Mason v. Henry

• Decision Date: 20 April 1897
• Citation: 152 N.Y. 529,46 N.E. 837
• Parties: MASON v. HENRY et al.
• Court: New York Court of Appeals Court of Appeals

152 N.Y. 529

46 N.E. 837

MASON

v.HENRY et al.

Court of Appeals of New York.

April 20, 1897.

Appeal from supreme court, general term, First department.

Action by Thomas F. Mason against Lydia Delphine Henry, as executrix of William D. Henry, deceased, and others.

The plaintiff, as the receiver of the defunct Widows' & Orphans' Benefit Life Insurance Company, commenced this action against the defendants' testator to compel him to account for the property, assets, and effects belonging to that company, and which were in the possession or under the control of him and his associates, as the trustees of that corporation, in the month of November, 1871. The plaintiff sets forth in his complaint a number of facts relating to that company, and to the Mutual Protection Life Insurance Company, which bear upon their management and their financial condition in October, 1871. It shows that at that time the former company, with a capital of $200,000, had a surplus as to its policy obligations, and that the latter company, with a capital of $100,000, was insolvent, and unable to meet its policy obligations. It sets forth the proposal by the trustees of the Mutual Protection Company to the trustees of the Widows' & Orphans' Company of a scheme for the purchase of the capital stock of the latter company at the price of par in gold; the resignation thereupon of the trustees of the Widows' & Orphans' Company; the election in their place of certain persons, designated by the Mutual Protection Company; and the transfer of the business and reserve under cover of a reinsurance contract. It alleges that on October 9, 1871, at a meeting of the board of trustees of the Widows' & Orphans' Company, the proposition for the purchase of the stock was accepted; that on October 19, 1871, certain of the trustees of the Widows' & Orphans' Company, at a meeting held at that date, resigned their positions, and there were elected in their places a number of the trustees of the Mutual Protection Company, among whom was the defendant Henry; that on November 9, 1871, the defendant Henry and his associates, acting as trustees of the Widows' & Orphans' Company, at a board meeting held on that day, confirmed and ratified the minutes of the proceedings of October 9th and 19th; that, having thus obtained control of the Widows' & Orphans' Company, these new trustees, Henry and his associates, caused to be transferred and paid to the Mutual Protection Company the property and assets of that company, constituting the reserve on the policy obligations, and that therefrom they caused to be paid out, wrongfully and illegally, large sums of money, in various ways particularly set forth, and in connection with the fraudulent and illegal plan of October, 1871. It alleged that subsequent to the election held on October 19, 1871, Henry and his associates suffered and permitted the assets, property, etc., of the Widows' & Orphans' Company to be wasted and misapplied, and the policy holders to be plundered and defrauded; that by reason of the fraudulent and illegal acts, doings, proceedings, etc., which had been set out, the Widows' & Orphans' Company was completely wrecked and ruined, so that on January 1, 1872, instead of having a surplus as to its policy obligations, the Widows' & Orphans' Company had a large deficit. It alleged that by reason of the premises the Widows' & Orphans' Company, its policy holders and creditors, had sustained damages in the sum of $400,000 and upward, and prayed judgment decreeing the defendants' intestate to be chargeable, as a trustee of the Widows' & Orphans' Company, and adjudging that he should account for the property and assets of that company. The only defense in the answer which need be referred to, inasmuch as it presents the only question to be considered upon this appeal, is that the cause of action did not accrue within six years before the commencement of this action. The trial court found, among other things, that the defendant Henry was liable under the proofs, and directed judgment against him for the amount due to the creditors and policy holders. He found as facts that the misappropriation of funds, and the acts which constituted the cause of action herein, accrued in November, 1871; that the business of the Widows & Orphans' Company was, in fact, abandoned on or about the 18th of June, 1872, and that this action was instituted in April, 1879. Upon appeal from the judgment so recovered by the plaintiff against the defendant, the latter appealed to the general term of the supreme court in the First department, where a reversal of the judgment and a new trial of the action were ordered. 31 N. Y. Supp. 1068. The plaintiff thereupon appealed to this court, giving the usual stipulation for judgment absolute in case of affirmance.

Wm. C. Trull and Raphael J. Moses, for appellant.

Thorndike Saunders, for respondents.

GRAY, J. (after stating the facts).

The reversal of the judgment by the general term was upon the ground that the action was barred by the statute of limitations which was in operation at the time of its commencement, and upon this appeal the only question argued or presented is the correctness of that proposition. As the action was commenced in April, 1879, it came under subdivision 3 of section 414 of chapter 4 of the Code of Civil Procedure, which excepts from its provisions the case of an action commenced before the expiration of two years after the act took effect, which was on September 1, 1877. Section 91 of the former Code is alone applicable to this case. That section prescribed a limitation of six years for ‘an action upon a contract, obligation, or liability, express or implied,’ etc. (subdivision 1); or for ‘an action for relief on the ground of fraud, in cases which heretofore were solely cognizable by the court of chancery; the cause of action in such cases not to be deemed to have accrued, until the discovery by the aggrieved party of the facts constituting the fraud’ (subdivision 6). The larger limitation of 10 years, prescribed by section 97 of the former Code, does not apply, inasmuch as that was for the case of ‘an action for relief, not hereinbefore provided for.’ The claim which the receiver has sought to enforce in the present action is comprehended within the provisions of subdivision 1 of section 91, for it rests upon the liability of the defendant Henry to make good the loss occasioned to the Widows' & Orphans' Company by the wrongful and illegal doings of himself and his associates while in the direction of its affairs. Upon the facts stated in the complaint the receiver, as the representative of the corporation, might have sued the defendant in the form of an action at law for the damages resulting from his misconduct, or in the present form, which he has adopted, of an equitable action to compel an accounting as to the property wasted and lost. It was said, in the case of O'Brien v. Fitzgerald, 143 N. Y. 377, 38 N. E. 371, that: ‘The facts as pleaded show a perfect cause of action at law in favor of the receivers as representatives of the bank against the directors for misconduct resulting in loss. The actual and real relationbetween them and the corporation is that of agents acting for their principal (Hun v. Cary, 82 N. Y. 65), and the directors may be sued at law for any damages, caused by their culpable misfeasance or nonfeasance.’ Under the old systems of law and equity, the two courts had concurrent jurisdiction over such a cause of action, and, if the bar of the statute operated at law, it was equally effective in equity. It was held in Butler v. Johnson, 1111 N. Y. 204, 18 N. E. 643, with reference to the limitation of time for the commencement of...