325 U.S. 304 (1945), 110, Chase Securities Corp. v. Donaldson

Docket Nº:No. 110
Citation:325 U.S. 304, 65 S.Ct. 1137, 89 L.Ed. 1628
Party Name:Chase Securities Corp. v. Donaldson
Case Date:May 21, 1945
Court:United States Supreme Court

Page 304

325 U.S. 304 (1945)

65 S.Ct. 1137, 89 L.Ed. 1628

Chase Securities Corp.



No. 110

United States Supreme Court

May 21, 1945

Argued February 27, 1945



1. Upon the record of this suit to recover the purchase price of securities sold in violation of the Minnesota Blue Sky Law and on misrepresentations, the defendant's immunity from suit cannot be said to have been finally adjudicated by the state courts prior to the legislature's enactment of an Act which operated to abolish any defense that the defendant may have had under the state statutes of limitations, and the Act therefore did not deprive the defendant of property without due process of law in violation of the Fourteenth Amendment. Following Campbell v. Holt, 115 U.S. 620. P. 310.

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2. The essential holding in Campbell v. Holt -- that, where lapse of time has not invested a party with title to real or personal property, a state legislature, consistently with the Fourteenth Amendment, may repeal or extend a statute of limitations, even after right of action is barred thereby, restore to the plaintiff his remedy, and divest the defendant of the statutory bar -- so far as applicable to this case, is sound, and should not be overruled. Pp. 311, 315.

3. The Act in question was a general one, applying to all similarly situated persons or transactions, and did not violate the equal protection clause of the Fourteenth Amendment. P. 309, n. 5.

4. That the defendant had no opportunity to submit testimony of legislators as to the intent of the Act did not constitute a denial of due process of law. P. 309, n. 5.

216 Minn. 269, 13 N.W.2d 1, affirmed.

Appeal from a judgment upholding the constitutionality of a state statute in a suit to recover the purchase price of securities sold to the plaintiff.

JACKSON, J., lead opinion

MR. JUSTICE JACKSON delivered the opinion of the Court.

This appeal from a judgment of the Supreme Court of Minnesota attacks as violative of the Fourteenth Amendment a provision of the Minnesota statutes enacted as part of a general revision of the Minnesota Securities or Blue Sky Law. Its effect upon appellant was to lift the bar of the statute of limitations in a pending litigation, which appellant contends amounts to taking its property without due process of law.

This action was brought in state court in November, 1937, to recover the purchase price of "Chase units," sold by appellant in Minnesota to the appellee's testate August

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10, 1929. The "units" had not been registered, as required by the laws of that state. The action was based in part on illegality of the sale, but it also was grounded on common law fraud and deceit. Defendant relied among other defenses on the statute of limitations. Plaintiff countered that the running of the statute had been suspended because defendant had withdrawn from the state and the statute did not run during its absence. The case was tried by the court without a jury. It found that there was a sale in violation of the Blue Sky Law, that the Minnesota 6-year statute of limitations, Mason's Minn.St.1927, § 9191, applying to actions "upon a liability created by statute," governed the case, but had been tolled by withdrawal of the appellant from the state in 1931. Judgment was therefore rendered for the purchase price, adjusted for interest and dividends, and the Court found it unnecessary to pass on the fraud issues.

The Supreme Court of Minnesota reversed.1 It held, by reference to a companion case,2 that the statute of limitations had not been tolled by the appellant's absence from the state because it had designated agents to receive service of process after its departure, as required by statute. The case was remanded on January 10, 1941, without prejudice to further proceedings on "issues other than that of the tolling of the statute of limitations."

While proceedings were pending in the lower court, the legislature enacted a statute, effective July 1, 1941, which amended the Blue Sky Law in many particulars not pertinent here. The section in question added a specific statute of limitations applicable to actions based on violations of the Blue Sky Law3 as to which there had [65 S.Ct. 1139] been no provision

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except a general statute of limitations. Under the former law, the limitation on actions for fraud did not commence to run until its discovery. Under the new law, actions for failure to disclose nonregistration or for misrepresentations concerning registration, or for falsity of representations implied from the fact of sale, all of which grounds were set up in this action, must be brought within six years of delivery of the securities. Aggrieved purchasers

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were therefore denied future benefit of suspension of the period of limitation during the time such frauds or grounds of action remained undiscovered. But it also was provided that, where delivery had occurred more than five years prior to the effective date of the Act, which was the fact in this case, the action might be brought within one year after the law's enactment. The effect of this was to abolish any defense that appellant might otherwise have made under the Minnesota statutes of limitation.

