Moran v. Harrison

• Decision Date: 03 May 1937
• Docket Number: No. 6838.,6838.
• Citation: 67 App. DC 237,91 F.2d 310
• Parties: MORAN v. HARRISON.
• Court: U.S. Court of Appeals — District of Columbia Circuit

67 App. DC 237, 91 F.2d 310 (1937)

MORAN v. HARRISON.

No. 6838.

United States Court of Appeals for the District of Columbia.

Argued April 8, 1937.

Decided May 3, 1937.

Rehearing Denied June 21, 1937.

D. C. Colladay and Joseph C. McGarraghy, both of Washington, D. C., for appellant.

Harry L. Ryan, Jr., of Washington, D. C., for appellee.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, GRONER, and STEPHENS, Associate Justices.

GRONER, J.

This action was brought in the court below by John F. Moran, receiver of the Departmental Bank, an Arizona corporation doing business exclusively in the District of Columbia. The declaration alleged that Harrison was the owner of 75 shares of the bank's stock; that on July 14, 1932, the Comptroller of the Currency determined that the bank was insolvent and appointed a receiver who took possession of the bank on July 22, 1932; and on October 18, 1932, the Comptroller determined the necessity of an assessment of 100 per cent. of the par value of the stock and directed the receiver to enforce the liability.

It is admitted there was no personal demand on Harrison for payment, but on October 17, 1935, the receiver filed his action for the amount of the assessment. There was a trial below, and judgment was entered for defendant. Three grounds of error are assigned, but we need notice only one of the questions raised, namely — What period of limitations governs the case and was the cause of action barred by lapse of that period?

The receiver contends that the applicable statute of limitations is that of the District of Columbia. The stockholder contends that it is that of Arizona. If the District statute is applicable, the suit was brought in time. If the Arizona statute is applicable, it was not.

The bank, as we have seen, was incorporated under the Arizona laws. At the time of incorporation the Constitution of Arizona (article 14, § 11) provided: "The shareholders or stockholders of every banking or insurance corporation or association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of such corporation or association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares or stock."

The Arizona Constitution is silent as to a time limitation on the exercise of the right to demand and collect the constitutional stockholder liability. The matter was left to general law and to such action as the Legislature might take with reference thereto; and in the revision of the Arizona laws in 1928, effective July 1, 1929,¹ a statute of limitations was enacted in the following words: "The action to enforce such liability shall be commenced within three years after the closing of such bank." Prior thereto the general statutes of Arizona applied, and the Supreme Court of Arizona had held that the time began to run when there was a judicial determination of the fact of insolvency.²

We are of opinion that the receiver's cause of action is subject to the Arizona statute of limitations.

In Washington Loan & Trust Co. v. Allman, 63 App.D.C. 116, 70 F.(2d) 282, and in Harper v. Moran, Receiver, 64 App. D.C. 210, 76 F.(2d) 980, we held that in every case in which the double liability of a stockholder is created by charter or law of the state of incorporation, and the corporation engages in business in the District of Columbia, the liability may be enforced in the District by a receiver appointed by the Comptroller of the Currency in a suit against the stockholder. But in Hamilton v. Offutt, 64 App.D.C. 385, 78 F.(2d) 735, we held that since under the law of Virginia, where the bank in question was chartered, there was no double liability, there could be no recovery against stockholders in the District of Columbia. And in Hamilton v. Bergling, 66 App.D.C. 83, 85 F.(2d) 249, we made clear the theory behind these opinions by holding that where the law of the state of incorporation limited a stockholder's liability to the payment of debts contracted while he held his stock, proof of the existence of this condition as to each stockholder was a prerequisite to recovery. One of the reasons which we gave for this conclusion was that it is fundamental that the liability of a stockholder is determined by the charter of incorporation and the laws of the state in which the incorporation is had. To this we add, as applicable to the present case, that where the statute of the state of incorporation creates liability it may declare the purpose of its creation and fix the duration of its existence; and all parties interested in the right so created will be bound by the limitations attached. And this is true because of the fact that the individual liability of stockholders created by state laws arises wholly out of the law creating it. It does not exist at common law, and the statute which creates it may fix and limit the liability which it has created or it may attach conditions to the exercise of the right. If one of these conditions be a limitation of time, it is binding outside of as well as within the state of incorporation. It will hardly be questioned that this is true if the statute — in this case the Constitution — which creates the liability at the same time creates the limitation, for in such a case obviously the limitation is one upon the right. Young v. Hoage, 67 App.D.C. 150, 90 F.(2d) 395 (decided by this court April 5, 1937). Here, such doubt as arises grows out of the fact that the limitation sought to be enforced is created by a later statute. But we think the same rule applies where the later statute clearly and obviously is directed to the newly created liability. In such case it is just as certainly a limitation upon the right, and just as much a part of the right itself, as where the right and the limitation are embraced in a single statute.

An often cited case typical of those in which the right and the limitation are contained in the same statute is The Harrisburg, 119 U.S. 199, 7 S.Ct. 140, 147, 30 L.Ed. 358, an admiralty proceeding to enforce a liability arising under the statute for wrongful death. There Chief Justice Waite said: "The statutes create a new legal liability, with the right to a suit for its enforcement, provided the suit is brought within 12 months, and not otherwise. The time within which the suit must be brought operates as a limitation of the liability itself as created, and not of the remedy alone. It is a condition attached to the right to sue at all. No one will pretend that the suit in Pennsylvania, or the indictment in Massachusetts, could be maintained if brought or found after the expiration of the year, and it would seem to be clear that, if the admiralty adopts the statute as a rule of right to...