This action is brought to establish the defendant's liability for the debts of a New Jersey corporation known as the Rockwell Construction Company. The defendant was a director of that company continuously from May 6th, 1897, down to the commencement of this action in July, 1900. The ground of liability alleged is the failure of that corporation to file an annual report in the month of January in each of the years 1898, 1899 and 1900; and the failure of the defendant, during each of said years, to file a certificate showing that he had endeavored to have such a report filed as then provided by section 30 of the Stock Corporation Law (Gen. Laws, ch. 36). The complaint, after setting forth such defaults during the years mentioned, states, in substance, that from December 11, 1897, to June 27, 1898, the Rockwell *Page 477 Construction Company became indebted to the plaintiff on notes and other obligations made and incurred by the plaintiff for the benefit of that company and paid by the former in sums aggregating about $128,000. Eight separate causes of action are stated, and it is alleged that the plaintiff, on or about June 30, 1900, served upon the defendant written notices that it intended to hold him personally liable for each of the amounts claimed by it.
The answer contains a general and specific denial of the plaintiff's several causes of action; it admits the service, on or about June 30, 1900, of the notices to hold him personally liable upon the claims set forth in the complaint and then sets up several separate defenses. Two of these defenses, the 9th and 13th, were demurred to by the plaintiff upon the ground that they were insufficient in law upon the face thereof. These demurrers have been sustained by the courts below. The Appellate Division has granted the defendant leave to appeal to this court upon two certified questions: 1. Is the ninth separate defense, contained in the defendant's amended answer herein, insufficient in law, upon the face thereof, to constitute a defense. 2. Is the thirteenth separate defense, contained in the defendant's amended answer herein, insufficient in law, upon the face thereof, to constitute a defense. The ninth defense is a plea of the Statute of Limitations. It sets forth that the defendant's liability accrued and existed, if at all, on April 18th, 1899, and prior thereto, and that the plaintiff has not complied with the provisions of chapter 354 of the Laws of 1899. The sufficiency of this defense depends upon the construction of that statute. Said chapter 354, Laws of 1899, added section 34 to the Stock Corporation Law (Gen. Laws, chapter 36; chapter 388, Laws of 1892) and provides, "No director or officer of any stock corporation shall be liable to any creditor of the corporation, * * * because of any failure to make or to file an annual report, whether heretofore or hereafter occurring. * * * Unless within three years after the occurrence of the act or the default in respect to which it shall be sought to charge *Page 478 the director or officer, such creditor shall have served upon such director or officer written notice of his intention to hold him personally liable for his claim; provided, nevertheless, that any such liability, because of any such default now existing * * * may be enforced by action begun at any time within the year eighteen hundred and ninety-nine or by action begun thereafter, if within such year written notice of intention to enforce such liability shall have been given as above provided."
It is claimed by the defendant that, as all the claims of the plaintiff were in existence when this statute was passed, (April 18, 1899) and no suit was commenced or notice given during the year 1899, the plaintiff's cause of action is barred. The facts stated are conceded, but the conclusion does not follow, as will clearly appear from a careful reading of the statute and an investigation into the reasons for its enactment. Prior to the enactment of the statute of 1899 the Stock Corporation Law, as amended by chapter 384, Laws of 1897, simply provided that "Every domestic stock corporation and every foreign stock corporation doing business within this State, * * * shall annually, during the month of January * * * make a report as of the first day of January, * * * If such report is not so made and filed, all the directors of the corporation shall jointly and severally be personally liable for all the debts of the corporation then existing, and for all contracted before such report shall be made." (Sec. 30.) It will be observed that this section contains no limitation upon the time within which such liability could be enforced. The only limitation was found in section 394 of the Code of Civil Procedure, which provides that an action to recover a penalty or forfeiture, or to enforce a liability created by law against a director or stockholder of a corporation must be brought within three years after the cause of action has accrued. The liability of a director under this section being in the nature of a penalty, actions to enforce such liability were governed by the provisions of that Code section. (Losee v.Bullard, 79 N.Y. 404; Knox v. Baldwin, 80 id. 610; *Page 479 Duckworth v. Roach, 81 id. 49; Merchants' Bank v. Bliss, 35 id. 412.) This state of the law, prior to the passage of the act of 1899, frequently visited severe penalties upon directors of corporations which had neglected to file their annual reports. Prior to April, 1899, the three years' Statute of Limitations could only be set in motion by the concurrence of three things. 1st. There had to be a debt in existence. 2nd. The debt had to be due. 3rd. The default in filing the annual report had to occur during the existence of the debt. Thus a director, who was in office when a debt was incurred, but was out of office when it matured, might be held liable for the debts of the company because a default had occurred in filing the annual report while he was in office. If such a debt, although in existence at the time of the default, had many years to run before it matured, a director could be sued and held liable long after his ability to make an effective defense had been destroyed or greatly weakened by lapse of time. (Morgan v. Hedstrom, 164 N.Y. 224.)