Both appellant and appellee moved in the trial court, shortly after the Act became effective, for supplemental findings. Appellant asked findings in its favor on the theory that the action was barred, that the new Act was inapplicable, and that there was no proof of actual fraud. Appellee contended that the 1941 law applied, and that, by reason of it, recovery was not barred. The trial court determined that the plaintiff was entitled to recover in tort both on the ground of an illegal sale and on the ground of common law fraud and deceit; that plaintiff had not discovered the deception until shortly before the action was begun; that the provisions of the 1941 Act applied to the plaintiff's "cause of action, or any of the separate grounds of relief asserted by plaintiff," and operated to extend the time for the commencement of action thereon to July 1, 1942, and that plaintiff's action was therefore commenced within the time limited by the statutes of Minnesota. The appellant moved for amended findings, and then, for the first time, raised the federal constitutional question that the statute, if applied so to lift the bar, deprived appellant of property without due process of law in violation of the Fourteenth Amendment. Its motion was denied.

Appealing again to the Supreme Court of Minnesota, appellant, among other things, urged this federal constitutional question. The Supreme Court again did not reach decision of the fraud aspects of the case. It held that the

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Blue Sky Law required the securities to be registered, and was violated by the sale; that the action was one in tort to recover as damages the purchase price of unregistered securities sold in Minnesota; that the new limitations [65 S.Ct. 1140] statute was applicable, and had the effect of lifting any preexisting bar of the general limitation statute, and that, in so doing, it did not violate the due process clause of the Fourteenth Amendment. The court relied on Campbell v. Holt, 115 U.S. 620, saying:

We do not find that Campbell v. Holt has been reversed or reconsidered, and we regard it as sound law; and, certainly, so far as the Federal Constitution is concerned, it is binding on this court until reversed by the Supreme Court.4

The judgment was therefore affirmed, rehearing was sought and denied,5 and the case brought here by appeal.

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As the case stood in the state courts, it is not one where a defendant's statutory immunity from suit had been fully adjudged, so that legislative action deprived it of a final judgment in its favor. The lower court had decided against appellant. The Supreme Court had confined its reversal to one question -- whether the defendant's withdrawal from the state tolled the running of the statute of limitations. The case was returned to the lower court without prejudice to any other question.

Appellant, however, insists that it was sued upon two separate and independent causes of action, one being "upon a liability created by statute," and that its immunity from suit on that cause of action had been finally adjudicated. The argument is not consistent with the holdings of the state court. The Blue Sky Law imposes duties upon a seller of certain securities, but it does not expressly define a liability for their omission, or create a cause of action in favor of a buyer of unregistered securities. The state courts, nevertheless, held that such an illegal sale will support a common law action in tort. Drees v. Minnesota Petroleum Co., 189 Minn. 608, 250 N.W. 563. And, on the second appeal of this case, the court said:

The action was brought in tort to recover as damages the purchase price of unregistered securities. . . . It also sought recovery on the ground of deceit based on misrepresentation, but, in view of our disposition of the case, we need not consider

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that phase of the case.6

It is not uncommon that a single cause of action in tort will rest both on omission of a statutory duty and on common law negligence; the two bases do not necessarily multiply [65 S.Ct. 1141] the causes of action. Cf. Baltimore Steamship Co. v. Phillips, 274 U.S. 316, 321; New York Central & H.R. R. Co. v. Kinney, 260 U.S. 340, 346; Seaboard Air Line Ry v. Koennecke, 239 U.S. 352, 354. This appears to be permitted by the law of Minnesota. Tuder v. Oregon Short Line R. Co., 131 Minn. 317, 318, 319, 155 N.W. 200. It is true that the Supreme Court, in disposing of the first appeal, relied on a companion case in which it...

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