McClaine v. Rankin/Opinion of the Court

by Melville Fuller

United States Supreme Court

197 U.S. 154

McClaine  v.  Rankin

 Argued: November 10, 1904. --- Decided: March 6, 1905

It is conceded that, in the absence of any provision of the act of Congress creating the liability, fixing a limitation of time for commencing actions to enforce it, the statute of limitations of the particular state is applicable. Rev. Stat. 721, U.S.C.omp. Stat. 1901, p. 581; Campbell v. Haverhill, 155 U.S. 610, 39 L. ed. 280, 15 Sup. Ct. Rep. 217. If, then, this action was barred by the statute of limitations of the state of Washington, that ended it, and both judgments below must be reversed and the cause remanded to the circuit court, with a direction that judgment be entered for defendant.

Reference to the state statutes shows that subd. 2 of § 4798 relates to 'an action upon a contract in writing, or liability, express or implied, arising out of a written agreement;' while subd. 3 of § 4800 relates to 'an action upon a contract or liability, express or implied, which is not in writing, and does not arise out of any written instrument.' The one relates to contracts or liabilities growing out of contracts in writing, and the other to contracts or liabilities growing out of contracts not in writing. The receiver's contention is that the case falls within subd. 3 of § 4800, imposing the limitation of three years. If it does not, it is not otherwise provided for, and falls within § 4805, which fixes the limitation at two years.

And as this action was commenced within three years, but not within two years, after the assessment became due and payable, the question is whether subd. 3 of § 4800 applies.

It is contended that the meaning of the word 'liability' as used in that subdivision is not restricted to contract liabilities, but, reading it with subd. 2 of § 4798, and in view of the enumeration of other actions to enforce liabilities, we think that this cannot be so, and, indeed, the subdivision has been construed by the supreme court of Washington as applicable only to contracts. Suter v. Wenatchee Water Power Co. 35 Wash. 1, 76 Pac. 298; Sargent v. Tacoma, 10 Wash. 212, 38 Pac. 1048. The circuit court was of that opinion when the case was originally disposed of, and held that the cause of action arose by force of the statute, and did not spring from contract. 98 Fed. 378. But that judgment was reversed by the circuit court of appeals on the ground that the liability was not only statutory, but contractual as well, and that the limitation of three years applied in the latter aspect. 45 C. C. A. 631, 106 Fed. 791. Conceding that a statutory liability may be contractual in its nature, or more accurately, quasi-contractual, does it follow that an action given by statute should be regarded as brought on simple contract, or for breach of a simple contract, and, therefore, as coming within the provision in question?

The national bank act provides that 'the shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares.' Rev. Stat. § 5151, U.S.C.omp. Stat. 1901, p. 3465.

And under other sections the duty is imposed on the Comptroller of the Currency to give the creditors of an insolvent national bank the benefit of the enforcement of this personal liability, and to decide whether the whole, or a part, and, if only a part, how much, shall be collected, he being also authorized to make more than one assessment, as circumstances may require. Kennedy v. Gibson, 8 Wall. 498, 19 L. ed. 476; Studebaker v. Perry, 184 U.S. 258, 46 L. ed. 528, 22 Sup. Ct. Rep. 463, and cases cited. But even his decision does not determine the liability except as to contracts, debts, and engagements of the bank lawfully incurred. Schrader v. Manufacturers' Nat. Bank, 133 U.S. 67, 33 L. ed. 564, 10 Sup. Ct. Rep. 238.

The liability is conditional, and statutes of limitation do not commence to run until after assessment has been made. McDonald v. Thompson, 184 U.S. 71, 46 L. ed. 437, 22 Sup. Ct. Rep. 297.

In the latter case the statute of Nebraska provided (§ 10) that actions must be commenced within five years, 'upon a specialty, or any agreement, contract, or promise in writing, or foreign judgment;' and (§ 11) within four years 'upon a contract not in writing, express or implied; an action upon a liability created by statute other than a forfeiture or penalty.'

