Richards v. Carpenter

• Decision Date: 05 November 1919
• Docket Number: 3290.
• Citation: 261 F. 724
• Parties: RICHARDS, State Superintendent of Banks, v. CARPENTER et al.
• Court: U.S. Court of Appeals — Sixth Circuit

261 F. 724

RICHARDS, State Superintendent of Banks, v. CARPENTER et al.

No. 3290.

United States Court of Appeals, Sixth Circuit.

November 5, 1919

John B Keeble, of Nashville, Tenn., for appellant.

Jordan Stokes, of Nashville, Tenn., for appellees.

Before KNAPPEN and DENISON, Circuit Judges, and McCALL, District Judge.

DENISON Circuit Judge.

The plaintiff below, appellant here, is the superintendent of banks in the state of New York. In January, 1911, the Carnegie Trust Company, a New York City corporation, was closed by plaintiff's predecessor in office, and he proceeded to administer its affairs in accordance with New York laws. In November, 1912, he made a written finding to the effect that in order to pay the debts of the bank, it was necessary for the stockholders to pay their full statutory liability in that event, being the double liability of 100 per cent. of the amount of the stock held by each, and he made an assessment accordingly against the stockholders of record. To collect this assessment from the stockholders living in Tennessee, he filed a bill in the state chancery court. This was eventually dismissed by the Supreme Court of the state. Van Tuyl v. Carpenter, 135 Tenn. 629, 188 S.W. 234. Thereupon his successor, the plaintiff, filed in the court below the present bill, which was generally similar to that which had been dismissed by the Supreme Court of the state and was against the same defendants. The defendants moved to dismiss, and, upon that and other motions, the court considered two different defenses which arose upon the undisputed facts. The court thereupon dismissed the bill upon the first of these defenses, holding that the action of the Supreme Court of Tennessee had been in effect to declare that the assessment was invalid, because it was in violation of the public policy of the state of Tennessee, and that, upon this question, the federal courts in Tennessee, whatever their own opinions, were bound to follow the decision of the state court.

The correctness of this conclusion is the question which has been chiefly argued in this court; but we find it unnecessary to reach any decision thereon, since we are of the opinion that, upon the face of the papers, the action was too late, and since this conclusion alone, if correct, is a sufficient ground for affirming the judgment below, without reference to the holding of the Tennessee Supreme Court in Van Tuyl v. Carpenter, supra.

The stockholders' double liability, relied upon by plaintiff, is that created by section 196 of the Banking Law of New York of 1909 (Consolidated Laws of New York of 1909, c. 2). Section 394 of the New York Code of Civil Procedure reads as follows:

'This chapter does not affect an action against a director or stockholder of a moneyed corporation, or banking association, to recover a penalty or forfeiture imposed, or to enforce a liability created by the common law or by statute; but such an action must be brought within three years after the cause of action has accrued.'

This section is a part of title 2 of chapter 4 of the New York Code. The chapter is entitled, 'Limitation of the Time of Enforcing a Civil Remedy,' and its three titles are: (1) Limitations of Real Actions; (2) Limitations of Other Actions; and (3) General Provisions. The decisive question is whether this three-year limitation should be considered as an ordinary statute of limitations, or as a condition affixed to the creation of the liability. If the former, the action would not be barred in New York, because the defendants have not been within the state (section 401, New York Code of Civil Procedure), if, indeed, any applicable provision of the general statute of limitations would have otherwise taken effect; and it would not be barred in Tennessee, because the generally applicable statute of Tennessee provides for six years (Shan. Code, Sec. 4472); while, if the restriction is of the latter character, we conclude that, for the reason to be stated, the time limit had expired before this suit was brought, in January, 1917, and hence an essential condition of the liability is absent.

