these notes, if any, is the Statute of Limitations. This action was not commenced until more than six years had elapsed after the maturity of the notes, and it is, therefore, insisted, in behalf of the defendant, that the Statute of Limitations is a complete defense to the action so far as the notes are concerned. The present receiver was appointed February 29, 1888, and we assume that the corporation was dissolved at the same time. Some of the notes had then matured, some had not. The Statute of Limitations had then been running but a few months at most as to any of the notes. As to some of them it had not commenced to run at all. There has never been any injunction issued by the court restraining the commencement of an action against the corporation or its receiver to recover any debts owing by the corporation. No action could have been brought against the corporation itself after its dissolution. An action could at any time have been commenced against the receiver, as plaintiff has finally done now. It would have been necessary, however, to obtain leave of the court to bring an action against the receiver, as plaintiff did before commencing this action.
It is said, however, in behalf of the plaintiff that upon the dissolution of the corporation, and the appointment of a receiver, the Statute of Limitations ceased to run upon these notes until the rejection of the plaintiff's claim thereon, presented to the receiver and the refusal by him to allow the same or to pay a dividend to plaintiff, which was certainly as late as 1891, and within six years prior to the commencement of the action. This contention is based upon the claim that the receiver was a trustee for the benefit of the creditors of the estate and that the Statute of Limitations did not run in his favor against the creditors, his cestui que trusts, until the rejection of and the refusal to pay these claims. In Kirkpatrick v. McElroy ( 41 N.J. Eq. 555) it is said by DEPUE, J.: "As a general rule the mere appointment of a receiver to take charge of property in dispute will not suspend the operation of the Statute (of Limitations) * * * nor will it interrupt the possession of a stranger so as to prevent the statute conferring title on him or suspend the running of the statute against a stranger. * * * But where the receiver is appointed to take charge of an estate for the purpose of administering it, as for instance the settlement of the affairs of a partnership and the payment of firm debts, the suit being substantially for the benefit of all the creditors, in analogy with an ordinary creditor's bill, the appointment of a receiver with such powers will suspend the running of the statute, * * * and the lapse of time before proceeding against the receiver in the court by which he was appointed will be regarded only on the question whether the creditor has been guilty of laches in delaying the prosecution of his demand."
In Von Sachs v. Kretz et al. ( 72 N.Y. 548, 556), ANDREWS, J., said: "The assignee of a bankrupt stands in a position of trustee for his creditors, and the Statute (of Limitations) did not run against their claims against the estate of the bankrupt not barred at the time of the adjudication." (Citing Parker v. Sanborn, 7 Gray, 191; Ex parte Ross, 2 Glyn Jameson, 330; Minot v. Thacher, 7 Metc. 348.)
In Parker v. Sanborn ( supra) (a Massachusetts case) METCALF, J., said: "After the property of an insolvent debtor has been assigned under the insolvent laws and thus sequestered and placed in the custody of the law in trust for his creditors, the Statute of Limitations does not run against their claims upon his estate in the hands of his assignee. * * * The assignee in bringing a suit upon a demand which was due to the insolvent before the commencement of proceedings in insolvency, represents the estate, and in such suit all claims of the defendant may be set off which existed at the time of the first publication of notice. * * * A claim against the estate of the debtor in the hands of his assignee stands upon a different ground, in this respect, from the right of action against the debtor personally. That right is not taken away or suspended by the proceedings in insolvency and is, therefore, barred by the lapse of the usual period of limitation."
In Minot v. Thacher ( supra) (also a Massachusetts case) DEWEY, J., said: "By force and effect of the appointment of a messenger (in proceedings in insolvency) and the publication thereof conformably to the statute, the property of the insolvent is sequestered for the benefit of all the then existing creditors. After such publication a suit by a creditor would be of no avail, as the property is all transferred to an assignee, and the body of the debtor is to be discharged from arrest on execution. The debts presented for allowance against the insolvent are to be considered with reference to their validity at the date of the publication by the messenger. If they are found to be barred by the Statute of Limitations at that period, it would of course be competent for the assignee to object to their allowance."
In Ex parte Ross ( supra) the vice-chancellor said that "After a commission (in bankruptcy) issued, * * * the Statute of Limitations did not run against a creditor; that the commission was a trust for the benefit of all the creditors, and it was a known principle that the statute did not run against a trust," and on appeal the chancellor asserted the same doctrine.
These cases appear to lay down the rule that where, by any form of proceedings, the property of a debtor is taken possession of by the court, to be administered for the benefit of all his creditors, and to be distributed among them in payment for their debts, the statute does not run against any debts which were not barred by the statute at the time possession of the property was taken by the court, and this rule would seem to be applicable to the appointment of the receiver in this case. The receiver here was appointed in proceedings for the dissolution of the corporation. He took possession of all the property and held it in trust, to be distributed among all the creditors existing at the time of the appointment of the receiver, and the true rule is under such circumstances that the running of the statute is suspended from the time of the appointment of the receiver.
Our conclusion is that the Statute of Limitations does not constitute a defense to the plaintiff's right of action upon the notes. The plaintiff was, therefore, entitled to recover upon the notes, but was not entitled to recover for the $1,500 loaned and advanced to Baylies while he was acting as receiver of the corporation.
It was erroneous to permit the jury to render a verdict for the amount of money loaned and advanced, and such verdict should be set aside and a new trial ordered, with costs to abide event, unless the plaintiff stipulates that the verdict be reduced so as to cover the amount due upon the notes alone.
The plaintiff should have an opportunity, if he desires, to retry his case and to give further proof than he gave upon this trial with reference to his right to recover the moneys loaned and advanced.
VAN BRUNT, P.J., BARRETT, RUMSEY and PATTERSON, JJ., concurred.
Verdict set aside and new trial ordered, with costs to abide event, unless plaintiff stipulates as directed in opinion.