Case Name: The Watertown National Bank of Watertown, New York, Respondent, v. George A. Bagley, Appellant, Impleaded with George W. Knowlton, Defendant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1909-11-17
Citations: 134 A.D. 831
Docket Number: 
Parties: The Watertown National Bank of Watertown, New York, Respondent, v. George A. Bagley, Appellant, Impleaded with George W. Knowlton, Defendant.
Judges: 
Reporter: Appellate Division Reports
Volume: 134
Pages: 831–836

Head Matter:
The Watertown National Bank of Watertown, New York, Respondent, v. George A. Bagley, Appellant, Impleaded with George W. Knowlton, Defendant.
Fourth Department,
November 17, 1909.
Corporation—liability of directors on failure to file report—contract— agreement to withhold suit against directors pending receivership — waiver of Statute of Limitations — consideration — agreement changing limitation of action.
Where the creditor of a corporation having a right to hold the directors personally liable by reason of their neglect to file an annual report as required hy section 80 of the Stock Corporation Law, after the enactment of chapter 354 of the Laws of 1901 which substituted a fixed penalty for a failure to make a report in place of a general liability for all outstanding debts and provided that the amendment should not affect existing claims providing action he commenced within six months after the amendment took effect, forbore to enforce the right of action against the directors at their special request, and agreed to hold the claim until the affairs of the corporation were closed by its receiver in consideration of a written promise hy the directors to waive any defense by way of “ said statute of limitations,” the creditor having received part payment on its claim from the receiver may maintain an action against the directors to enforce their statutory liability for the balance.
Such agreement by the directors waiving the “statute of limitations" should not be construed to mean that the operation of the statute was to he suspended only during the receivership.
Such agreement to refrain from suit and to satisfy the claim as far as possible through the receivership being for the benefit of the directors, was founded upon a good consideration and is not against public policy.
A waiver of the Statute of Limitations cannot he held invalid on the ground that it is against public policy. Parties may lengthen or shorten the period of limitation, if the contract he founded upon a good consideration and is reasonable.
Quaere, as to whether the six months given by chapter 354 of the Laws of 1901 to a creditor of a corporation to enforce an existing liability of directors was a condition precedent to the maintenance of the action so that the plaintiff must bring himself within the statute, or whether it is a Statute of Limitations to he asserted hy the defendant.
Appeal by the defendant, George A. Bagley, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Jefferson on the 3d day of February, 1909, upon the decision of the court rendered after a trial at the Jefferson Trial Term, a jury having been waived.
The opinion delivered at Trial Term is reported in Watertown Nat. Bank v. Bagley (62 Misc. Rep. 380).
Virgil K. Kellogg, for the appellant.
Henry Purcell, for the respondent.

Opinion:
Spring, J.;
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, Iinowlton 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. (Stock Corp. Law [Laws of 1892, chap. 688], § 30, as amd. by Laws of 1897, chap. 384.)
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. (Stock Corp. Law, § 30, as amd. by Laws of 1901, chap. 354, § 1.). Section 5 of this amending act, which became a law April sixteenth 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, providing 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 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 beforé 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 the said Watertown National Bank of Watertown, N. Y., against The E. 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, eighteen 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 of chapter 354 of the Laws of 1901, and already quoted, is a statute of limitations, and a waiver of 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 consideration 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 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 -by lapse of time from becoming established," 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, support that proposition.
In Shapley v. Abbott (42 N. Y. 443), relied on by the appellant's counsel, the waiver was by paroi and without consideration, and the court held it was not sufficient. Chief 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 defendants 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. American Central Ins. Co., 9 App. Div. 339; 154 N. Y. 449; Utica Ins. Co. v. Bloodgood, 4 Wend. 652; Woods v. Supervisors, etc., 136 N. Y. 403; Wilkinson v. First Nat. Fire Ins. Co., 72 id. 499.)
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. Police Comrs., 174 N. Y. 450, 456; Embury v. Conner, 3 id. 511; Matter of Cooper, 93 id. 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, 22 N. Y. 249.)
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 may be lost to him is not consistent with public policy. (Roach v. Curtis, 191 N. Y. 387, 391.) 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 óf the Statute of Limitations cannot be held invalid úpon the hypothesis that the protection of poor people requires such a holding. Tfie 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. (62 Misc. Rep. 380.) While there is some doubt as to the correctness of this position,.! 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; Colell v. D., L. & W. R. R. Co., 80 App. Div. 342; Winter v. City of Niagara Falls, 190 N. Y. 198; Johnson v. Phœnix Bridge Co., 133 App. Div. 807.)
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.
All concurred.
Judgment affirmed, with costs.