Hospelhorn v. Corbin

• Decision Date: 02 March 1942
• Citation: 19 S.E.2d 72
• Court: Virginia Supreme Court
• Parties: HOSPELHORN et al. v. CORBIN.

19 S.E.2d 72

HOSPELHORN et al.

v.CORBIN.

Supreme Court of Appeals of Virginia.

March 2, 1942.

Error to Circuit Court, Northampton County; John E. Nottingham, Judge.

Action by John D. Hospelhorn and another, ancillary receivers, etc., against Charles S. Corbin to enforce defendant's liability as a stockholder in an insolvent trust company. To review an adverse judgment, plaintiffs bring error.

Affirmed.

Before CAMPBELL, C. J., and HOLT, HUDGINS, GREGORY, BROWNING, EGGLESTON, and SPRATLEY, JJ.

William F. Ayres and W. A. Dickinson, both of Cape Charles, for plaintiffs in error.

Benjamin W. Mears, L. H. Mears, and Howard H. Adams, all of Eastville, for defendant in error.

HUDGINS, Justice.

Charles S. Corbin, a resident of Baltimore in 1930, acquired 100 shares of stock in the Baltimore Trust Company. The statute law of Maryland rendered this stock liable to an assessment of $10 per share in the event the corporation became insolvent and its assets were insufficient to discharge its obligation to creditors. Later, Corbin became a citizen of Northampton county, Virginia.

On January 5, 1935, John D. Hospelhorn, a deputy bank commissioner, was duly appointed receiver to liquidate the assets of the then insolvent Baltimore Trust Company. On November 13, 1935, Circuit Court No. 2 of the city of Baltimore imposed an assessment of $10 per share on each share of stock in the company then outstanding. In the order making the assessment, the receiver was authorized "to take and institute such proceedings and suits against any and all parties liable as may be advisable and necessary."

The first notice of motion, instituted in the Circuit Court of Northampton county by the receiver against Charles S. Corbin to recover the amount of the stock assessment, was dismissed. This court declined to review the judgment of dismissal on the ground that a foreign receiver was not authorized to maintain an action in the courts of this State. Thereafter, the Circuit Court of Northampton county appointed ancillary receivers, who instituted this action.

The defendant filed two pleas. One alleged that the action was barred because it was not brought within three years, and the other alleged that the action was barred because it was not brought within five years. The trial court sustained the plea of the three-year limitation and dismissed the action. From that judgment this writ of error was awarded.

The question presented is--What period of limitation is applicable to actions brought to enforce stockholders' double liability created by the laws of another State.

The general rule is that the statute of limitations of the jurisdiction in which the action is brought and the remedy is sought to be enforced controls, and not the statute of limitations in force in the jurisdiction in which the contract was made. In other words, the lex fori determines the time in which a cause of action shall be enforced. See 34 Am.Jur. 51; Burks P1. & Prac, 3d Ed., 364. Hence, the twelve-year limitation, applied by the Maryland court to a similar action in Sterling v. Reecher, 176 Md. 567, 6 A.2d 237, cited and relied upon in plaintiffs' brief, is not applicable.

Code, sec. 5810, prescribes the periods of limitation for personal actions generally. It fixes the period of limitation for contracts under seal at 10 years, and for written awards and contracts not under seal at 5 years. The pertinent provision is: "Every action to recover money * * * shall be brought * * *; and if it be upon any other contract express or implied within three years, " with certain exceptions not material to this case.

Section 5818 provides: "Every personal action, for which no limitation is otherwise prescribed, shall be brought within five years next after the right to bring the same shall have accrued, if it be for a matter of such nature that in case a party die it can be brought by or against his representative; and, if it be for a matter not of such nature, shall be brought within one year next after the right to bring the same shall have accrued."

Which of the two statutes controls this class of cases is an open question in Virginia. Two of the strongest reasons urged by plaintiffs for this court to apply the five-year period of limitations are: (1) That the statutes of West Virginia are very similar to the statutes of Virginia, and West Virginia applies statutes containing similar provisions to those found in section 5818; and (2) that Judge Paul, in the District Court for the Western District of Virginia, has so construed the Virginia statute.

An examination of the West Virginia statutes reveals that the periods of limitation, in its two statutes similar to Virginia Code, sections 5810 and 5818, are the same--that is, the period of limitation stated in each statute in West Virginia is five years.

