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Opinion of the Court.

309 U.S.

MR. JUSTICE STONE delivered the opinion of the Court.

The question decisive of this case is whether, in a suit brought in the federal district court in New York to enforce the statutory liability of shareholders of a joint stock land bank for its debts, the court rightly declined to apply the three-year state statute of limitations.

Respondents Todd, Work and Weiss, copartners, in behalf of themselves and other creditors of the insolvent Ohio Joint Stock Land Bank of Cincinnati, Ohio, brought suit in the District Court for Southern New York against petitioners, copartners, to enforce their liability as record shareholders of the bank under § 16 of the Federal Farm Loan Act, 39 Stat. 374, 12 U. S. C. $ 812. Petitioners, among other defenses, pleaded the New York three-year statute of limitations. $ 49 (4) N. Y. Civil Practice Act. The district court found, as is conceded here, that the cause of action accrued April 6, 1928; that plaintiffs in the suit had notice of its accrual on April 15, 1928, and that the suit was commenced three years and eight months later, on December 16, 1931. It overruled the plea of limitations and gave judgment for respondents. 1 F. Supp. 788; 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 the state statute of limitations was applicable, and held that respondents had not been guilty of laches. We granted certiorari, 308 U. S. 541, limited to the question of the application of the New York statute, upon a petition which challenged the decision below as in conflict with the decisions of this Court applying the three-year statute of limitations in a suit to enforce the liability of stockholders of a state bank in Platt v. Wilmot, 193 U. S. 602; cf. as to liability of stockholders of national banks, McDonald v. Thompson, 184 U. S. 71; McClaine v. Rankin, 197 U. S. 154.

280

Opinion of the Court.

Section 16 of the Federal Farm Loan Act provides that the shareholders of every joint stock land bank "shall be held individually responsible, equally and ratably, and not one for another, for all . . . debts ... of such bank to the extent of the amount of stock owned by them at the par value thereof... Unlike the comparable provisions of the National Bank Act, R. S. $S 5151, 5234, 12 U. S. C. $$ 63, 192, which authorize the receiver of a national bank to enforce the liability of stockholders of an insolvent national bank assessed against them by the comptroller of the currency, this section of the Federal Farm Loan Act confers no power on the receiver of a farm loan bank to levy an assessment on the stockholders of an insolvent bank or to maintain a suit to enforce their liability. Wheeler v. Greene, 280 U. S. 49; Christopher v. Brusselback, 302 U. S. 500, 502; Brusselback v. Cago Corporation, 85 F. 2d 20.

As the liability of the stockholders as prescribed by this section is to pay "equally and ratably," the sole remedy is by plenary representative suit brought in equity in behalf of all creditors of the bank, in which the existence and extent of insolvency, and the ratable shares of the contribution by shareholders can be ascertained and an equitable distribution made of the fund recovered. But this amount cannot be determined and its distribution effected without resort to the procedures traditionally employed by equity upon a bill for an accounting and for the distribution of a fund brought into its custody. No stockholder is liable for more than his proportion of the debts not exceeding the par value of his stock. His proportion can be ascertained only upon an accounting of the debts and of the stock and a pro rata distribution of the liability among the shareholders and of the proceeds of recovery among the creditors. Such a suit during its progress and at its conclusion by a final decree of distribution requires the exercise of powers which are pecu

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liarly those of a court of equity to bring before it in a single suit all the necessary parties to ascertain their rights and liabilities, and to adjust and settle them by its decrees. Pollard v. Bailey, 20 Wall. 520; Terry v. Little, 101 U. S. 216; Richmond v. Irons, 121 U. S. 27; Christopher v. Brusselback, supra.

When the receiver or officer performing like functions is authorized by statute to assess the shareholders, the assessment is binding on them by reason of their membership in the corporation, and each shareholder then becomes liable in a suit at law for the amount of the assessment. See Christopher v. Brusselback, supra, 503, and cases cited. It is for this reason that there is a divergence between the procedure for recovering assessments of shareholders of national banks, and that for enforcing the liability of shareholders in a federal land bank. In the latter case there is no legal remedy, the relief being afforded exclusively in equity. The test of the inadequacy of the legal remedy prerequisite to resort to a federal court of equity is the legal remedy which federal rather than state courts afford. Di Giovanni v. Camden Fire Insurance Assn., 296 U. S. 64; Atlas Life Insurance Co. v. Southern, Inc., 306 U. S. 563. And the jurisdiction of federal courts of equity, as determined by that test, is neither enlarged nor diminished by the names given to remedies or the distinction made between them by state practice. Stratton v. St. Louis S. W. Ry. Co., 284 U. S. 530, 534.

