McClaine v. Rankin/Dissent White

by Melville Fuller

United States Supreme Court

197 U.S. 154

McClaine  v.  Rankin

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

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

The statutes of the state of Washington limit to three years the right to bring '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 cause of action here involved is now held not to be embraced within this statute, and therefore barred by the following provision: 'An action for relief, not hereinbefore provided for, shall be commenced within two years after the cause of action shall have accrued.'

The liability sought to be enforced is the obligation of a shareholder of a national bank to pay an amount equal to the par of his shares of stock. The circuit court held the action not to be one upon contract, but to enforce a conditional liability imposed by the law as an incident to ownership of bank stock, and therefore barred by two years. 98 Fed. 378. The circuit court of appeals reversed this judgment, and decided that the period of limitation was three years, because the liability was contractual. 45 C. C. A. 631, 106 Fed. 791.

In Suter v. Wenatchee Water Power Company, decided April 18, 1904, 35 Wash. 1, 76 Pac. 298, the supreme court of Washington construed the provision of the statutes of limitation here involved, providing that an action might be brought within three years 'upon a contract or liability, express or implied, which is not in writing,' and held that it did not embrace torts, 'but was evidently intended to refer to a contractual liability.' The court, in its opinion, among other authorities, referred to this case as decided below, saying:

'Such, in effect, was the decision in Sargent v. Tacoma, 10 Wash. 212, 215, 38 Pac. 1048. The same statute was construed by the United States circuit court, district of Washington, in Aldrich v. Skinner, 98 Fed. 375, and also in Aldrich v. McClaine, 98 Fed. 378. The last-named case was, on appeal to the United States circuit court of appeals, reversed. Aldrich v. McClaine, 45 C. C. A. 631, 106 Fed. 791. The reversal was, however, upon the ground that the liability involved was a contractual one, the lower court having held otherwise. The appellate court construed the statute itself as did the lower court.'

It might well be considered that the supreme court of Washington regarded the interpretation of the court of appeals as harmonizing with its own views of the meaning of the provision in question. But be this as it may, the prior decisions of this court to me seem conclusive, since, in deciding various questions concerning the liability of stockholders in national banks to pay the double liability, this court has expressly held that such liability is contractual. Matteson v. Dent, 176 U.S. 521, 525, 526, 44 L. ed. 571, 573, 574, 20 Sup. Ct. Rep. 419; First Nat. Bank v. Hawkins, 174 U.S. 364, 372, 43 L. ed. 1007, 1011, 19 Sup. Ct. Rep. 739; Richmond v. Irons, 121 U.S. 27, 55, 56, 30 L. ed. 864, 873, 7 Sup. Ct. Rep. 788. In Richmond v. Irons the court said (pp. 55, 56, L. ed. p. 873, Sup. Ct. Rep. p. 801):

'Under that [the national banking] act the individual liability of the stockholders is an essential element in the contract by which the stockholders became members of the corporation. It is voluntarily entered into by subscribing for and accepting shares of stock. Its obligation becomes a part of every contract, debt, and engagement of the bank itself; as much so as if they were made directly by the stockholder, instead of by the corporation. There is nothing in the statute to indicate that the obligation arising upon these undertakings and promises should not have the same force and effect, and be as binding in all respects, as any other contracts of the individual stockholder. We hold, therefore, that the obligation of the stockholder survives as against his personal representatives. Flash v. Conn, 109 U.S. 371, 27 L. ed. 966, 3 Sup. Ct. Rep. 221; Hobart v. Johnson, 19 Blatchf. 359, 8 Fed. 493. In Massachusetts it was held, in Grew v. Breed, 10 Met. 569, that administrators of deceased stockholders were chargeable in equity, as for other debts of their intestate, in their representative capacity.'

In Matteson v. Dent the evidence showed that at the time of the death of Matteson he was the owner of ten shares of stock in a national bank,-a going concern. His widow and heirs, by the decree of a probate court of Minnesota, became the joint and undivided owners of the stock, which continued, however, to stand in the name of Matteson. Thereafter the bank failed, and, on the ground that they had received assets of the estate, a suit was brought against the widow and heirs for the amount of an assessment made by the Comptroller against the stock. The suit was defended on two grounds; first, that the assessment was not binding, because the bank had not failed at the time of Matteson's death, and at the time when, by the decree of the probate court, the widow and heirs had become the owners in indivision of the stock; and, second, that under the national banking law they could only be made liable, in any event, each in proportion to his or her interest in the stock. In considering the first ground the court, approvingly citing the passage from Richmond v. Irons above quoted, said (p. 524, L. ed. p. 573, Sup. Ct. Rep. p. 420):

'Because the insolvency of the bank took place after the death of Matteson, did it result that the assessment, which was predicated upon the insolvency, was not a debt of his estate? To so decide the statute must be construed as imposing the liability on the shareholder for the amount of his subscription when necessary to pay debts only in case insolvency arises during the lifetime of the shareholder. In order words, that all liability of shareholders to contribute to pay debts ceases by death. This construction, however, would be manifestly unsound. The obligation of a subscriber to stock to contribute to the amount of his subscription for the purpose of the payment of debts is contractual, and arises from the subscription to the stock. True, whether there is to be a call for the performance of this obligation depends on whether it becomes necessary to do so in consequence of the happening of insolvency. But the obligation to respond is engendered by, and relates to, the contract from which it arises. This contract obligation, existing during life, is not extinguished by death, but, like other contract obligations, survives, and is enforceable against the estate of the stockholder.'

