
    Kilbreath v. Gaylord, Adm’r, etc.
    The subscribers to the stock of an insurance company organized under a. special charter granted prior to the adoption of the present constitution, gave to the corporation their secured promissory notes, payable-on demand, for the amount of the stock by them respectively subscribed. Held, that the notes must be construed in connection with the-nature of the business of the corporation, and in view of the object intended by the parties in giving their notes. Thus construed, the notes-were intended to be payable on the call of the directors; and the statute of limitations is no more available as a defense against the collection of the notes, than it would have been against the collection of the-subscriptions.
    Motion for leave to file petition in error to reverse the judgment of the Superior Court of Cincinnati.
    The original petition was filed by W. E. Gaylord, administrator of Eliza Lemerick, deceased, against the Washington Life Insurance Company, and James R. Kilbreath and others, stockholders in said corporation, to subject the .amount due from them respectively, as stockholders, on account of their stock subscriptions, to the payment of a judgment recovered by Gaylord, as administrator, against the corporation.
    The "Washington Life Insurance Company was organized under a special charter granted on the 20th of March, 1851. •49 Ohio L. 214.
    The judgment for which payment is sought was recovered on the 24th day of February, 1872, on a policy of insurance issued by the corporation on the 20th day of September, 1851.
    Suit was first brought on the policy in January, 1852, "which was afterward dismissed without prejudice. In May, 1855, suit was again entered on the policy, which was prosecuted continuously until it resulted in the judgment against ■the corporation of February 24, 1872, before mentioned. 'The suit was defended by the officers of the corporation ■until the final judgment.
    Execution issued on the judgment was returned unsatisfied, the company having no property subject to execution.
    On the 6th day of June, 1851, the stock subscribers executed to the corporation their several promissory notes for ■the amount of stock by them respectively subscribed. These notes were in the following form: “On demand, we promise to pay to the ~Washington Life Insurance Company of. -Cincinnati,” etc., and were signed by the stock subscriber .and his surety as makers.
    On the 6th day of June, 1851, the company made an assessment of ten per cent, on the notes; and in March, 1853, .an additional assessment of ten per cent.; and in April, .1854, a further assessment of five per cent.; all of which .assessments were paid by the parties. No other assessments were made by the company on the stock subscriptions or on ■the notes.
    The company ceased to take risks in the year 1854, and proceeded to close up its business; and no debts are owing by the company, except the judgment recovered as aforesaid, and two small sums of money lent to the company by two ■of the stockholders in 1854 and 1855, and the attorney’s fees arising from defending the suit in which the judgment was recovered.
    The stock subscribers interposed a plea of the statute of limitations in bar of the action. This plea was overruled, ■and the court gave judgment against them pro rata for the amount necessary to pay the plaintiff’s judgment.
    The plaintiffs in error now seek the reversal of this judgment.
    The only ground of error relied on is the overruling by the court of the plea of the statute of limitations.
    
      JBoadly, Johnson $ Colston, for the motion:
    This action, is on the notes, not otherwise; hut, if other~wise, and this can be treated as a suit on the subscriptions, still the plaintiff gains nothing, for the demand for and acceptance of notes payable on demand with sureties, is a ■call, which prevents any new call now.
    Besides the note given with surety is payment, within the third section of the charter (49 Ohio L. 213).
    Suit could not be brought on the subscription without returning or offering to return the notes. Miller v. Woods, 21 Ohio St. 485 ; Sawyer v. Hoag, 17 Wall. 619.
    The notes were payable on demand, and the statute of limitation runs from their date. Hill v. Henry, 17 Ohio, 9; Darling v. Wooster, 9 Ohio St. 517; Pullen v. Chase, 4 Ark. 210.
    
      Follett $ Dawson and Collins § Herron, contra:
    The giving of a promissory note is not payment of a subsisting debt, unless it clearly appears that it was the understanding of the parties that the latter should be extinguished by the former. McNaughton v. Partridge, 11 Ohio, 223 ; Merrick v. Bowry, 4 Ohio St. 60 ; Leach v. Church, 15 Ohio St. 169.
    Unless, then, the statute of limitations applies to the subscription of stock, the giving of the notes will not help it. 
      Sawyer v. Hoag, 17 Wall. 610; Warren v. Callender, 20 Ohio St. 190.
   White, C. J.

The plaintiffs in error can not avail themselves of the statute of limitations as a defense.

They rely on the decision in Hill v. Henry, 17 Ohio, 1, as entitling them to the benefit of the statute. It was held, in that case, that a promissory note for money, payable on demand, is due on delivery.

Upon the question whether the statute of limitation began to run from the delivery of the note, the court say: “ Upon this point, we are aware that there have been contradictory decisions, but, in our opinion, a right of action exists in the payee of such note, upon its delivery, and that from the time of the delivery the statute of limitations commences to run.”

The principle ruled in that case was subsequently followed in Darling v. Wooster, 9 Ohio St. 517, where it was held that a due-bill became payable on delivery, and bore interest from that time; though it was conceded that the weight of authority, both in England and in this country, favored the rule that such note will bear interest only from the time of demand made, or of suit brought.

But, without questioning the authority of these cases, we think the rule applicable to promissory notes given in the ordinary course of business by a debtor to a creditor, can not be properly applied to a case like the one before us.

The plaintiffs in error, and their associates, became incorporated for the purpose of carrying on the business of life insurance. The only means of the company for doing business, consisted of its stock subscriptions. In payment, or to secure the payment of these subscriptions, the subscribers executed their non-negotiable notes to the company, payable on demand. These notes must be construed in connection with the nature of the business of the corporation, and in view of the object intended by the parties in giving the notes. The notes represent the fund intended ultimately for the payment of debts, if they should be required for such purpose. To hold that the statute of limitations began to run from the time of the execution of the notes, would defeat the purpose intended, and work a fraud, not only on the policy-holders, but on such of the stockholders as might see fit to pay the cash in discharge of their liability.

Upon such view of the liability of the subscribers, upon the notes, if the business of the company should be sufficiently prosperous to enable it to meet its current liabilities from its current income, during the period required for the statutory bar, the company would, after that time, be destitute of the means to pay policies which might subsequently mature; and in regard to policies maturing before the bar was complete, if payment could be postponed until that time, payment of such policies would be defeated. At least the .ability of the company to pay them would depend upon whether the subscribers chose to plead the statute.

That such was not the intention of the parties is very clear; and if it had been, that it would have been a fraud upon creditors, and could not have been carried out, is equally clear. Sawyer v. Hoag, 17 Wall. 620.

The notes were intended to be payable on the call of the ■directors. We see no good reason why such intention ■should not have effect. The statute of limitation is no more available as a defense against the collection of the notes than it would have been against the collection of the ■.subscriptions.

This was the view taken of the nature of the liability arising ou the notes by the directors in the assessments which they did make, and we see no reason to doubt its ■correctness.

We do not say that, the directors might not call for payment- of part of the notes without calling for the payment ■of all of them. Special reasons might arise why this should be done. But in the absence of a call or demand for payment by the directors, we think a suit by the company on the notes would have been contrary to the intention of the parties. Leave refused.  