It was this situation which chapter 354, Laws of 1899, was intended to relieve. It first provided that "No director or officer of any stock corporation shall be liable to any creditor of the corporation * * * because of any failure to make or file an annual report whether heretofore or hereafter occurring * * * Unless within three years after the occurrence of * * * the default * * * such creditor shall have served upon such director or officer written notice of his ntention to hold him personally liable for his claim." If the statute had stopped here no doubt could have existed as to its meaning. The obvious import of the language just quoted is that a director should have notice, within three years after the default in filing the report, of a debt which could not be barred within that time because not then due. But to this language there was added the following proviso: "provided, nevertheless, that any such liability, because of any such default now existing * * * may be enforced by action begun at any time within the year 1899 or by action begun thereafter, if within such year written notice of intention to *Page 480 enforce such liability shall have been given as above provided." By reading the statute as a whole we see that unless this proviso had been added, a debt which had existed for more than three years at the time the statute was passed, but which was not then due, would have been cut off. The purpose of the proviso, therefore, was to give to a creditor holding such a debt an opportunity during the time between April 18th, 1899, when the statute went into effect, and the end of that year, to save his claim by either commencing an action within that time, if the debt should become due, or by serving the notice provided within that time. Such being the purpose and meaning of the statute it had no reference to plaintiff's claims, as they were in existence and due when the first default occurred at the end of January, 1898, and this action was commenced in June, 1900, less than three years from that time. (Duckworth v. Roach, 81 N.Y. 49.) Under this construction of the statute in question the order sustaining the demurrer to the ninth separate defense was right and should be affirmed.
The respondent suggests two other grounds upon which he claims the demurrer to the ninth defense may be sustained. 1st. It is contended that, as the Rockwell Construction Company is a foreign corporation, the provisions of the statute in question have no application to it. In this connection it is to be remembered that section 30 of the Stock Corporation Law was amended in 1897 so as to include foreign as well as domestic corporations within its provisions. (Laws of 1897, ch. 384, sec. 2.) Section 30 creates the liability for a failure to file the report. While section 34 does not in terms refer to foreign corporations, and simply uses the words "director or officer of any stock corporation," it nevertheless regulates the enforcement of the liability created by section 30, and the two sections should be read together. When considered together there can be no doubt that section 34 was intended to apply to the same corporations that are specified in section 30. Thus construed section 34 applies to both foreign and domestic corporations. 2nd. It is further urged that as the defendant *Page 481 is in fact a non-resident of the state he cannot take advantage of the provisions of said section 34 to shield himself from liability. Upon this point it is enough to say that the record does not disclose that the defendant is a non-resident.
The remaining question to be considered is whether the demurrer to the thirteenth separate defense should be sustained. This defense, in effect, avers that the obligations of the Rockwell Construction Company, for which the plaintiff seeks to render the defendant liable, were in fact paid by a firm known as Robert Wetherell Company, and that if they were paid by plaintiff, they were so paid with funds of that firm and as its agent. This is the substance of the defense, although it sets out at great length the specific transactions between the plaintiff, the Rockwell Construction Company and the firm of Wetherell Company, from which that conclusion is drawn. The demurrer assumes the truth of the facts thus alleged. If they are true it is difficult to see why they do not constitute a valid defense to the cause of action set out in the complaint. It is probably a defense that could be proved under the general denial, but this does not render the specific allegations demurrable. There are defenses which may be stricken out on motion but cannot be reached by demurrer. Section 500 of the Code of Civil Procedure provides: "The answer of the defendant must contain: 1. A general or specific denial of each material allegation of the complaint controverted by the defendant, or of any knowledge or information thereof sufficient to form a belief. 2. A statement of any new matter constituting a defense or counterclaim in ordinary and concise language without repetition." It may be conceded that this defense is not new matter as it is not in avoidance or confession of the matters set forth in the complaint. But it is none the less a defense, because it is what is termed in pleading a denial. (Bouvier's Law Dictionary; Anderson's Law Dictionary; Moak's Van Santvoord's Pleadings, p. 509.) If authority for such a plain proposition is needed we have it in the case ofBenedict v. Seymour (6 How. Pr. 298, 304). That was one of the early decisions explaining the nature of *Page 482 pleadings under the Code, and in that case Judge SELDEN said: "Defences, then, are divisible into two classes: 1. Those which deny some material allegation on the part of the plaintiff. 2. Those which confess and avoid those allegations." It was also decided in that case that demurrer was not the proper method of getting rid of such defenses, for the "plain reason that a demurrer admitted the truth of the plea; and the facts contained in such a plea, if proved or admitted, must necessarily constitute a good defense." (Id. p. 308.) It follows, therefore, that the first question certified should be answered in the affirmative and the second in the negative.
That part of the order appealed from which affirms the judgment of the trial court sustaining the demurrer to the ninth defense should be affirmed, and that part which affirms the judgment sustaining the demurrer to the thirteenth defense should be reversed, with leave to the defendant to amend his answer accordingly within twenty days, without costs to either party.
PARKER, Ch. J., GRAY, O'BRIEN, BARTLETT, HAIGHT and CULLEN, JJ., concur.
Judgment accordingly.