Court Opinion

ID: 6877454
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:09:46.170175+00
Date Added: 2024-06-11T16:05:31.298231
License: Public Domain

CLARK, Circuit Judge
(dissenting).
I think this claim is now too stale to be enforced. New York Civil Practice Act, § 49, subd. 4, includes, among the actions which must be commenced within three years after the cause of action has accrued, “an action against a * * * stockholder of a moneyed corporation, or banking association, * * * to enforce a liability created by the common law or by statute.” This statute has been applied to an action in a federal court in the Northern District of New York to enforce a stockholder’s statutory liability (Platt v. Wilmot, 193 U.S. 602, 24 S.Ct. 542, 48 L.Ed. 809), pursuant to the wise and settled policy whereby analogous state statutes of limitation are applied in the federal courts when there is no controlling federal statute. See Pufahl v. Estate of Parks, 299 U.S. 217, 225, 57 S.Ct. 151, 81 L.Ed. 133. The statute is specific; it is difficult to think of words more apt to cover the present case of a suit more than three years old to enforce liability of stockholders of an insolvent joint stock land bank, under 12 U.S.C.A. § 812.1
The ruling that the statute is not applicable resorts for support to the historic division of remedies among courts of law and courts of equity to justify that result. And hence to a statutory liability created in 1916 — one essentially contractual in nature because the statute makes it a conditional obligation assumed as a part of the voluntary act of becoming a stockholder— is applied a rule developed by the English chancellors as a part of their general system of grace to suitors improperly treated in the law courts, and an explicit statute of limitations is disregarded. I would not contest that history; it served its purposes in reforming law and is a part of our glorious heritage. Nor do I question that we cannot easily or roughly repeal .historical doctrines, and hence that the rule that statutes of limitation do not apply fully to purely equitable claims (Hanover Fire Ins. Co. v. Morse Dry Dock & Repair Co., 270 N.Y. 86, 200 N.E. 589) may have its appropriate scope in proper cases. But ancient rules can only apply to newly created statutory liabilities by analogy at best. And the analogy here seems 'to me clearly to a claim at law. Indeed, up to this time that certainly has been the view, in the precedents holding stockholders’ liability subject to statutes of limitation, whether the form of action was equitable or otherwise. Carrol v. Green, 92 U.S. 509, 516, 23 L.Ed. 738; McDonald v. Thompson, 184 U.S. 71, 22 S.Ct. 297, 46 L.Ed. 437; Hale v. Coffin, C.C., 114 F. 567, 576; Id., 1 Cir., 120 F. 470, 473; Godfrey v. Terry, 97 U.S. 171, 24 L.Ed. 944; Thompson v. German Ins. Co., C.C.Neb., 76 F. 892; Early v. City of Helena, 8 Cir., 87 F.2d 831, 832; Terry v. McLure, 103 U. S. 442, 26 L.Ed. 403. In fact, until we come to these land bank cases, we have been cited to no authorities holding otherwise as to this statutorily created obligation of stockholders. And if the liability is essentially legal, it is quite clear, according to long-settled principles, that, even though the action happens to be an equity one, nevertheless the legal limitation applies. Wallace v. Lincoln Savings Bank, 89 Tenn. 630, 648, 649, 15 S.W/448, 24 Am.St.Rep. 625 (Lurton, J.), cited and followed in Curtis v. Connly, 257 U.S. 260, 42 S.Ct. 100, 66 L.Ed. 222; Hughes v. Reed, 10 Cir., 46 F.2d 435; Schram v. Poole, supra; Torgeson, Rec’r v. Dept. of Trade & Commerce, 127 Neb. 49, 254 N.W. 740; cf. Baker v. Cummings, 169 U.S. 189, 206, 18 S.Ct. 367, 42 L.Ed. 711; Hovenden v. Lord Annesley, 2 Sch. & Lef. 607, 630 (Eng.Ch.1806) ; 2 Story, Eq.Jur., 14th ed., § 70S.
*176But the result reached here is thought necessary because the Supreme Court has held that the remedy to enforce this particular liability under 12 U.S.C.A. § 812 is a representative suit in equity brought on behalf of all the creditors. Wheeler v. Greene, 280 U.S. 49, 50 S.Ct. 21, 74 L.Ed. 160; Christopher v. Brusselback, 302 U. S. 500, 502, 58 S.Ct. 380, 82 L.Ed. 388; cf. Brusselback v. Cago Corp., 2 Cir., 85 F.2d 20, certiorari denied 299 U.S. 586, 57 S.Ct. 111, 81 L.Ed. 432; and Holmberg v. Anchell, D.C., S.D.N.Y., 24 F.Supp. 594. I suggest that the italicized words may be omitted without change in the rule; or, in other words, that they are no part of the rule itself. For that rule is really aimed at, not the underlying nature of the stockholders’ liability, but the effecting of a collection and distribution of funds “equally and ratably” (as appellees argue so forcefully, using the words employed in 12 U.S.C.A. § 812) among all the creditors. Involved is only a procedural difficulty on an issue in which the defendants are not primarily concerned and which should be solved without affecting defendants’ responsibility. And there is no procedural difficulty, from lack of parties or otherwise, in establishing defendants’ liability, up to the full par value of the stock where (as here) the bank is completely insolvent, or for a less amount where it is not; and the unnecessary prayer for an accounting in the complaint adds nothing. A truer indicia of the nature of a claim than any mere question of parties is whether a jury trial can fairly be had. All 'analogies would say that on the issue of defendants’ liability to pay this money, a jury trial should be granted unless waived; on the issue of distribution of the funds recovered, whether presented in the same suit, or, as easily possible, in a separate suit, no jury trial should be had.
