Case Name: McCLAINE v. RANKIN
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1905-03-06
Citations: 197 U.S. 154
Docket Number: No. 58
Parties: McCLAINE v. RANKIN.
Judges: Me. Justice Beown and Me. Justice McKenna, dissenting.
Reporter: United States Reports
Volume: 197
Pages: 154–169

Head Matter:
McCLAINE v. RANKIN.
ERROR TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT.
No. 58.
Argued November 10, 1904.
Decided March 6, 1905.
In the absence of any provision of the act of Congress creating the liability of .stockholders of national banks, fixing a limitation of time for commencing actions to enforce it, the statute of limitations of the particular State is applicable.
Although a statutory liability may be contractual, or gtiosi-contractual in its nature, an action given by statute is not necessarily to be regarded as brought on simple contract, or breach of simple contract.
The liability of stockholders of national banks- is conditional, and the right to sue does not obtain until the Comptroller of the Currency has acted; his order is the basis of the suit, and the statute of limitations does not commence to run until assessment made, and then it runs as against an action to enforce the statutory liability and not an action for breach of contract.
As the statute of limitations of Washington has been construed by the courts of that State the time within which such an action must be brought • is two years under § 4805, Ballinger’s Code, arid not within three years under subd. 3 of § 4800.
The First National Bank of South Bend, .Washington, became insolvent and was closed August 10, 1895, and on the seventeenth day of the same month one Heim was appointed receiver, who was succeeded by Aldrich, and Aldrich by George C. Rankin.
August 17, 1896, the acting Comptroller of the Currency levied an assessment against the shareholders of the bank in enforcement of their statutory liability. Adolphus F. Mc-Claine, one of the stockholders, was notified of the levy, and demand was duly made of him to pay the assessment on or before September 17, 1896, and shortly thereafter an action was commenced against him by the receiver to recover the same. Pending the action, efforts to settle .the claim were made. Subsequently, the action was dismissed. Thereupon the receiver brought an action against McClaine upon an alleged contract of. compromise, which went to trial, and the receiver took a non-suit. The present action was then brought on the assessment, August 15, 1899, and McClaine set up the statute of limitations by demurrer, which the Circuit Court sustained, and dismissed the action. 98 Fed. Rep. 378. The cause was taken to the Circuit Court of Appeals, and the judgment of the Circuit Court reversed. 106 Fed. Rep. 791:
The case having been remanded, the Circuit Court overruled the demurrer, McClaine answered, and a trial was had, resulting in judgment for the. receiver, which was affirmed by the Circuit Court of Appeals. 119 Fed. Rep. 110. This writ of error was then brought.
The following are sections of the statutes of Washington in relation to limitations, as found in Ballinger’s Codes:
“Sec. 4796. Actions can only be commenced within the periods herein prescribed after the cause of action shall have accrued, except when in special cases a different limitation is prescribed by statute; but the objection-that the action was not commenced within the time limited can only be taken by answer or demurrer.
“Sec. 4797. The period prescribed in the preceding section for the commencement of actions shall be as follows: . . .
“Sec. 4798. Within six years: 1. An action upon a judgment or decree of any court of the United States, or of any State or Territory within the United States;
“2. An action upon a contract in writing, or liability express or implied arising out of a written agreement;
“3. An action for the rents and profits or for the use and occupation of real estate.”
“Sec. 4800. Within three years: 1. An action for waste or trespass upon ¿real property;
“2. An action for taking, detaining, or injuring personal property, including an action for the specific recovery thereof, or- for any other injury to the person or rights of another not hereinafter enumerated;
■. “3. An action upon a contract or liability, express or implied, which is not in writing, and does not arise out of any written instrument;
“4. An action for relief upon the ground of fraud, the cause of action in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud;
“5. An action against a sheriff, coroner, or constable upon a liability incurred by the doing of an act in his official capacity and by virtue of his office, or by the omission of an official duty, including the non-payment of money collected upon an execution; but this subdivision shall not apply to action for an escape;
“6. An action upon a statute for penalty or forfeiture, where an action is given to the party aggrieved, or to such party and the State, except when the statute imposing it prescribed a different penalty [limitation];
“7. An action for seduction and breach of promise of marriage.”
“Sec. 4805. An action for relief not hereinbefore provided for shall be commenced within two years after the cause of action shall have accrued.”
Mr. T. 0. Abbott for plaintiff in error:
The action is barred by the Washington statute of limitations. Ballinger’s Codes, §§ 4796, 4800, 4805.
