Norman v. Baldwin

• Decision Date: 13 June 1929
• Parties: NORMAN. v. BALDWIN.
• Court: Virginia Supreme Court

148 S.E. 831

NORMAN.

v.BALDWIN.

Supreme Court of Appeals of Virginia.

June 13, 1929.

Error to Circuit Court of City of Norfolk.

Motion by Zebulon Vance Norman, receiver of the Bank of Roper, to recover excess individual liability from Robert F. Baldwin, a Virginia stockholder of an insolvent North Carolina bank. The motion was dismissed, and movant brings error. Reversed and rendered.

Mann & Tyler, of Norfolk, for plaintiff in error.

Williams, Loyall & Taylor, of Norfolk, and W. L. Whitley, of Plymouth, N. C, for defendant in error.

HOLT, J. This is a motion brought to recover excess individual liability from a Virginia stockholder of an insolvent North Carolina bank.

The Bank of Roper was organized in 1906, and became insolvent in 1921, at which time there were outstanding 200 shares of stock of the par value of $20,000. Five shares had been subscribed for, and were and are owned by, the defendant, Robert F. Baldwin, a citizen of Norfolk, Va.

Section 237, of the Consolidated Statutes of North Carolina declares that stockholders, in such circumstances, shall be liable to the extent of the par value of their stock, in addition to the amount already invested in it. Section 239 goes on to provide that, when a bank's assets are insufficient to discharge its obligations, an accounting may be had, "and the shareholders made parties defendant thereto, " and that, when a deficiency is adjudged to exist, an assessment shall be made.

Section 240 authorizes the receiver to sue these stockholders both within and without the state, and declares that "the receiver may, within ten years after an assessment on the stock, institute civil actions against the stockholders to reduce their liability thereon to final judgment."

To this motion for judgment, filed November 9, 1927, the defendant pleaded both the three and the five year statute of limitations (Code Va. 1919, § 5810). An agreed statement of facts sets out that A. B. Litchfield was, on October 10, 1921, appointed receiver in the case of Corporation Commission of North Carolina v. Bank of Roper, by the superior court of Washington county, a court of general jurisdiction. Litchfield qualified and gave the required bond, and, at the January term of that court, 1923, filed a petition setting out that this defendant was the holder of five shares of stock, and asked leave to sue him and other stockholders whose names there appeared. At the same term of that court he was authorized and directed to sue. The trial court was of opinion that the right to sue ran from the date of that order, that defendant's obligation was on an implied contract, that the three-year statute applied, and dismissed the motion. This judgment is now before us on a writ of error.

The general rule is that, while contracts are to be construed according to the lex loci contractus, they are to be enforced according to the lex fori. Wood on Lim. (4th Ed.) i 8; Burks, Pleading and Practice (2d Ed.) p. 3S9; Patton v. Lumber Co., 171 N. C. 837, 73 S. E. 167.

To this general rule there is an exception now as universally recognized as the rule itself.

"Where the statute imposing the liability and creating the remedy does not itself limit the time within which an action to enforce it must be brought, but leaves the matter to be governed by the general statute of limitations, the laws of the forum will govern in determining whether an action brought in a State other than that by which the corporation was created is barred, since general statutes of limitations relate to the remedy and have no extra-territorial force. This rule does not apply, however, when the statutes of the State by which the corporation was created and the liability is imposed prescribe a special limitation for actions to enforce the liability. In such a case the statutes of that State govern, and they will be given the construction which they have received by the highest court of that State." 7 Fletcher's Cyc. Corp. pp. 7452, 7453.

"Where by statute a right of action is given which did not exist by the common law, and the statute giving the rights fixes the time within which the right may be enforced, the time so fixed becomes a limitation or condition on such right, and will control, no matter in what forum the action is brought." 37 Corpus Juris, p. 732.

"The reason upon which this line of decisions is based is that in the enforcement of a liability not existing at common law, and arising by virtue of a statute, the right, as well as the mere remedy, is involved, and that to the statute in question alone, as construed by the courts of the State of its passage, can resort be had, either in the matter of the ascertainment of rights arising thereunder, or remedies provided thereby. The statute itself prescribes just what right it gives, and it can likewise provide the remedy for its enforcement, and the time within which it shall be operative." Brunswick Terminal Co. v. National Bank (C. C. A.) 99 F. 635, 48 L. R. A. 625.

The Supreme Court of the United States refused a writ of certiorari in the above-styled case. 178 U. S. 611, 20 S. Ct. 1029, 44 L. Ed. 1215. See, also, The Harrisburg, 119 U. S. 199, 7 S. Ct. 140, 30 L. Ed. 358; Northern Pac. Ry. Co. v. Crowell (D. C.) 245 F. 668; Burks, PI. & Pr. (2d Ed.) 389; 17 R. C. L. p. 701.

This is not seriously questioned, but it is said that the statute law of Virginia provides otherwise, and we are cited to section 5S25 of the Code of Virginia 1919, which declares that, "Upon a contract which was made and was to be performed in another State or country by a person who then resided therein, no action shall be maintained after the right of action thereon is barred either by the laws of such State or country or of this State." Plainly this statute has no application. When the contract of subscription was made, Mr. Baldwin did not reside in North Carolina, but in Virginia.

It is argued that any other construction would be inequitable, in that a North Carolina subscriber, who afterwards moved to Virginia, would be in better circumstances than a Virginia subscriber who had always lived here. This may be true, but we have to take the statute as written. It is difficult to frame one that at all times and in all circumstances operates with exact equality. This has actually occurred. Mary A. Roper, a citizen of Norfolk, held property in North Carolina. She was also a stockholder in that bank, and her property there located has been attached and sequestrated (Litchfield v. Roper, 192 N. C, 202, 134 S. E. 651), so that the net result of this is that one stockholder in Norfolk has had to pay and one has been set free. Of course, this has little to do with the issue before us, but only serves to show the difficulty in drafting laws which at no time discriminate between litigants.

No general statute of limitations acts extraterritorially. It must inhere in and attach to the right sought to be asserted. 37 Corpus Juris, p. 735. It is also true that, in the construction of state statutes, we follow the courts of that state, though their enforcement under the guaranties of the Federal Constitution may continue to present open questions.

With this in mind, it is said that the North Carolina statute has been twice construed in North Carolina to be simply one of limitation and not a condition attached to the contract of subscription.

In Long v. Bank, 90 N. C. 405, the court said: "The three year statute of limitations [since changed to 10 years] begins to run against an action to enforce the personal liability of stockholders of a bank under a clause in its charter, from the date the bank suspends specie payments."

Again, in the Litchfield Case, supra, it observed: "We must assume that the General Assembly acted with deliberation and had good reason for extending the limitation of actions for an assessment against the stockholders of a bank from three to ten years, "

Of course, broadly speaking, it is a statute of limitations; it is that and something more —not a general statute governing all implied contracts, but a special one intended to apply only to stockholders of insolvent banks into whose contract of subscription it is incorporated.

An examination of these North Carolina cases shows that the court had no such distinction in mind as we are called upon to make in the case in judgment, nor was it necessary. The same conclusion would havebeen reached and the same statement of the, law there made would have been unassailable, whether the limitation had been regarded as general or special. To apply any statement of the law intelligently, the facts to which it is addressed are to be always remembered, nor are we to presume that the Supreme Court of North Carolina intended in this casual way to set aside a rule so well established.

The Bank of Roper was chartered in 1906, and the limitation at that time was three years. This continued to be the law until 1911, Laws N. C. 1911, c. 25 (C. S. N. C. § 240), when the statute was changed and...