The action was brought on an assessment upon the stockholders of a national bank to the amount of the par value of the shares, and not to recover an amount unpaid on the original subscription, and it was held that the five-year limitation did not apply, because the cause of action was not upon a written contract, but that the four-year limitation applied, 'whether the promise raised by the statute was an implied contract not in writing or a liability created by statute,' no distinction between them as to the limitation being made by the state statute. And Mr. Justice Brown, speaking for the court, said: 'Whether the promise raised by the statute was an implied contract, not in writing, or a liability created by statute, it is immaterial to inquire. For the purposes of this case it may have been both. The statute was the origin of both the right and the remedy, but the contract was the origin of the personal responsibility of the defendant. Did the statute make a distinction between them with reference to the time within which an action must be brought, it might be necessary to make a more exact definition; but, as the action must be brought in any case within four years, it is unnecessary to go farther than to declare what seems entirely clear to us, that it is not a contract in writing within the meaning of § 10 of the Nebraska act.' And it was also said: 'Granting there was a contract with the creditors to pay a sum equal to the value of the stock taken, in addition to the sum invested in the shares, this was a contract created by the statute, and obligatory upon the stockholders by reason of the statute existing at the time of their subscription; but it was not a contract in writing within the meaning of the Nebraska act, since the writing-that is, the subscription-contained no reference whatever to the statutory obligation, and no promise to respond beyond the amount of the subscription. In none of the numerous cases upon the subject in this court is this obligation treated as an express contract, but as one created by the statute and implied from the express contract of the stockholders to take and pay for shares in the association.'

In the present case the limitation imposed on an action upon a statute for penalty or forfeiture, where an action was given, was three years (subd. 6, § 4800), and on any other action to enforce a statutory liability was two years, because not otherwise provided for, and, therefore, the question must be met whether this is an action brought on a contract or not. But it is an action to recover on an assessment levied by the Comptroller of the Currency by virtue of the act of Congress, and although the shareholder, in taking his shares, subjected himself to the liability prescribed by the statute, the question still remains whether that liability constituted a contract within the meaning of the statute of limitations of the state of Washington.

Some statutes imposing individual liability are merely in affirmation of the common law, while others impose an individual liability other than that at common law. If § 5151 had provided that subscribing to stock or taking shares of stock amounted to a promise directly to every creditor, then that liability would have been a liability by contract. But the words of § 5151 do not mean that the stockholder promises the creditor, as surety for the debts of the corporation, but merely impose a liability on him as secondary to those debts, which debts remain distinct, and to which the stockholder is not a party. The liability is a consequence of the breach by the corporation of its contract to pay, and is collateral and statutory. Brown v. Eastern Slate Co. 134 Mass. 590; Platt v. Wilmot, 193 U.S. 602, 48 L. ed. 809, 24 Sup. Ct. Rep. 542. In Matteson v. Dent, 176 U.S. 521, 44 L. ed. 571, 20 Sup. Ct. Rep. 419, the stock still stood in the name of the decedent, and it was decided that the statutory liability was a debt within the state law, but not that it was a true contract.

It is true that in particular cases the liability has been held to be, in its nature, contractual, yet, it is nevertheless conditional, and enforceable only according to the Federal statute, independent of which the cause of action does not exist; so that the remedy at law in effect given by the statute is subject to the limitations imposed by the state statute on such actions.

Cases such as Carrol v. Green, 92 U.S. 509, 23 L. ed. 738, and Metropolitan R. Co. v. District of Columbia, 132 U.S. 1, 33 L. ed. 231, 10 Sup. Ct. Rep. 19, are not controlling, for in them the right to recover was direct and immediate, and not secondary and contingent. In Metropolitan R. Co. v. District of Columbia, the charter of the company provided 'that the said corporation hereby created shall be bound to keep said tracks, and for the space of 2 feet beyond the outer rail thereof, and also the space between the tracks, at all times well paved and in good order, without expense to the United States or to the city of Washington.' The declaration set out a large amount of paving done by the city, which it was averred should have been done by the company. The action was based on the implied obligation on the part of defendant to reimburse plaintiff for moneys expended in performing the duty which the statute imposed on defendant. In Carrol v. Green it was said: 'According to the statute, the liability of 'each stockholder' arose upon 'the failure of the bank.' The liability gave at once the right to sue; and, by necessary consequence, the period of limitation began at the same time.'

But here the right to sue did not obtain until the Comptroller of the Currency had acted, and his order was the basis of the suit. The statute of limitations did not commence to run until assessment made, and then it ran as against an action to enforce the statutory liability, and not an action for breach of contract.

We think that subd. 3 of § 4800 did not apply, and that § 4805 did.

The judgment of the Circuit Court of Appeals is reversed; the judgment of the Circuit Court is also reversed, and the cause remanded to that court with a direction to sustain the demurrer and enter judgment for defendant.

Mr. Justice White, with whom concur Mr. Justice Brown and Mr. Justice McKenna, dissenting:

Notes