Case Name: SEATTLE NAT. BANK v. PRATT
Court: United States Circuit Court for the Northern District of New York
Jurisdiction: United States
Decision Date: 1900-07-10
Citations: 103 F. 62
Docket Number: 
Parties: SEATTLE NAT. BANK v. PRATT.
Judges: 
Reporter: Federal Reporter
Volume: 103
Pages: 62–64

Head Matter:
SEATTLE NAT. BANK v. PRATT.
(Circuit Court, N. D. New York.
July 10, 1900.)
1. Corporations — Actions to Enforce Statutory Liability of Stockholders — Limitations.
Gen. St. Kan. e. 23, § 44, provides tliat if a corporation be dissolved, leaving debts unpaid, suits may be brought against stockholders. Id. par. 1200, provides that, as to creditors seeking to enforce additional liability of stockholders, the corporation shall be deemed dissolved if it has suspended business for more than one year. Held, that limitations against the enforcement of such liability begin to run at the expiration of a year from such suspension, whether the claim against the corporation has been reduced to judgment or not, since the creditor may immediately proceed against the stockholders on the dissolution of the corporation, without waiting to obtain a judgment against the corporation.
2. Same.
Code Civ. Proc. N. Y. § 394, providing that an action against a stockholder to enforce a statutory liability must be brought within three years after the cause of action accrues, applies to an action against a stockholder of a corporation of another state to enforce a liability imposed by the statutes of such state.
At Law.
L. A. Stebbins and George Lawyer, for plaintiff.
Charles E. Patterson and Charles C. Van Kirk, for defendant.

Opinion:
COXE, District Judge.
This is an action to recover of the defendant, who was a stockholder of the Western Farm Mortgage Trust Company, a Kansas corporation, the additional liability created by the constitution and laws of that state. The only defense, necessary to consider, is the statute of limitations. The plaintiff recovered a judgment against the trust company January 18, 1897, upon a debt which matured prior to March, 1898. Execution was returned nulla bona on the same day. An alias execution was issued and returned nulla bona April 15, 1897. A receiver was appointed for the trust company in Colorado, February 6,1892, and in Kansas, March 5,1892. No business was transacted by the trust company after the appointment of these receivers. An attempt was made to show that its business career, did not end at this time, but it was not successful. There can be no doubt that the commercial life of the company terminated when the title to its property, of every name and nature, vested in the receiver. It was stricken with financial coma and, though not legally dead, it was as incapable of conducting business as is a general paretic for whom a committee has been appointed by the court.
In determining whether or not the action is barred it is necessary to answer the following questions: First. When did the cause of action against the defendant accrue? Second. Does the statute of limitations of Kansas or of New York apply?
In Cottrell v. Manlove, 49 Pac. 519, the supreme court of Kansas has construed sections 32 and 44 of the Kansas statute (Gen. St. c. 23) prescribing the manner of enforcing the liability of stockholders. Section 44 provides that if the corporation "be dissolved, leaving debts unpaid, suits may be brought against any person or persons who were stockholders at the time of such dissolution." The court holds that this remedy is open to creditors immediately upon the dissolution of the corporation, without awaiting the recovery of a judgment against the corporation, and that the statute of limitations starts to run at the date of dissolution. The remedy under section 32, giving the creditor the right to pursue the stockholder upon the judgment against the corporation, cannot operate, says the court, to extend the period of limitation. In the case of a dissolved corporation section 44 gives an immediate right of action, and the creditor cannot extend the limitation upon that right by adopting the slower process of obtaining a judgment against the corporation. The right of action was complete the moment the corporation was dissolved. This decision was pronounced in an action in which the Kansas statute of limitations was a defense, but it cannot be considered as construing that statute. It is a construction of the foregoing sections of the corporation law of Kansas and, as such, is binding upon this court. If it construed the Kansas statute of limitations, and that only, it would not conclude this court, unless that statute'is applicable asa defense.
At what date was the corporation dissolved? Paragraph 1200 of the General Statutes of Kansas provides that, as to creditors seeking to enforce the additional liability of stockholders, the corporation shall be deemed dissolved if it has suspended business for more than one year. It is not necessary that there should be a formal judgment of dissolution. The statute begins to run after the expiration of a year from the date of suspension. Bank v. King, 60 Kan. 733, 57 Pac. 952; Crocker v. Ball (Kan. App.) 59 Pac. 691. As the receiver in the case at bar was appointed in Kansas, March 5, 1892, the statute began to run March 6, 1893. The cause of action would, therefore, be outlawed on the 7th of March, 1896, if a three-years statute of limitation applies. This action was begun Peptember 3,1898. Section 394 of the Code of Civil Procedure of New' York provides that an action against a stockholder to recover a penally or forfeiture or to enforce a liability created by statute "must be brought within three years after the cause of action has accrued." That this statute applies to the present situation was held by the circuit court of appeals of this circuit upon facts, which, from a legal point of view, are identical. Hobbs v. Bank, 37 C. C. A. 513, 96 Fed. 396; Id. (C. C. A.) 101 Fed. 75. The leárned counsel for the plaintiff contend that an analysis of the four opinions delivei*ed in the Hobbs Case leads to the conclusion that the Kansas and not the New York statute was held to he applicable. The court canno t accept this view though it be pressed wit h earnestness and ingenuity. There can be no question that the defense of the statute of limitations was sustained, and it is difficult to perceive how this result could have been reached under the Kansas statute when section 21 of the Code of that state expressly provides that the period of limitation does not run in favor of a person wTho is "out of the state." It is said that this point was not argued and may have escaped the attention of the court, but this is hardly probable in view of the fact that the record necessarily disclosed the citizenship and residence of the defendant in this district, and in view of the further fact that a similar provision is found in the Code of almost every state of the Union, New York included, refusing the benefit of the statute of limitations to persons not actually within the state. But in any event this court interprets the decisions in the Hobbs Case as holding that section 394 of the New York Code is a bar to an action brought in this state to enforce the stockholder's liability created by the laws of Kansas, if not commenced within three years after the cause of action accrued. It follows that the complaint must be dismissed, with costs.