Partridge v. Ainley
| Decision Date | 26 July 1939 |
| Citation | 28 F. Supp. 472 |
| Parties | PARTRIDGE et al. (MARTIN et al., Interveners) v. AINLEY et al. |
| Court | U.S. District Court — Southern District of New York |
C. Walter Randall, of New York City (C. Walter Randall and H. H. Levin, both of New York City, of counsel), for complainants.
Miller, Owen, Otis & Bailly, of New York City (E. J. Bennett and T. J. Namack, both of New York City, of counsel), for complainants-interveners.
Bangser & Kaufmann, of New York City (Adolph Bangser, of New York City, of counsel), for defendant Edw. J. Isaacs.
Sidney Kalfus, of New York City, for defendant David L. Kaye.
Milton Siegel, of New York City, for defendant A. S. Hanau.
Henry Woog, of New York City, for defendant Hattie G. Westmore.
Joseph Wheless, of New York City, for defendant Mamie T. Wheless.
Blackwell Bros., of New York City, for defendant J. M. Blackwell, executor of Florence A. Smallwood's estate.
David E. Jeffery, of Lockport, N. Y. (Irving Smith, Jr., of New York City, of counsel), for defendant Daniel R. Sillesky.
O'Brien, Driscoll & Raftery, of New York City (Benjamin Pepper and Alton S. Wolfert, both of New York City, of counsel), for defendant W. H. Dempsey.
MacIntyre, McNally & Downey, of New York City (Francis J. MacIntyre, of New York City, of counsel), for defendant Lloyd P. Hepburn.
Stanley Gray Horan, of New York City, for defendant Virginia C. DeMurias.
Sheer & Delemos, of New York City (S. Charles Sheer, of New York City, of counsel), for defendant G. E. Meyer.
George S. Hills, of New York City (Leslie D. Taggart, of New York City, of counsel), for defendants Wm. R. Compton, R. P. Compton, and D. F. Sullivan.
Cohen & Haas, of New York City (Isidore Cohen, of New York City, of counsel), for defendant Alex Helfand.
Isaac Roth, of New York City (A. Bertram Roth, of New York City, of counsel), for defendant W. Burke Harmon.
My decision herein is that the plaintiffs may have judgment, as hereinafter provided, with costs and all taxable disbursements and allowances against all the defendants appearing herein, except defendant J. M. Blackwell, as Executor of Florence Smallwood, as against whom the complaint will be dismissed with costs and all taxable disbursements and allowances for the reasons hereinafter stated.
I. My subject matter jurisdiction in this cause is based on the fact that the matter in controversy exceeds, exclusive of interest and costs, the sum or value of $3,000, and arises under the Laws of the United States, Title 28, United States Code, Section 41(1)(a), 28 U.S.C.A. § 41(1)(a).
Subject matter jurisdiction herein on this basis has been sustained, and a remedy in equity for the relief herein sought has been approved by the Circuit Court of Appeals of this Circuit in Brusselback et al. v. Cago Corporation et al., 85 F.2d 20.
II. In view of Rule 52 of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, it is now a work of supererogation to write a considered opinion in a non-jury case, for its place will be taken by formal findings of fact and conclusions of law separately stated.
There have also been elaborate pretrial concessions of fact herein which were settled before Judge Knox, which have greatly simplified the trial herein, and to which recourse may be had for any proposed findings of fact not inconsistent herewith.
I will content myself, therefore, in this cause with a very short reference to such facts as I feel should be here mentioned and a short statement of my conclusions of law.
III. This is a suit by creditors of the St. Louis Joint Stock Land Bank to enforce stockholders' double liability imposed on them by Title 12, United States Code, § 812, 12 U.S.C.A. § 812.
The defendants remaining in the cause, as I understand, after discontinuances based on settlements or granted for other reasons and the severances granted at the commencement of the trial in respect of defendants named but not served, there remain, on my count, fourteen defendants in the cause.
The following six defendants are registered holders of bank stock:
Number
of
Name Shares
Helfand & Abel, Inc. ................. 300
David L. Kaye ........................ 20
George E. Meyer ...................... 55
Robert S. Watts ...................... 15
John J. Van Voorhis .................. 10
William R. Compton ................... 244
The following eight defendants, who exchanged their bank stock for stock of the Land Bank Securities Company, had held bank stock before the receivership as follows:
Number
of
Name Shares
James M. Blackwell as
Executor of Smallwood ................. 20
William H. Dempsey .................... 50
W. Burke Harmon ....................... 15
Virginia C. DeMurias .................. 55
Daniel R. Sillesky .................... 44
Hattie G. Westmore .................... 25
Edward J. Isaacs ...................... 17
Randolph P. Compton ................... 12
Defendants Robert S. Watts, Helfand & Abel, Inc., and John J. Van Voorhis have defaulted and, as against them, the trial has been an inquest.