What we have said to be the decisive question is controlled by the decision of the Supreme Court in Davis v. Mills, 194 U.S. 451, 24 Sup.Ct. 692, 48 L.Ed. 1067. There is, in our opinion, no substantial distinction between the facts of that case and of this. The corporation laws of Montana required certain annual reports to be filed, and provided that, in default of such filing, 'all the trustees of the company shall be jointly and severally liable for all the debts of the company. ' Thus we have a liability independently created by a manufacturing corporation law, just as there is, in the present case, an independent liability created by the banking law. Neither in that case nor in this did the same statute which created the liability prescribe any time limitation. The Montana Code of Civil Procedure contained a separate title, which embodied four chapters governing limitations upon the time of commencing actions. The various sections of this title prescribed appropriate limitations in various cases according to the nature of the action, and section 541 contained the usual provision that the time when the defendant was outside of the state should be excluded from the computation. Section 554 says:

'This title does not affect actions against directors or stockholders of a corporation, to recover a penalty or forfeiture imposed, or to enforce a liability created by law; but such actions must be brought within three years,' etc.

The lower court certified to the Supreme Court the question whether this three-year limitation applied in a suit brought in the court of another state where the defendant resided and was found. The opinion of the court, by Mr. Justice Holmes, after stating that the defendant is entitled to the benefit of the conditions created by the foreign law under which his liability arises, continues:

'It is true that this general proposition is qualified by the fact that the ordinary limitations of actions are treated as laws of procedure and as belonging to the lex fori, as affecting the remedy only and not the right. But in cases where it has been possible to escape from that qualification by a reasonable distinction courts have been willing to treat limitations of time as standing like other limitations and cutting down the defendant's liability wherever he is sued. The common case is where a statute creates a new liability and in the same section or in the same act limits the time within which it can be enforced, whether using words of condition or not. The Harrisburg, 119 U.S. 199 (7 Sup.Ct. 140, 30 L.Ed. 358). But the fact that the limitation is contained in the same section or the same statute is material only as bearing on construction. It is merely a ground for saying that the limitation goes to the right created and accompanies the obligation everywhere. The same conclusion would be reached if the limitation was in a different statute, provided it was directed to the newly created liability so specifically as to warrant saying that it qualified the right.

'If, then, the only question were one of construction and as to liabilities subsequently incurred, it would be a comparatively easy matter to say that section 554 of the Montana Code of Civil Procedure qualifies the liability imposed upon directors by section 451 of the Civil Code, and creates a condition to the corresponding right of action against them, which goes with it into any jurisdiction where the action may be brought.' The court then proceeds to consider special circumstances, which were claimed to take the case out of the conclusion just stated, overrules this contention, and continues:

'A further difference is that, while there might be difficulties in construing the general limitation upon actions for penalties as going to the right, this section is so specific that it hardly can mean anything else. We express no opinion as to the earlier act, but we think that this section 554 so definitely deals with the liability sought to be enforced that upon the principles heretofore established it must be taken to affect its substance so far as it can, although passed at a different time from the statute by which that liability first was created. * * *

'The law is dealing not with tangible property, but with a cause of action of its own creation. The essential feature of that cause of action is that it is one in the jurisdiction which created it; that it is one elsewhere is a more or less accidental incident. If the laws of Montana can set the limitation to the domestic suit, it is the least possible stretch to say that they may set it also to a foreign action, even if to that extent an existing right is cut down. We can see no constitutional obstacle in the way, and we are of opinion that they have purported to do it and have done it.'

See, also, Boyd v. Clark (C.C.) 8 Fed. 849, 852; Theroux v. Northern Co. (C.C.A. 8) 64 F. 84, 85, 12 C.C.A. 52; Brunswick Co. v. National Bank (C.C.A. 4) 99 F. 635, 636, 40 C.C.A. 22, 48 L.R.A. 625; Stern v. La Compagnie (D.C.) 110 F. 996, 998; International Co. v. Lindstrom (C.C.A. 2) 123 F. 475, 60 C.C.A. 649; Atlantic R.R. v. Burnette, 239 U.S. 199, 201, 36 Sup.Ct. 75, 60 L.Ed. 226; Northern Co. v. Crowell (D.C.) 245 F. 668, 672.

Incidentally this case also disposes of the contention that the section (541) providing that the time of absence from the state shall not be counted (section 401 of the New York Code) is operative to extend the three-year period of section 554 (section 394 of the New York Code). The court points out that this section is one of those in the title in which the section creating the three- ear limitation is found,...