Broderick v. American General Corporation

• Decision Date: 11 June 1934
• Docket Number: No. 3657.,3657.
• Citation: 94 ALR 1359,71 F.2d 864
• Parties: BRODERICK, Superintendent of Banks of New York, v. AMERICAN GENERAL CORPORATION et al.
• Court: U.S. Court of Appeals — Fourth Circuit

94 ALR 1359, 71 F.2d 864 (1934)

BRODERICK, Superintendent of Banks of New York, v. AMERICAN GENERAL CORPORATION et al.

No. 3657.

Circuit Court of Appeals, Fourth Circuit.

June 11, 1934.

Herbert M. Brune, Jr., of Baltimore, Md. (Brown & Brune, of Baltimore, Md., and Arthur Ofner and Carl J. Austrian, both of New York City, on the brief), for appellant.

Allan H. Fisher and Charles McH. Howard, both of Baltimore, Md. (Reuben Oppenheimer, Morton P. Fisher, Howard H. Conaway, Emory, Beeuwkes, Skeen & Oppenheimer, Fisher & Fisher, William C. Walsh, and Simon E. Sobeloff, all of Baltimore, Md., on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is a suit by the superintendent of banks of the state of New York against stockholders of the failed Bank of United States resident in the state of Maryland, to collect the "double liability" assessment made against them pursuant to the law of New York under which the bank was incorporated. The bill was filed against sixty defendants, but against only six of these are judgments asked in excess of $3,000. The bill was dismissed under the authority of Hale v. Allinson, 188 U. S. 56, 23 S. Ct. 244, 47 L. Ed. 380, on the ground that the remedy at law was adequate; and the superintendent of banks has appealed.

The bill alleges that the bank was incorporated under the laws of the state of New York with a capital stock of 1,010,000 shares of the par value of $25 per share; that the bank was insolvent and plaintiff had taken possession of its property pursuant to the laws of New York and was engaged in liquidating its affairs; that he had made an examination of its condition and had determined that its liabilities exceeded its assets by more than $30,000,000; that he had decided that an assessment against stockholders of $25 per share, the full liability under the New York law, was necessary, and had accordingly levied an assessment in that amount; and that pursuant to the law of New York he had made a demand upon all of the stockholders of the bank, including the defendants, for the payment of such assessment. A list of the stockholders made defendants, with the amount of their stock holdings and the assessments made against them, was set forth in the bill; and attached to it was a certified copy of plaintiff's certificate levying the stock assessment and a copy of the demand made upon each stockholder. The certificate recited that the plaintiff had determined to enforce the individual liability of stockholders, that the assessment of $25 per share to provide money for the payment of creditors was necessary, and that an assessment in that amount had been levied. It contained a statement showing that the assets of the bank amounted to $41,774,017.11 and its liabilities to $75,896,549.71, leaving a deficit of $34,122,532.60, which with interest of $10,048,000 upon claims of creditors amounted to $44,170,532.60. The demand upon stockholders recited the assessment and set forth the amount thereof, together with the number of shares of stock held by the stockholder addressed, and the amount of the assessment against him, and demanded of him the payment of the assessment.

As grounds for invoking the jurisdiction of equity the bill alleged that questions to be determined were the necessity for plaintiff's taking over the bank, the amount of its assets and liabilities, and the amount of the insufficiency of the assets to meet liabilities as compared with the amount of capital stock; that the defendants had a community of interest in the subject-matter of the controversy, to wit, the necessity, amount, and validity of the assessment, and that equity should take jurisdiction to avoid multiplicity of suits; that the New York law permits the joining as defendants of stockholders against whom liability is asserted; that plaintiff is acting as a fiduciary and trustee for the creditors of the failed bank; and that questions necessitating discovery, subrogation, and other equitable remedies might arise, although no facts were alleged showing the necessity for any of these remedies with respect to any of the defendants. Motions to dismiss were filed on the ground that there was a misjoinder of parties and causes of action, that plaintiff had an adequate remedy at law, and, as to the defendants against whom less than $3,000 was asked, that the jurisdictional amount was not involved. As heretofore stated, the bill was dismissed for lack of equity under Hale v. Allinson, supra.

Four questions are presented by the appeal: (1) Whether there was jurisdiction in any aspect of the case as to the defendants against whom a recovery of less than $3,000 was sought; (2) whether equitable rights were asserted or equitable remedies asked which would give the court jurisdiction in equity irrespective of the number of defendants; (3) if not, whether jurisdiction in equity existed because of the number of defendants on the ground of avoiding multiplicity of suits; and (4) if equity was without jurisdiction, should the court have dismissed the bill as to the defendants against whom the jurisdictional amount was involved, or should it have transferred the cause to the law side of the docket to the end that the liability of these defendants might be enforced at law.