Now the representative suit, which originated in equity, is, of course, a neat procedural device, well fitted for the situation which the Supreme Court has found to exist with respect to this federal statute. But since code pleading developed, it has been available in all actions — legal or equitable — and hence in New-York-it has been in use since 1849 (McKenzie v. L’-Amoureux, 11 Barb., N.Y., 516, 1851), and was therefore properly available in the federal courts under the conformity principle when this action was brought. 2 Moore’s Federal Practice, § 23.02, note 13, and cases cited; .Penny v. Central Coal & Coke Co., 8 Cir., 138 F. 769; Stearns Coal & Lumber Co. v. Van Winkle, 6 Cir., 221 F. 590; Cherry v. Howell, D.C., E.D.N.Y., 4 F.Supp. 597, also appearing in 2 Cir., 66 F.2d 713; Colt v. Hicks, 97 Ind.App. 177, 179 N.E. 335; 19 Corn.L.Q. 614; but see 20 Va.L.Rev. 564, supporting the old distinctions in part. Since the adoption of the new Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, the class action is fully available in all civil actions. Rule 23, fully discussed in 2 Moore, op. cit., §§ 23.01-23.09.
Hence the fundamental legal-nature of this claim, so far as the defendants are concerned, seems to me to persist through any procedural forms or devices designed purely for the adjustment of equities among plaintiffs. And á wise policy calls for its application. The contrary holding blots out all statutes of limitation for this claim and leaves only the uncertain doctrine of laches, where courts are prone to look at the plaintiffs’ petitionings, and not at the defendants’ protection. Naturally joint stock land bank stockholders would include many borrowing farmers, for whom the fanp loan legislation was devised; indeed under certain circumstances borrowers could be required to take some stock. Compare 12 U.S.C.A. § 813 with ibid. § 723(c) and § 802; G. E. Putnam, The Federal Farm Loan Act, 6 Am.Econ. Rev. 770, 781 (1916). If defendants in ordinary civil actions are entitled to protection from harassment by stale, and hence uncertain and doubtful, claims, then it is to be expected that this group of deserving persons who have always been favorites of legislatures would be entitled to similar protection. One of the lessons thoroughly taught by the recent depression is that double liability of bank stockholders is a great hardship upon those who are subject to it, without consequent gain in safety to the bank, and hence the legislative trend is now overwhelmingly toward abolition of such liability. This has now been accomplished as to national banks and as to state banks in New York, and by 1936 in at least 18 others of an original 38 imposing liability. Act of June 16, 1933, c. 89, § 22, 48 Stat. 189; Act of Aug. 23, 1935, c. 614, § 304, 49 Stat. 708, 12 U.S.C.A. § 64a; N.Y.Const, art. 8, § 7, repealed by vote of the people in 1935; N.Y. Banking Law, Consol.Laws, c. 2, § 113-a; R. W. Marquis and F. P. Smith, Double Liability for Bank Stock, 27 Am.Econ.Rev. *177490, 500 (1937). Messrs. Marquis and Smith point out that the principle of double liability “today stands at its lowest point of popularity in half a century” and “is definitely losing ground,” and that at the present rate “it will be a matter of only a few years until double liability provisions will have disappeared from banking regulations in the United States.” The present ruling, it is submitted, goes against this trend.
Here the defendants are not even the beneficial holders of the stock, but are pledgees forced to redeem their pledges or are nominal holders; while at least the named plaintiffs are speculators who bought up the bonds they hold at 50 cents on the dollar after the bank’s insolvency and who already have a profit, since the bank has paid them a 63 per cent dividend. True, they are but “representatives” of the creditors, but we may venture to believe they are not unrepresentative of those creditors who may now be suing. Ordinary statutes of limitation afford fully adequate protection to worthy suitors whose action has failed otherwise than on its merits. The New York Civil Practice Act, § 23, gives such suitors a further year in which to start their action anew. Hence Platt v. Wilmot, supra, is wise and should govern here.
But even if the doctrine of laches alone applies, I think the plaintiffs have not shown a good case. Possibly the first year and a half of delay until the Supreme Court had spoken in Wheeler v. Greene, 280 U.S. 49, 50 S.Ct. 21, 74 L.Ed. 160, may be excused, though even here plaintiffs had some warning of the ultimate result by the District Court’s decision forecasting it in June, 1928 — a month and a half after their cause accrued; and there is a question how far one is entitled to delay his suit until other parties in another action involving another bank have settled the law. But in any event the later delay is inexcusable. It seems to be dde to the time taken to perfect some voluntary organization of creditors willing to risk the chance and expense of suit. Indeed, one creditor started an action on behalf o'f itself and all others in this district in proper time, and then voluntarily discontinued, though leave to amend had been given. Such voluntary discontinuance prevents the operation of New York Civil Practice Act, § 23. Since this was a representative suit and amendment was freely given under the old equity rules (see Equity Rules 28, 37, 38, 28 U.S.C.A. following section 723), as now under the new rules of civil procedure (Rules 15, 21, 23, 28 U.S.C.A. following section 723c), it could have been amended to have included more representative plaintiffs if such a course was thought either necessary or desirable.
It is now almost twelve years since this joint stock land bank failed. Of course, a part of the period has been consumed by the determined efforts of the defendants to contest a levy which one can sympathize with them in considering inequitable. But I think it dear there would not have been unusual delay, except for the time needed to stimulate a pursuit corps into action. I hate to see the developing union of law and equity halted to allow this kind of suit to slip by against a statute in terms clearly applicable. I favor reversal of the decree below.

 A similar rule governs the claim against the California defendant herein. New York Civil Practice Act, § 55; Cal. Code Civ.Proc. § 359; Johnson v. Greene, 9 Cir., 88 F.2d 683, 684; Schram v. Poole, 9 Cir., 97 F.2d 566, 567, 572.