In Washington there is no statute relating in express language to a liability created by statute, “except for a forfeiture or penalty.” An action to enforce such a liability therefore comes within the provision of § 4805, above quoted, because it is an action upon a liability for which no relief.is “herein-before provided for.” Spokane v. Stevens, 12 Washington, 667; Ballard v. West Coast Co., 15 Washington, 572; State v. Ballard, 16 Washington, 418; Seattle v. De Wolfe, 17 Washington, 349.
The court below failed to distinguish the rule and relied on Bank v. Hawkins, 174 U. S. 364; but see contra, McDonald v. Thompson, 184 U. S. 71. Howarth v. Angle, 56 N. E. Rep. 489, and Howarth v. Lombard, 56 N. E. Rep. 888, can be distinguished, see Chapman v. Morrell, 20 California, 137; Bliss v. Sneath, 119 California, 530; Wilson v. Brook, 13 Washington, 676; Thompson on Corp. § 1991; Wood Stat. cf Lim., 3d ed., § 36; Robertson v. Blaine County, 90 Fed. Rep. 63; Bullard v. Bell, 1 Mason, 243; S. C., Fed. Cas. No. 2121; Shaw v. Nor. Pac. R. R. Co., 101 U. S. 557; Johnson v. Southern Pacific Ry. Co., 117 Fed. Rep. 462.
Mr. F. F. Oldham for defendant in error,
contended that the action is not barred by' the two-year provision of the statute of limitations of the State but falls under the three-year provisions. Bank v. Hawkins, 174 U. S. 364, and cases cited in opinion in this case below, 106 Fed. Rep. 791.

Opinion:
Mr. Chief Justice Fuller,
after making the foregoing statement, delivered the opinion of the court.
It is conceded that, in the absence of any provision of the act of 'Congress creating the liability, fixing a limitation of time for commencing actions to enforce it, the statute of limitations of the particular State is applicable. Rev. Stat. §721; Campbell v. Haverhill, 155 U. S. 610. If, then, this action was barred by the statute of limitations of the State of Washington, that ended it, and both judgments below must be reversed and the cause remanded to the' Circuit Court with a direction that judgment be entered for defendant.
Reference to the state statutes shows that subdivision 2 of §4798 relates to "an action upon a contract in writing, or liability express or implied arising out of a written agreement," while subdivision 3 of §4800 relates to "an action upon a contract or liability, express or implied, which is'not in writing, and does not arise out of any written instrument." The one relates to contracts or liabilities growing out of contracts in writing, and the other to contracts or liabilities growing out of contracts not in writing. The receiver's contention is that the case falls, within subdivision 3 of § 4800, imposing the limitation of three years. If it does not, it is not otherwise provided for, and falls within § 4805, which fixes the limitation at two years.
And as this action was commenced within three years, but not within two years, after the assessment became due and payable, the question is whether subdivision 3 of § 4800 applies.
It is contended that the meaning of the word "liability" as used in that subdivision is not restricted to contract liabilities, but reading it with subdivision 2 of § 4798, and in view of the enumeration of other actions to enforce liabilities, we think that this cannot be so, and, indeed, the subdivision has been construed by the Supreme Court of Washington as applicable only to contracts. Suter v. Wenatchee Water Power Company, 35 Washington, 1; Sargent v. Tacoma, 10 Washington, 212. The Circuit Court was of that opinion when the case was originally disposed of, and held that the cause of action arose by force of the statute and did not spring from contract. 98 Fed. Rep. 378. But that judgment was reversed by the Circuit Court of Appeals on the ground that the liability was not only statutory but contractual as well, and that the limitation of three years applied in the latter aspect. 106 Fed. Rep. 791. Conceding that a statutory liability may be contractual in its.nature, or more accurately, gwasi-contractual, does it follow that an action given by statute should be regarded as brought on simple contract, or for breach of a simple contract, and, therefore, as coming within the provision in question?
The national bank act provides that "the shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares." Rev., Stat. § 5151.
And under other sections the duty is imposed on the Comptroller of the Currency to give the creditors of an insolvent national bank the benefit of the enforcement of this personal liability, and to decide whether the whole, or a part, and, if only a .part, how much, shall be collected, he being also authorized to make more than one assessment, as circumstances may require. Kennedy v. Gibson, 8 Wall. 498; Studebaker v. Perry, 184 U. S. 258, and cases cited. But even his decision does not determine the liability except as- to contracts, debts, and engagements of the bank lawfully incurred. Schrader v. Manufacturers' National Bank, 133 U. S. 67.
The liability is conditional, the statutes of limitation do not commence to run until after assessment has been made. McDonald v. Thompson, 184 U. S. 71.
In the latter case the statute of Nebraska provided (§ 10) that actions must be commenced yfithin five years, "upon a specialty, or any agreement, contract or promise in writing, or foreign judgment;" and (§ 11) within four years "upon.a contract not in writing, express or implied; an action upon a liability created by statute other than a forfeiture or penalty."
