Holmberg v. Carr

• Decision Date: 07 December 1936
• Docket Number: No. 87.,87.
• Citation: 86 F.2d 727
• Parties: HOLMBERG et al. v. CARR.
• Court: U.S. Court of Appeals — Second Circuit

86 F.2d 727 (1936)

HOLMBERG et al. v. CARR.

No. 87.

Circuit Court of Appeals, Second Circuit.

December 7, 1936.

F. Wright Moxley, of New York City, for appellant.

Burlingame, Nourse & Pettit, of New York City (Paul A. Crouch and Clarence Fried, both of New York City, of counsel), for appellees.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

L. HAND, Circuit Judge.

This is an appeal from a decree, striking out certain parts of the answer of the defendant Carr, as sham and frivolous, dismissing the defences in his answer, and summarily appointing a receiver in the Southern District of New York, ancillary to a receiver already appointed in the Fourth Division of the District of Minnesota. The bill was filed by five creditors of the "Southern Minnesota Joint Stock Land Bank of Minneapolis," suing on behalf of themselves and all other creditors similarly situated. It alleged that the plaintiffs had already filed a similar bill in the Fourth Division of the District of Minnesota on July 28, 1932, against the same bank, which had alleged that the bank had become so far insolvent that an assessment of one hundred per cent. upon its shareholders was necessary to pay the creditors in full, and which had prayed that a receiver be appointed to enforce such an assessment for the benefit of all creditors. That court had appointed such a receiver, and had levied an assessment upon all shareholders which it directed the receiver to collect; he had qualified and was now acting. The bank's books showed that about fifty-five of its shareholders were residents of the Southern District of New York, whose liabilities amounted in the aggregate to about one and a half million dollars. These the Minnesota receiver had no power to enforce. Therefore the bill asked that an ancillary receiver be appointed with the same powers and for the same purposes as in Minnesota. The defendants to the present suit are the bank, the receiver, appointed by the Federal Farm Board, and his successor, who was also appointed by the Minnesota court, and three of the New York shareholders, of whom Carr, the appellant, was one. He appeared and answered; he specifically denied that the Minnesota bill had been filed against him, that an ancillary receiver was necessary, or that the plaintiffs were without adequate remedy at law; he declared that he had no knowledge or information as to the truth of any of the allegations in the bill, and he pleaded some defences not necessary to detail. Upon affidavit of local counsel the judge struck out the denials in the answer, held that the defences were insufficient and impertinent, and granted "summary judgment," appointing an ancillary receiver with the same powers as the Minnesota receiver, and directing him to collect the assessments of local shareholders, whether by separate actions, or in this suit, does not appear.

The practice adopted was anomalous, so far as we can find, apparently imported into a federal suit in equity from the state procedure. The defendant had interposed an answer in which he denied knowledge of all the vital allegations of the bill, a good denial under the Thirtieth Equity Rule (28 U.S.C.A. following section 723). True, the bill spoke only of matters of record in the Minnesota court, copies of which were annexed; but even so we know of no procedure which permits a court of equity to strike any part of an answer because it is a sham, and grant the relief prayed. There is indeed a motion for decree on bill and answer, but on that the answer must be taken as true. Besson & Co. v. Goodman (C.C.) 147 F. 887. Traverses were not originally allowed in answers in equity at all; the defendant's denials were part of his discovery and evidence; every plaintiff had to prove his bill, regardless of denials. Under the Equity Rules this is no longer true, but to strike a denial as sham is no more countenanced now than it was originally. Hence the decree was irregular at best and the cause should have been set down for hearing. However, since the appeal has been presented as though the real question were of the validity of the bill, we will decide that question.

The liability is that of the shareholders of a "Joint Stock Land Bank" under section 812, title 12, U.S.Code (12 U.S.C.A. § 812). In Brusselback v. Cago Corp., 85 F.(2d) 20, we held that creditors of such a bank might file a class bill in equity on behalf of themselves and others against such shareholders as were within reach of the court's arm, and recover against them the amount of their proper assessment — that is, the ratable proportion per share of the deficiency between debts and assets. The bill at bar, as drafted, depends altogether upon what was done in the district court of Minnesota; it does not allege the facts upon which the liability depends, but only their adjudication by that court; hence it can depend only upon the conclusiveness of the assessment there found. There is no enabling act, like section 194 of title 12 U.S.Code (12 U.S.C.A. § 194), by virtue of which the Comptroller levies an assessment against shareholders in a national bank, which will be conclusive elsewhere. Wheeler v. Greene, 280 U.S. 49, 50 S.Ct. 21, 74 L.Ed. 160, held that no such powers were vested in the Federal Farm Board and its receiver; and the assessment can be valid extraterritorially, if at all only because it was made by a court in the...