Larsen v. James

• Citation: 1 Colo.App. 313,29 P. 183
• Parties: LARSEN v. JAMES et al.
• Decision Date: 08 February 1892
• Court: Court of Appeals of Colorado

29 P. 183

1 Colo.App. 313

LARSEN v. JAMES et al.

Court of Appeals of Colorado

February 8, 1892

Error to district court, Arapahoe county; A.J. RISING, Judge.

Action by Niels Larsen against William H. James and others, as directors of a bank, to enforce their personal liability for a corporate debt. From a judgment sustaining defendants' demurrer, plaintiff appeals. Affirmed.

L.C Rockwell, for plaintiff in error.

C.S Thomas and Bryant & Lee, for defendants in error.

REED J.

In September, 1881, the Merchants' & Mechanics' Bank was organized and commenced business in Leadville, continued the business until January 30, 1884, when, having become insolvent, it closed its doors. In November, 1883, plaintiff drew his check upon the bank for $7,000, payable to the order of Peter W. Breen, which check was certified by the cashier as follows, "Good when properly indorsed," and delivered to Breen. On the 30th of January, Breen presented the check, properly indorsed, for payment, which was not made. Plaintiff had upon deposit in the bank money to pay the check. The bank having failed to pay, Breen brought suit, and recovered judgment for the amount against the plaintiff, which was paid and discharged. The defendants were, and had been from the organization of the bank to its close, the directors of the corporation. The bank being insolvent, suit was brought by plaintiff against the defendants as directors, alleging their failure to make and transmit to the state treasurer a statement of the condition of the bank, as required by law.

The statutory requirement is the following, (Gen.St. § 277:) "The directors of each banking association shall semi-annually, (or oftener, as they may elect,) on the first Monday in January and July, declare a dividend of so much of the net profits of the bank as they shall deem expedient, and on each of such days as the president or cashier shall make a full, clear, and accurate statement to the state treasurer of the condition of the bank, as it shall be on that day, after declaring the dividend, (if any be declared,) which shall be verified by the oath of the president or cashier, and shall contain a full abstract of the general accounts of the bank so as to show plainly its resources and liabilities, and the amount of each kind thereof; and the same shall be published at least once a week, for three successive weeks, in some newspaper of the county where such bank is located, if any newspaper be published therein; if not, then in some newspaper of general circulation, published at the seat of government." Section 278: "If any such banking association shall neglect to make out and transmit the statement required in the preceding section for one month beyond the period when the same is required to be made, or shall willfully violate any of the provisions of this act, the directors shall be personally liable for all debts of said association contracted previous to and during the period of such neglect."

The complaint was demurred to, and, among others, upon the following grounds: That no judgment had been obtained by the plaintiff against the bank; that the action was barred by the statute of limitations. The demurrers were sustained, and the action dismissed.

In deciding upon the correctness of the judgment, only two questions need be determined: (1) Whether the statutory liability of the defendants was secondary, and depended upon plaintiff's having first exhausted his remedy against the bank; (2) whether the action was barred by the statute of limitations.

The first may be disposed of quite briefly. The statute is punitive in character, dictated by public policy, to prevent the perpetration of frauds by dishonest or insolvent corporations. The statutory liability is not made to depend upon a failure to collect from the corporation. The liability is primarily and directly imposed upon a failure to comply with the law, and may be enforced regardless of any proceeding against the corporation. The language is that upon failure to comply "the directors shall be personally liable for all debts of said association contracted previous to and during the period of such neglect." The liability attaches upon the failure to make the statutory statement, and so remains until removed by a compliance with the requirements of the law. Such appears to have been the conclusion of our own supreme court in regard to the statute of 1868, differing somewhat in phraseology from the statute under consideration, but substantially the same, as to the present question. In Gregory v. Bank, 3 Colo. 333, it is said: "The liability of the trustees arising from a failure to publish an annual report is in no way related to the loss that creditors of the company may sustain by reason of such violation of the statute;" and such is the construction of the same statute in the state of New York. Bank v. Bliss, 35 N.Y. 412. The liability of the bank arose from a failure to pay the check,--a violation of a contract. The liability of the directors arose from a failure to comply with the provisions of the statute. It is clear that there was no primary liability of the directors to pay the debt, nor had they any connection with the creditor of the bank by contract to pay upon its default as guarantor, indorser, or otherwise. Hence there was no relation that would require the creditor to exhaust his remedies against the bank. The action depends wholly upon the statute.

The other question is one of greater difficulty. The actions which shall be commenced within six years are thus stated in section 2163, Gen.St.: "First. All actions of debt founded upon any contract or liability in action." "Fourth. All actions of assumpsit or on the case founded on any contract or liability, express or implied." "Seventh. All other actions on the case, except actions for slanderous words or libels." It is clear that the statutory debt in question, imposed...