And the same principle has been applied to similar liabilities imposed upon stockholders in state corporations, the court uniformly holding that the liability, although statutory in its origin, was contractual in its nature, and therefore the cause of action was transitory. Whitman v. National Bank, 176 U.S. 559, 44 L. ed. 587, 20 Sup. Ct. Rep. 477; Flash v. Conn, 109 U.S. 371, 27 L. ed. 966, 3 Sup. Ct. Rep. 263.

In Whitman v. National Bank, discussing a statute of the state of Kansas, the court, through Mr. Justice Brewer, said (p. 563, L. ed. p. 590, Sup. Ct. Rep. p. 478):

'The liability which, by the Constitution and statutes, is thus declared to rest upon the stockholder, though statutory in its origin, is contractual in its nature. It would not be doubted that, if the stockholders in this corporation had formed a partnership, the obligations of each partner to the others and to creditors would be contractual, and determined by the general common law in respect to partnerships. If Kansas had provided for partnerships with limited liability, and these parties, complying with the provisions of the statute, had formed such a partnership, it would also be true that their obligations to one another and to creditors would be contractual, although only in the statute was to be found the authority for the creation of such obligations. And it is none the less so when these same stockholders organized a corporation under a law of Kansas which prescribed the nature of the obligations which each thereby assumed to the others and to the creditors. While the statute of Kansas permitted the forming of the corporation under certain conditions, the action of these parties was purely voluntary. In other words, they entered into a contrack authorized by statute.'

And the principle sustained by the previous decisions of this court is also supported by the decisions of state courts of last resort. Thus, the supreme judicial court of Maine in Pulsifer v. Greene, 96 Me. 438, 52 Atl. 921, held the doctrine to be consonant with reason and natural justice and sustained by the weight of authority, the court citing not only the decisions of this court previously referred to, but also decisions of the courts of California, Connecticut, Illinois, Kansas, Massachusetts, and Michigan. And the decisions of the state courts of last resort thus referred to were, in many cases, in part rested upon the previous adjudications of this court to which I have referred, those decisions being considered as conclusive on the subject of the contract nature of the liability. My mind sees no reason for saying that the doctrine thus settled is not applicable to a statute of limitations, for if the liability of the stockholder be contractual, for the purpose of enforcing the obligation, it is not by me perceived upon what principle it can be held that it is not contractual, but purely statutory, for the purpose of determining whether an action to enforce the liability is barred by a statute of limitations. But the unsoundness of the distinction as an original question in my opinion does not require to be demonstrated, since it is absolutely foreclosed by previous decisions of this court. Thus, in Carrol v. Green, 92 U.S. 509, 23 L. ed. 738,-an action against stockholders of a South Carolina bank to enforce a double liability provided for in the act of incorporation,-it was expressly held that, as the liability was contractual, it was barred by a statute of limitations applicable to simple contract indebtedness. Reference was made to decisions of the courts of New York and Massachusetts, holding the same doctrine in analogous cases (pp. 514, 515, L. ed. p. 740), and, in concluding the opinion, the court expressly noticed and overruled the contention 'that the liability here in question, being created by a statute, is to be regarded as a debt by specialty.' Carrol v. Green was subsequently approved and followed in Metropolitan R. Co. v. District of Columbia, 132 U.S. 1, 23 L. ed. 231, 10 Sup. Ct. Rep. 19. The action was to recover the cost of certain street paving, the liability being recited in the act of incorporation. The trial court overruled demurrers to pleas of the statute of limitations, among other reasons, upon the ground that the action was founded on a statute, and that the statute of limitations did no apply to actions founded on statutes or other records or specialties. This ruling was held to be erroneous, the court saying (p. 12, L. ed. p. 235, Sup. Ct. Rep. p. 23):

'It is an action on the case upon an implied assumpsit arising out of the defendant's breach of a duty imposed by statute, and the required performance of that duty by the plaintiff in consequence. This raised an implied obligation on the part of the defendant to reimburse and pay to the plaintiff the moneys expended in that behalf. The action is founded on this implied obligation, and not on the statute, and is really an action of assumpsit. The fact that the duty which the defendant failed to perform was a statutory one does not make the action one upon the statute. The action is clearly one of those described in the statute of limitations.'

To avoid the controlling effect of these rulings upon this case, on the theory that, by virtue of the statutes which were considered in Carrol v. Green, and the Metropolitan Railroad Case, the right to recover was direct and immediate, whilst in the case at bar, in consequence of provisions of the national banking act, the right to recover is secondary and contingent, is, in effect, in my opinion, to overrule the cases in this court determining that the liability of a stockholder in a national bank is contractual. This becomes apparent when the ground of the alleged distinction is considered. That ground is this, that, as the national banking act empowers the Comptroller to determine the necessity for an assessment on the stockholders of national banks, and to make a call for such assessment, thereby the obligation of the stockholder becomes secondary and contingent, and hence statutory, and not contractual. To me it seems that this interpretation, whilst overruling the previous cases also originally considered, gives to the national banking act an erroneous construction. The mere fact that the act gives to the Comptroller the power of making a call on stockholders for the purpose of enforcing their contract liability, in my judgment lends no support to the proposition that the ministerial duty created to better enforce the contract must be considered as destroying the contract itself. The consequences which must arise from the new construction now placed upon the national banking act, it seems to me, will be of the most serious nature; and being unable to agree with such construction, I cannot concur in the opinion and judgment of the court.

I am authorized to say that Mr. Justice Brown and Mr. Justice McKenna join this dissent.

Notes