Todd v. Russell, 299.

Citation104 F.2d 169
Decision Date08 May 1939
Docket NumberNo. 299.,299.
PartiesTODD et al. v. RUSSELL et al. (LISSENDEN et al., Intervenors).
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Pleasants & Donovan, of New York City (Samuel A. Pleasants, Benjamin G. Myron, and Stanley D. Schuval, all of New York City, of counsel), for appellants.

Mack, Taylor, Spiegelberg & McCauley, of New York City, for plaintiffs-appellees.

Mack, McCauley, Spiegelberg & Gallagher, of New York City (George A. Spiegelberg, of New York City, of counsel), for intervenors-appellees.

Before SWAN, CHASE, and CLARK, Circuit Judges.

CHASE, Circuit Judge.

This appeal is from a final decree in a suit in equity brought in the District Court for the Southern District of New York. The plaintiffs own certain bonds of the insolvent Ohio Joint Stock Land Bank of Cincinnati, Ohio, and are seeking to recover in behalf of themselves and all other creditors of said Land Bank as their interests may appear. The defendants are alleged owners of stock in the Land Bank and it is their liability as shareholders under the provisions of 12 U.S.C.A. § 812 that the plaintiffs are trying to enforce.

This statute reads as follows: —

"Individual liability of shareholders: Shareholders of every joint-stock land bank organized under this chapter shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such bank to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares."

The decree from which this appeal was taken was entered only after a long struggle in the courts in which uncertainty as to the proper parties; the proper action; the scope of the statute; the time when any action accrued; and what statute of limitations, if any, was applicable all had to be determined. These questions have now been resolved in such a way that this appeal presents but two issues, viz., (1) whether the defendants are shareholders of the Land Bank within the meaning of 12 U.S.C.A. § 812; and, (2) whether, if so, the suit is barred by local statutes of limitations which would have been a bar had the action been at law instead of in equity. Though the New York statute of limitations would not be available to all the defendants, we will for present purposes treat it as the only one relied on since that will present the entire issue as to limitation statutes.

As to whether or not the defendants are shareholders within the purview of the above statute, decision must turn upon whether liability thereunder is substantially the same as that which was formerly held to be the liability of shareholders of a national banking association under Secs. 63 and 64 of 12 U.S.C.A. The language of the statutes differs somewhat. Sec. 812 imposes liability upon shareholders "* * * to the extent of the amount of stock owned by them at the par value thereof * * *"; while that applicable to national bank shareholders was, "* * * to the extent of the amount of their stock therein, at the par value thereof * * *".

This distinction is relied upon by the defendants to support the argument that Sec. 812 applies only to the beneficial owner and not to one who merely appears on the books of the bank as the owner.

The defendants were all stockholders of record on the books of the Land Bank when it was closed. This bank was organized on January 12, 1923, with a capital stock of $250,000 represented by 2,500 shares each of the par value of $100. Its principal place of business was at Cincinnati, Ohio, until it failed to meet its obligations on September 1, 1927, and was declared insolvent.

The stock then standing on the books of the Land Bank in the names of defendants Russell, Miller and Carey, who are, with defendants Steers and Wing, co-partners in the New York brokerage firm of Russell, Miller and Carey, was received by them for the account of a client. It was represented by a certificate for 200 shares which they subsequently delivered to a bank for the account of their client but there is no finding that they were not to some extent, at least, the beneficial owners as well as the record holders of the stock. Defendant Pleasants was, however, clearly only a pledgee as he received his stock as collateral security for a loan and, being entitled under the terms of the pledge to have the stock transferred to his name on the books of the Land Bank, did so.

For the purposes of this decision we shall assume that the defendants are all in the position of Pleasants for the others can stand no better than he and we think he is liable on the merits.

It is well established that under Secs. 63 and 64 of Title 12 U.S.C.A. the record holder of national bank stock, though only a pledgee, was liable; National Bank v. Case, 99 U.S. 628, 25 L.Ed. 448; Rankin v. Fidelity Trust Co., 189 U.S. 242, 23 S. Ct. 553, 47 L.Ed. 792; Kenyon v. Fowler, 2 Cir., 155 F. 107; unless the pledgee who receives the shares from his debtor for transfer has himself described as the pledgee in the new certificate issued. Pauly v. State Loan & Trust Co., 165 U.S. 606, 17 S.Ct. 465, 41 L.Ed. 844; Rankin v. Fidelity Trust Co. supra, 189 U.S. 242, 23 S.Ct. 553, 47 L.Ed. 792.

The reasons for holding that the one who takes the stock as security for a loan but whose name appears on the books of the corporation as the owner have been stated to be estoppel; the release of the former owner from statutory liability; and the enjoyment of the rights of a stockholder to receive dividends, to vote the stock, and to exercise all the privileges of ownership, making it inequitable to permit the one who has thus become entitled to the benefits to refuse the responsibilities of a stockholder.