In Pyles v. Carney, 85 W.Va. 159, 101 S.E. 174, the court applied the five-year period of limitation and, in support of that conclusion, cited sec. 12, ch. 104, of West Virginia Code, sec. 4425. It appears that the point now under consideration was not argued, because it was immaterial which statute the court applied. In either event the period of limitation was the same.

In Rinehart v. Wilfong, 121 W.Va. 24, 1 S.E.2d 174, 175, it is said: "The one essential point decided in the Pyles case, therefore, was the nature of the liability, which, in turn, would determine the applicable statute of limitations. This Court held that the obligation was contractual and consequently that the five-year statute of limitations applied." From this language it appears that the West Virginia Court applied the West Virginia statute corresponding to section 5810 of the Virginia Code.

In Hall v. Ballard, 90 F.2d 939, District Judge Wyche, speaking for the Circuit Court of Appeals for the Fourth Cir-cuit, in an action brought to enforce the stockholders' liability on stock in the Peoples National Bank of Abingdon, Virginia, stated that the Virginia and West Virginia statutes of limitation were identical and that the period of limitation was five years in each state. However, if a distinction had been necessary and had been pointed out to the court in that case, the period of limitation fixed by the West Virginia statute, and not the Virginia statute, would have been controlling. It was unnecessary to determine which statute of limitation applied, as it appeared that the action was instituted within less than three years from the date the cause of action arose.

It is true that Judge Paul, in Cable v. Commercial & Savings Bank, D. C, 31 F.Supp. 628, 629, said: "In the case of Bond, Receiver v. Williamson¹ (September, 1937), this Court held that the liability of a stockholder in a national bank was a statutory one and not contractual. Mc-Claine v. Rankin, 197 U.S. 154, 25 S.Ct. 410, 49 L.Ed. 702, 3 Ann.Cas. 500. That the right of action on an assessment on such stock was not one as to which the Virginia law had fixed a specific period of limitation and that, therefore, it was governed by the Sect. 5818 of the Virginia Code, providing that 'Every personal action, for which no limitation is otherwise prescribed, shall be brought within five years next after the right to bring the same shall have accrued * * *.'"

The opinion in Bond, Receiver v. Williamson, referred to, was never published and hence we do not have the benefit of Judge Paul's reasoning in applying section 5818.

Judge Parker, in Chisholm v. Gilmer, 4 Cir., 81 F;2d 120, 125 (see 299 U.S. 99, 57 S.Ct. 65, 81 L.Ed. 63), said: "As the subscription was a joint subscription and the stock was held in trust for the subscribers jointly, the "liability for stock assessment was also joint, being 'contractual, ' and arising from the 'subscription to the stock.' Matteson v. Dent, 176 U.S. 521, 525, 20 S.Ct. 419, 421, 44 L.Ed. 571; Richmond v. Irons, 121 U.S. 27, 55, 7 S.Ct. 788, 30 L.Ed. 864."

The North Carolina statute of limitation reads, in part, as follows:

"441. Three years. Within three years an action--

"1. Upon a contract, obligation or liability arising out of a contract, express or implied, except those mentioned in the preceding sections.

"2. Upon a liability created by statute, other than a penalty or forfeiture, unless some other time is mentioned in the statute creating it."

Judge Parker, in Briley v. Crouch, 4 Cir., 115 F.2d 443, held that the limitation in subsection 2 above was applicable to the liability of a stockholder imposed by statute. The language of the statute expressly so declares. The legislature of North Carolina has made a distinction between the obligation of a contract express or implied and a liability created by statute. There is no such distinction found in the Virginia statutes. The language of Virginia Code, sec. 5810, is broad and comprehensive. It fixes the period of limitation of obligations, based on contracts not otherwise specifically covered, in this language: The limitation "upon any other contract express or implied [shall be] three years." The provisions of section 5818 are applicable to personal actions only in the event that such limitations are not covered by the general provision of section 5810.

The nature of the added liability of stockholders has been defined by the Supreme Court of the United States in numerous cases. In Richmond v. Irons, 121 U.S. 27, 55, 7 S.Ct. 788, 801, 30 L.Ed. 864, the court said: "Under that act the individual liability of the stockholders is an essential element in the contract by which the stockholders became members of the corporation. It is voluntarily entered into by subscribing for and accepting shares of stock. Its obligation becomes a part of every contract, debt, and engagement of the bank itself, as much so as if they were made directly by the stockholder instead of by the corporation. There is nothing in the statute to indicate that the obligation arising upon these undertakings and promises should not have the same force and effect, and be as binding in all respects,...