The present suit is not any the less in equity because it turns out that the liability of the shareholders equals the full par-value of their stock. The amount of the liability could not be determined and assessed without an accounting of assets and liabilities, and distribution could not be effected among creditors without resort to the power traditionally that of a court of equity to make its determination of the rights of the parties effective

280

Opinion of the Court.

through its decrees in personam. Here the decree directs payment into court of the amount found to be due, for distribution among the creditors in conformity to the further order of the court.

The suit being in equity, brought in a federal district court, the question decisive of this case is what lapse of time will bar recovery in the absence of an applicable federal statute of limitations. The Rules of Decision Act does not apply to suits in equity. Section 34 of the Judiciary Act of 1789, 28 U. S. C. 725, directing that the "laws of the several states" "shall be regarded as rules of decision” in the courts of the United States, applies only to the rules of decision in “trials at common law” in such courts, but applies as well to rules established by judicial decision in the states as those established by statute. Erie R. Co. v. Tompkins, 304 U. S. 64.

From the beginning, equity, in the absence of any statute of limitations made applicable to equity suits, has provided its own rule of limitations through the doctrine of laches, the principle that equity will not aid a plaintiff whose unexcused delay, if the suit were allowed, would be prejudicial to the defendant. Wagner v. Baird, 7 How. 234, 258; Stearns v. Page, 7 How. 819, 828, 829; Philippi v. Philippe, 115 U. S. 151, 157; United States v. Beebe, 127 U. S. 338; Curtner v. United States, 149 U. S. 662, 676; Alsop v. Riker, 155 U. S. 448, 460; Abraham v. Ordway, 158 U. S. 416, 420. In the application of the doctrine of laches it recognized that prejudice may arise from delay alone, so prolonged that in the normal course of events evidence is lost or obscured; and the English Court of Chancery early adopted the rule, followed in the federal courts, that suits to assert equitable interests in real estate will, without more, be barred after the lapse of twenty years when ejectment or the right of entry for the assertion of a comparable legal interest in the land would be barred. Elmendorf v. Taylor, 10

Opinion of the Court.

309 U.S.

Wheat. 152, 173; Hovenden v. Lord Annesly, 2 Sch. & Lef. 607. And where resort was had to equity in aid of a legal right, equity, following the law, would refuse its aid if the legal right had been barred by the applicable statute of limitations. Carrol v. Green, 92 U. S. 509; Godden v. Kimmell, 99 U. S. 201, 210; Wood v. Carpenter, 101 U. S. 135; Philippi v. Philippe, supra; McDonald v. Thompson, supra; Pomeroy, Equity Jurisprudence (4th ed.), § 1441 and cases cited.

In federal courts of equity the doctrine of laches was early supplemented by the rule that when the question is of lapse of time barring relief in equity, such courts, even though not regarding themselves as bound by state statutes of limitations, will nevertheless, when consonant with equitable principles, adopt and apply as their own, the local statute of limitations applicable to the equitable causes of action in the judicial district in which the case is heard. Bacon v. Howard, 20 How. 22, 26; Clarke v. Boorman's Executors, 18 Wall. 493, 505, 506; Boone County v. Burlington & M. R. R. Co., 139 U. S. 684, 692; Pearsall v. Smith, 149 U. S. 231, 233, 237; Benedict v. City of New York, 250 U. S. 321.'

'But federal courts of equity have not always held themselves bound to follow local statutes which in ordinary circumstances they could adopt and apply by analogy. In each case the refusal has been placed upon the ground of special equitable doctrines, making it inequitable to apply the statute. Laches may bar equitable remedy before the local statute has run. Alsop v. Riker, 155 U. S. 448, 460, 461; Abraham v. Ordway, 158 U. S. 416; Patterson v. Hewitt, 195 U.S. 309, 318, et seq.; Badger v. Badger, 2 Clifford 137, 154; Lemoine v. Dunklin County, 51 F. 487, 492; Kelley v. Boettcher, 85 F. 55, 62; Pooler v. Hyne, 213 F. 154, 159. On the other hand, time has been held to be no bar to an equitable suit for a trustee's accounting. Michoud v. Girod, 4 How. 503, 561; cf. Badger v. Badger, 2 Wall. 87, 92; Southern Pacific Co. v. Bogert, 250 U. S. 483. Federal courts of equity have not considered themselves obligated to apply local statutes of limitations when they conflict with equitable principles, as where they apply, irrespective of the plaintiff's ignorance of his

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