IV. The Question of Insolvency and the Quantum of Assessment.
I hold that the receivership of the St. Louis Joint Stock Land Bank which was set up by the Federal Farm Loan Board on June 1, 1932, is a matter with which I cannot properly deal because it is an act of an executive administrative board not shown to have been wrong. Therefore, insolvency on May 2, 1932, must be assumed.
The total outstanding stock of the bank at the date of the receivership was, and now is, 14,300 shares of a par value of $100 each. Those shares, therefore, have a total par value of $1,430,000.
The deficit of the bank at the present time is upwards of $8,000,000. The liability of the stockholders, therefore, under Title 12, United States Code, § 812, 12 U.S.C.A. § 812, is for a 100% assessment on their stock.
Indeed the present insolvency of the bank to this extent is not contested in behalf of the defendants appearing at the trial.
Furthermore, I find that at all times from 1933 up to the present time the deficit has been such that a 100% assessment would have been necessary if recovery had been secured during that period.
During the elapsed time, therefore, between any possible date of recovery of a judgment against the stockholders, and the present time, the quantum of their liability has not increased.
V. As is usual in these suits against stockholders of insolvent joint stock land banks many defences have been pleaded which have not been pressed at the trial or on the argument.
Only the following three defences remain for me to consider:
(1) That the stockholders who made transfer to their bank stock to the Land Bank Securities Company can escape their double liability.
(2) That as the Rules of Civil Procedure (28 U.S.C.A. following section 723c) have provided that there should be only one form of civil action, and since this cause — though commenced before September 16, 1938 when the Rules became effective — has been prepared and tried under the Rules, the three year New York Statute of Limitations — New York Civil Practice Act, § 49 — is applicable and the claims of the plaintiffs are barred thereby.
(3) That, even if this be not so, the plaintiffs have been guilty of laches in not prosecuting their cause of action diligently, and, consequently, that the complaint must be dismissed, at least as to any defendants who have shown that they have been prejudiced.
I shall now deal shortly with these three defences.
VI. Conclusions of Law.
I hold that owners of bank stock who transferred it to the Securities Company did not escape double liability on their bank stock by such transfer.
I find that this was not a case of a bona fide sale of the bank stock but was another instance — whereof there are many in the books — e. g. Barbour v. Thomas, 6 Cir., 86 F.2d 510, 517; Ullrich v. Thomas, 6 Cir., 86 F.2d 678, 679; Metropolitan Holding Company v. Snyder, 8 Cir., 79 F. 2d 263, 266-268, 103 A.L.R. 912; Brusselback v. Cago Corporation et al., D.C., 24 F.Supp. 524, 529, 530; Holmberg v. Anchell et al., D.C., 24 F.Supp. 594, 599, wherein a holding company without double liability on its stockholders was formed to hold bank stock, and possibly also (although that matters not) to unify the control of the bank as much as might be, looking to its reorganization.
Indeed in respect of the Land Bank Securities Company, both Judge Wham of the Eastern District of Illinois on May 25, 1938, in the case of Martin v. Alexander unreported, and Judge Davis of the Eastern District of Missouri in 1939 in the case of Ball v. St. Louis Joint Stock Land Bank et al., also unreported, have held that it did not constitute — to borrow the felicitous phrase of Mr. Justice Holmes, used in another connection, in Donnell v. Herring-Hall-Marvin Safe Co., 208 U.S. 267, 28 S.Ct. 288, 52 L.Ed. 481 — a "nonconductor" of the double liability of the stockholders of the Bank.
For the reasons given at length by me in Holmberg v. Anchell, D.C., 24 F. Supp. 594, at page 601, and the other authorities there cited, a cause of this kind is, in my opinion, exclusively of equitable cognizance. Consequently, as I there held, the cause was removed from the bar of the three year New York Statute of Limitations — New York Civil Practice Act, § 49. But there was not any question of the new Federal Rules of Civil Procedure there involved.
It would not be necessary to say anything further now if in this cause the original complaint had not been filed on March 3, 1937, and amendments thereto filed November 14, 1938, and June 14, 1939, and the trial had in June 1939.
This cause which has...
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