The provisions of 12 U.S.C.A. § 62, which require the keeping, subject to inspection by shareholders and creditors, of a full and accurate list, in the office where its business is transacted, of the names and residences of all the shareholders in a national banking association, together with the number of shares each holds, are not duplicated in the statutes relating to Joint Stock Land Banks. Because of this difference in the statutes, it is argued that the decisions above mentioned are not here controlling. But estoppel was only one basis for the above mentioned decisions and its absence in this case does not do away with the sufficiency of the others which are equally applicable here and make the analogy complete. We can attach no significance to the fact that the older statute speaks of the stock of shareholders in national banking associations as "their stock" while that of shareholders in Joint Stock Land Banks is designated as stock "owned by them". It is as much "their" stock and stock "owned by them" in the one instance as in the other. Such a slight change in statutory language does not indicate an intent on the part of Congress to make a substantial difference in the liability imposed.

If, however, the state statute of limitations is a bar, this suit was brought too late. That issue was tried separately before hearing on the merits and it was found that the cause of action accrued in April, 1928. No one now disputes that. The local statute of limitations ran in three years thereafter and this suit was not commenced until about three years and eight months had elapsed.

Ordinarily, suits in equity are not barred absolutely by any general statute of limitations but are subject only to being dismissed for laches where by reference to some analogous limitation statute they are stale and no good excuse for the delay is shown. Yet there is ample authority to the effect that one should not be permitted to avoid the effect of such a limitation statute merely by choosing to bring a suit in equity where there is concurrent jurisdiction and an action at law has become barred. Metropolitan Nat. Bank v. St. Louis Dispatch Company, 149 U.S. 436, 448, 13 S.Ct. 944, 37 L.Ed. 799; Baker v. Cummings, 169 U.S. 189, 18 S.Ct. 367, 42 L.Ed. 711; Kelly v. Dolan, 3 Cir., 233 F. 635; Hughes v. Reed, 10 Cir., 46 F.2d 435. Even where there is concurrent jurisdiction, however, and an action at law would be barred, in New York a suit in equity is not if resort to equity is necessary to obtain complete and adequate relief. Hanover Fire Insurance Co. v. Morse Dry Dock & Repair Co., 270 N.Y. 86, 200 N.E. 589; Rundle v. Allison, 34 N.Y. 180.

Though the basis of this action is purely statutory and in that sense the relief is not strictly equitable in its nature, there is, however, no concurrent jurisdiction at law since creditors of a Joint Stock Land Bank can enforce the statutory liability of shareholders only in "an adversary suit in equity against the stockholders wherever they may be found". Christopher v. Brusselback, 302 U.S. 500, 502, 58 S.Ct. 350, 351, 82 L.Ed. 388; Wheeler v. Greene, 280 U.S. 49, 50 S.Ct. 21, 74 L.Ed. 160; Brusselback v. Cago Corporation, 2 Cir., 85 F.2d 20. Since this suit of necessity was brought in equity, it is to be governed by the principles of equity rather than the inflexible rules of legal statutes of limitations. Though they do for the most part, as statutes of repose, bring about beneficial results, there are circumstances where the application of such hard and fast time limits upon the commencement of suits would not be equitable. As the local statutes are here to be used only as a guide to decision on the equitable question of laches, it becomes necessary to determine whether the plaintiffs have delayed unduly or whether they have been trying with reasonable dispatch to assert and maintain their rights.

When the Ohio Joint Stock Land Bank of Cincinnati defaulted on some of its obligations on September 1, 1927, and was declared insolvent, J. S. Horton was appointed its receiver. What followed, so far as now material, has been well stated in the opinion written by Judge Knox after the question of laches and the applicability of ...

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7 cases
  • Russell v. Todd
    • United States
    • U.S. Supreme Court
    • February 26, 1940
    ...and gave judgment for respondents. D.C., 1 F.Supp. 788; D.C., 20 F.Supp. 930, 936. The Court of Appeals for the Second Circuit affirmed, 104 F.2d 169. Both courts, holding that the suit was exclusively within the equity jurisdiction of the court, ruled that the doctrine of laches and not th......
  • Nemkov v. O'Hare Chicago Corp., 78-1333
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • January 24, 1979
    ...right for which the sole remedy is in equity." Holmberg v. Armbrecht, supra, 327 U.S. at 395, 66 S.Ct. at 584; See Todd v. Russell, 104 F.2d 169, 172 (2d Cir. 1937), Aff'd, 309 U.S. 280, 60 S.Ct. 527, 84 L.Ed. 754 If, however, the sole remedy is not in equity and an action at law can be bro......
  • Holmberg v. Hannaford
    • United States
    • U.S. District Court — Southern District of Ohio
    • June 9, 1939
    ...the suit is governed by the principles of equity. In affirming the lower court (D.C., 1 F.Supp. 788) in Todd v. Russell, the Circuit Court of Appeals 2 Cir., 104 F.2d 169, 172, in a very recent decision say, inter "Ordinarily, suits in equity are not barred absolutely by any general statute......
  • Partridge v. Ainley
    • United States
    • U.S. District Court — Southern District of New York
    • July 26, 1939
    ...1938. It involves, therefore, a closer question as to the application of the New York Statute of Limitations than the case of Todd v. Russell, 2 Cir., 104 F.2d 169, decided on May 8, 1939, by the Circuit Court of Appeals, for in that case all proceedings were had before the new Rules became......
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