Platt v. Wilmot

Background

This case arose from a lawsuit seeking to hold a stockholder liable for obligations tied to a trust company. The lower courts applied New York’s three-year limit for actions against directors or stockholders of moneyed corporations. The person challenging that result argued the shorter limit should not apply because the defendant was a shareholder in a foreign corporation, the trust company was not a “moneyed corporation,” and the shareholder’s liability was contractual rather than created by statute or common law.

Reasoning

The Court examined the history of New York law and concluded the state legislature changed the rule over time to cover liabilities created by statute or common law and to reach shareholders of foreign as well as domestic corporations. The Court accepted New York’s definition of a “moneyed corporation” as one with banking powers such as receiving deposits and making loans, and found the trust company had those powers. The Court also explained that the shareholder’s liability arose from statute and constitutional provisions (and related legal principles), so it fits within the kind of liability governed by the three-year rule. The Court noted that federal courts sitting in New York must apply the state time limit in such cases and affirmed the lower court’s judgment.

Real world impact

The decision means people who want to enforce statutory or common-law liabilities against directors or shareholders of New York moneyed or banking corporations generally have only three years to sue; that shorter deadline applies even when the corporation was formed under another State’s laws and when federal courts hear the case.