Cockrill v. Butler

• Decision Date: 15 February 1897
• Citation: 78 F. 679
• Parties: COCKRILL v. BUTLER et al.
• Court: U.S. District Court — Eastern District of Arkansas

78 F. 679

COCKRILL v. BUTLER et al.

United States Circuit Court, E.D. Arkansas.

February 15, 1897

Cockrill & Cockrill and J. M. Moore, for plaintiff.

Rose Hemingway & Rose, M. M. Cohn, J. M. Rose, E. M. Kimball, and John McClure, for defendants.

WILLIAMS District Judge.

This is a suit in equity, brought by the plaintiff, as receiver of the First National Bank of Little Rock, against the defendants, charging that they were directors of the said bank for a period of years, and seeking to fix a liability upon them as such directors under the provisions of the acts of congress and by the rules of equity. The bill, after reciting various losses sustained by the bank during the time in which the defendants were directors thereof, charges:

'That when said bank failed its liabilities, resulting from the mismanagement of its affairs, exceeded its resources to such an extent that it became necessary for the comptroller to make an assessment of 92 per cent. on the stockholders for the purpose of paying its debts, and it is doubtful if the fund raised from such assessment will be enough to pay off and discharge all of the liabilities. Plaintiff avers that under the provisions of the acts of congress, as well as by the rules of equity, the defendants are liable for the losses ensuing from their wrongful acts and from their neglect and failure to perform their duties, and he alleges that the bank was injured and sustained loss to a very large amount, to wit, three hundred thousand dollars, by the aforesaid misconduct and neglect of the defendants. During all the time of the said illegal and wrongful acts the defendants, or some of the, were the directors of the bank, and constituted a majority of the board, and no suit could be brought by the corporation by reason thereof. Wherefore plaintiff prays that process issue against the defendants, requiring them to appear and answer the allegations of plaintiff's complaint, but not under oath, which is hereby waived; and upon a hearing of said cause that the defendants be required to make good all the losses sustained by said bank by reason of their misconduct and neglect to perform their duties, and that he have judgment against them, and each of them, for such sum as they may be respectively liable for, and for such other and further relief as may seem meet.'

The original complaint in this case was filed and writ issued on May 22, 1894. Various amendments have been made from time to time to the original bill, to meet objections raised by demurrers which have been heretofore passed upon by the court, and to which it is not now necessary to further refer. The bill alleges that the First National Bank was placed in the hands of a receiver by the comptroller of the currency on the 3d day of February, 1893, and that the causes of action recited in the bill all occurred prior to that time. The defendants interpose a demurrer to the bill as it now stands with its various amendments, by which demurrer they interpose the defense of the statute of limitations of the state of Arkansas, claiming that by said statute the cause of action is barred after the lapse of one year. The demurrer raises four propositions: The first is, does the states statute of limitations apply to proceedings in the federal courts, at law and in equity, whether the cause of action be based upon federal statutes, state statutes, or common law? Second, does the cause of action in this case come within the provisions of the statute of limitations of the state of Arkansas, which is claimed to have been in full force and effect in the state of Arkansas from the year 1838 to the present time? The statute mentioned is in the following language:

'The following actions shall be commenced in one year after the cause of action shall accrue and not after: (1) All special actions on the case, for criminal conversation, assault and battery and false imprisonment; (2) all actions for words spoken, slandering the character of another; (3) all words spoken whereby special damages are sustained. ' Sand. & H. Dig. Sec. 4823.

Third, is the above-quoted statute of limitations in full force and effect in the state of Arkansas, or has it been repealed or abrogated?

It is unnecessary to take up much time in the disposition of the first proposition, i.e. does the said statute of limitations apply to proceedings in the federal courts, in law or equity, whether the cause of action is based upon federal statutes or state statutes or the common law? This court has heretofore held that this action is based upon a federal statute, to wit, section 5239 of the Revised Statutes, which is in the following language:

'If the directors of any national banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate any of the provisions of this title, all the rights, privileges and franchises of the association shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, district, or territorial court of the United States, in a suit brought for that purpose by the comptroller of the currency, in his own name, before the association shall be dissolved. And in cases of such violation, every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person, shall have sustained in consequence of such violation.'

This having been settled, so far as this court is concerned, the inquiry arises, does the state statute of limitations apply to this proceeding? In Carroll v. Green, 92 U.S. 509, which was a suit in equity in the United States court brought by the creditors of an insolvent bank against its stockholders to recover an amount for which they as stockholders became liable under the charter by reason of its insolvency, the state statute of limitation was interposed as a defense. The court held that it applied, using the following language:

'If a claim like that of the appellees, sued at law, would have been barred at law, their claim is barred in equity. This proposition is too clear to require argument or authority to support it.'

The circuit court of appeals of the Eighth circuit, in Hayden v. Thompson, 17 C.C.A. 592, 71 F. 60, applied the statutes of limitation of the state of Nebraska to a suit in equity brought by the receiver of an insolvent national bank to recover from stockholders the amount paid to them in dividends improperly declared. Judge Sanborn, speaking for the court, said:

'It goes without saying that the national courts, sitting in equity, act or refuse to act in analogy to the statute of limitation of the state in which they are sitting, and that if the analogous action at law against this defendant would be barred under the statutes of Nebraska this suit must be dismissed as against him.'

But the matter has been definitely settled beyond controversy by the supreme court of the United States in Campbell v. City of Haverhill, 155 U.S. 610, 15 Sup.Ct. 217. The court in that case refers to the division among the circuit courts upon the question, and reviews the arguments against the applicability of the statutes, and, in summing up, Judge Brown, speaking for the court, says:

'The truth is that statutes of limitation affect the remedy only, and do not impair the right, and that the settled policy of congress has been to permit rights created by its statutes to be enforced in the manner and subject to the limitations prescribed by the laws of the several states.' So it was decided that, in a patent case, the state statute applied, although the cause of action arose out of a federal statute, and was cognizable only in the federal courts. It may well be said, therefore, that the first proposition raised by the demurrer is definitely settled.

The determination of the second question involves the consideration of two propositions: First, the nature or kind of action under which this may be classed; and, second, the intent, meaning, force, and effect of the statute of Arkansas quoted, and which it is contended governs in this case. As to the kind of action this is, Justice Miller and Judge Thayer, in the case of Stephens v. Overstolz, 43 F. 465, 466, say:

'The statute (referring to the statute under which this action is brought) says, you shall not do that, and if you do you shall be liable to all persons injured by your wrongful act. The extent of the liability incurred is the amount of the damage you have inflicted upon others. The terms 'wrongful act,' 'liability incurred,' and 'damages' would seem to leave no doubt that the foundation of this class of actions is a tort.'

Mr. Chitty says:

'Actions on the case are founded on common law or upon acts of parliament, and lie generally to recover damages for torts not committed with force, actual or implied.' 1 Chit.Pl. 133.

He further says that 'the injuries may be by nonfeasance misfeasance, or malfeasance'; and that 'these respective torts are commonly the performance or omission of some act contrary to the general obligation of the law or the particular rights or duties of the parties.' Id. Again Mr. Chitty says: 'Wherever the statute prohibits an act, and provides for a recovery of damages caused by its violation, the remedy is an action on the case.' Id. 142. Mr. Stephen says that an action on the case lies where a party sues for damages for any wrong to which trespass will not apply. Steph. Pl. Sec. 52. Judge Bliss says that trespass lies for a wrongful act committed with force, and where the injury is direct; that where the injury is not the direct result of force, but grows out of the wrongful act of defendant, the...