On the first question, it is admitted that the liability of each of the stockholders is individual and several. Constitution of N. Y. art. 8, § 7; Banking Laws of New York (Consol. Laws c. 2) §§ 80 and 120. The suit, therefore, as to each stockholder involves only the amount of the liability asserted as to him. It is well settled that, in such case, the test of jurisdiction is the amount of each separate claim and not their aggregate amount. Bullard v. City of Cisco, Tex., 290 U. S. 179, 54 S. Ct. 177, 180, 78 L. Ed. 254; Id. (C. C. A. 5th) 62 F.(2d) 313; Woodmen of the World v. O'Neill, 266 U. S. 292, 295, 45 S. Ct. 49, 69 L. Ed. 293; Lion Bonding Co. v. Karatz, 262 U. S. 77, 85, 43 S. Ct. 480, 67 L. Ed. 871; Citizens' Bank v. Cannon, 164 U. S. 319, 321, 17 S. Ct. 89, 41 L. Ed. 451; Walter v. Northeastern R. R. Co., 147 U. S. 370, 374, 13 S. Ct. 348, 350, 37 L. Ed. 206; Georgia Power Co. v. Hudson (C. C. A. 4th) 49 F.(2d) 66, 68, 75 A. L. R. 1439. Where the suit is to enforce the separate liabilities of a number of defendants, the jurisdiction as to a particular defendant does not exist if the amount demanded of him does not equal the jurisdictional amount. "Although the proceeding is in form but one suit, its legal effect is the same as though separate suits had been begun on each of the separate causes of action." Schwed v. Smith, 106 U. S. 188, 190, 1 S. Ct. 221, 222, 27 L. Ed. 156. And, as said in Walter v. Northeastern R. R. Co., supra, "The rule applicable to several plaintiffs having separate claims, that each must represent an amount sufficient to give the court jurisdiction, is equally applicable to several liabilities of different defendants to the same plaintiff."

The cases relied on by plaintiff to sustain the jurisdiction are not in point; and this is clearly apparent when it is remembered that the plaintiff here is suing, not for the collection and administration of a trust fund, but to recover on a statutory liability of the several defendants. Handley v. Stutz, 137 U. S. 366, 11 S. Ct. 117, 118, 34 L. Ed. 706, was a creditor's bill, brought by a creditor whose claim exceeded the jurisdictional amount and who was suing in behalf of himself and other creditors, to require stock subscriptions to be paid in for administration by the court as a trust fund for the benefit of creditors. A motion to dismiss the appeal in the Supreme Court was made on the ground that the amounts distributable to certain of the creditors were less than required to give the Supreme Court jurisdiction on appeal; but this motion was denied on the ground that appellants, against each of whom a decree for more than the jurisdictional amount had been entered, were not interested in the distribution, and that the bill "could not have been filed by one creditor in his own behalf only, and the case does not fall under that class in which creditors who might have sued severally join in one bill for convenience and to save expense." Conway v. Owensboro Savings Bank & Trust Co. (C. C.) 185 F. 950; Alsop v. Conway (C. C. A. 6th) 188 F. 568; Robertson v. Conway (C. C. A. 6th) 188 F. 579, were all similar suits for the collection, administration, and distribution of trust funds; and jurisdiction as against a stockholder liable for less than the jurisdictional amount was expressly based (see 188 F. 579, at page 584) on the ground that the court, having acquired jurisdiction over the administration of the trust, could have brought in such stockholder by an ancillary proceeding for the adjudication of his liability. Reagan v. Midland Packing Co. (D. C.) 298 F. 500, is to the same effect. Pacific Live-Stock Co. v. Hanley (C. C.) 98 F. 327, involved injunctive relief where the jurisdiction was measured by the value of the right of plaintiff which was being protected against the several defendants. Dern v. Tanner (D. C.) 60 F.(2d) 626, involved plaintiff's right to use certain streams, and the measure of the amount involved was held to be the value of that right.

Plaintiff places great reliance upon the decision of this court in General Finance Corporation v. Keystone Credit Corporation (C. C. A. 4th) 50 F.(2d) 872, 876. But that was a suit in behalf of all of the stockholders of a corporation who had been defrauded of their stock by another corporation, and its purpose was to recover the stock of which they had been defrauded and in the meantime to protect the assets of the corporation in which they were stockholders. It was held that the smaller stockholders were properly allowed to join as plaintiffs and to participate in the fund realized by the suit, just as small creditors are allowed to join in a...