The action was brought on an assessment upon the stockholders of a national bank to the amount of the par value of' the shares, and not to recover an amount unpaid on the original subscription, and it was held that the five-year limitation did not apply, because the cause of action was not upon a written contract, but that the four-year limitation applied, "whether the promise raised by the statute was an implied contract not in writing or a liability created by statute," no distinction between them as to the limitation being made by the state statute. And Mr. Justice Brown, speaking for the court, said: "Whether the promise raised by the statuté was an implied contract'not in writing or a liability created by statute, it is immaterial to inquire. For the purposes of this' case it may have been both. The statute was the origin of both the right and the remedy, but the contract was the origin of the personal responsibility of the defendant. Did. the statute make a distinction between them with reference to the time within which an action must be brought it might be necessary to make a more exact definition; but as the action must be brought in any case within four years, it is unnecessary to go further than to declare what seems entirely clear to us, that it is not a contract in writing within the meaning of section 10 of the Nebraska act." And it was also said: "Granting there, was a.contract with the creditors to pay;a sum equal to the value of the stock taken, in addition to the sum invested in the shares, this was 'a contract created by the statute, and obligatory upon the stockholders by reason of the statute existing at the time of their subscription; but it was not a contract in writing within the meaning of the Nebraska act, since the writing — that is, the subscription — contained 'no reference whatever to the statutory obligation and no promise to respond beyond the amount of the subscription. In none of the numerous cases upon the subject in this court is this obligation treated as an express contract, but as ope created by the statute and implied from' the express contract of the stockholders to take and pay for shares in the association."
In the present case the limitation imposed on an action. upon a statute for penalty or forfeiture, where an action was given) was three years (sub. 6, § 4800), and on any other action to enforce a statutory liability was two years, because not otherwise provided for, and, therefore, the question must be met whether this is an action brought on a contract or not. But it is an action to recover on an assessment levied by the Comptroller of the Currency by virtue of the act of Congress, and although the shareholder in taking his shares subjected himself to the liability prescribed by the statute, the question still remains whether that liability constituted a contract within the meaning of the statute of limitations of the State of Washington.
Some statutes imposing individual liability are merely in affirmation of the common law, while others impose an individual liability other than that at common law.. If § 5151 had provided that subscribing to stock or taking shares of stock amounted to a promise directly to every creditor, then that liability would have been a liability by contract. But the words of § 5151 do not mean that the stockholder promises the creditor as surety for the debts of the corporation, but merely impose a liability on him as secondary to those debts, which debts remain distinct, and to which the stockholder is not a party. The liability is-a consequence of the breach by the corporation of its contract to pay, and is collateral and statutory. Brown v. Eastern. State Company, 134 Massa chusetts, 590; Platt v. Wilmot, 193 U. S. 602. In Matteson v. Dent, 176 U. S. 521, the stock still stood in the name of the decedent, and it was decided that the statutory liability was a debt within the state law, but not that it was a true contract.
It is true that in particular cases the liability has been held to be in its nature contractual, yet it is nevertheless conditional, and enforcible only according to the Federal statute, independent of which the cause of action does not exist, so that the remedy at law in effect given by that statute is subject to the limitations imposed by the state statute on such actions.
Cases such as Carrol v. Green, 92 U. S. 509, and Metropolitan Railroad Company v. District of Columbia, 132 U. S. 1, are not controlling, for in them the right to recover was direct and immediate and not secondary and contingent. In Metropolitan Railroad Company v. District of Columbia, the charter of the company provided "that the said corporation hereby created shall be bound to keep said tracks, and for the space of two feet beyorid the outer rail thereof, and also, the space between the tracks, at all times well paved and in good order, without expense to the United States or to the city of Washington.!' The declaration set out a large amount of paving done by the. city, which it was averred should have been done by the company. The action was based on the implied obligation on the part of defendant to reimburse plaintiff for moneys expended in performing the duty, which the statute imposed on defendant. In-Carrol v. Green it was said: "According to the statute, the liability of ' each stockholder ' arose upon 'the failure of the bank.' The liability gave at once the right to, sue; and, by necessary consequence, the period of limitation began at the same time."
But here the right to sue did not obtain until the Comptroller of the Currency had' acted, and his order was the basis of the suit. The statute of limitations did not commence to run until assessment made, and then it ran as against an action to enforce the statutory liability and not an action for breach of contract.
We think that subdivision 3 of § 4800 did not apply, and that § 4805 did.
The judgment of the Circuit Court of Appeals is reversed; the judgment of the Circuit Court is also reversed, and the cause remanded to that court with a direction to sustain the demurrer and enter judgment for defendant.