# Petition for Writ of Certiorari — Russell v. Todd > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386401_0265%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1940 - **Citation:** 309 U.S. 280 ## Text —— i ee ame. BL) rte Ae la GE CGP hy Be ” ° | Supreme Gourt of ws Anited Stakes 6. RE. LL. ~ E MILLER, CHARLES HENRY. RUSSELL, -LAWR ’ co-partners, doing business STEERS, and JOHN P. WI ‘under the firm name of R "Or tae pee . _JAMES § TOW; JOSEPH 'R. WORK and WILLARD C. WEISS, co-pattners, doing business under the firm name of ~J-S. TODD & CO., on behalf of themselves and all other cred- ,, MILLER AND CAREY, ; er? 3 Pilate itors of THE OHIO JOINT STOCK LAND ares OF 7 CINCINNATI, OHIO, and HOWARD y. LISSENDEN, HENR¥ TRUXTON EMERSON, “....2.0..50000, vee ce ston" = 2. Statutes Gael pp aes Serer ee ‘geeee, D Specification of Errors to be Urged........ rem & Point I. The applicable three-year. New York and—— California statutes of limitations barred this action © eight months before its’ incepfon Dec avedetaniesas eee A. The New York and California statutes com- ? pletely bar the action ........+.+s.+eeeeee tebe * ae B. Under existing ‘Federal a ae application of the New York statute of limitations was dic- tated by the existence of a concurrent jurisdic- © oe in law EE 56 is kas ce ae. fie = ture of the right here involved being ex- . ve aaa y-legal, enforcement is barred by the period of limitations at la regardless of eee ") equitable form of the remedly.........6..... 20 D.* The present case clearly illustrates the inequity € ee. whi h will arise from the | application of so- equitable principles P pe UK ARebae aces ae. Point II. Petitioners are not owners, within the mean-. ing of the statute, of, the Ohio Joint Stock Land’ - Bank stock ere in their ont beae es et eeees 23 G ~ ee - Coit v. Campbell, 82 N. ¥. 509..,...... ghegenees : \ Curtis v. Connly, 257 U. S. 260... 0.2.4... ore. YF Cwerdinski v. Bent, 256 App. Div. 612. iawn Mi nees 19. Erie R. Co. v. Tompkins, 304 U. S..64....0...6. _ Friede-v. Mackey, 10 N. E- (2d), a SeGhecue wens ae -Galliher v. Cadwell; 145 U. S. 368..... ‘aeons » ee! 6: — Godfrey v. Terry, 97 U. S.A71. 6 Bei ccc e wees oe ae Graham v. Boston etc.*R. Co., 118 U. S. 161....... AG Pe Oe oe epee Sia aera 23 Hale v. Coffin, 114 F. 587; aftemed 120 F. a0... a Heiden v. Cremin, 66 F. (2a) § certiorari denied - 4 : he Te coe dcccsvharteess: vesttesvess aun & Holmberg v. Anchell, 24 F. Sint 504 PEERS GAPE. , - Howarth v. Angle, 162 N. Y. 179...... eae igavens 20 ‘Johnson ¥. Greene, 88 F. (2d) 6830.......... sseees 6 Keys v. Leopold, 241 N. Y. 189...... Sunes eee’ i ae Kirk v. Young, 2 Abb. Pr. 453... ....-.. wattteese (18% Kuhn v. Fairmont Coal Co., 215.U. S. 349. ree ote “9 Lang v. Lutz, 180 N. ¥. 254: apeeee Lord v. exindadues ee aut soa als « @ ~ en titer . ee PAGE ‘Mian. y 197-U. S. 1H... ieee Se _ McDonald ¥. mpeon; 184 U.S. 71..... tT te McKensie v.f Amoureus, 11 Barb. 516...... oeee:: ae? Metropol Bank v.. St. Lous — Company, > Ee aes NR eae eC awe cece’: cogeneesls 5,17 Miller v. 160 Cal. 90, 116 Pac. 58 reyee' eo ee ee ‘Morgan amlet; 113 U, S. S, 449.00 .e se ees ee ene ) ee _—National-Bank-v.Case, 9 Us. Mc d Weeks vy. Love, 50 N. Y. we: fine keane 18° Wheelerv. Greene, 280 U.S. 49. ...6..5.3..5, 17, 19, 28. Wilson se Koonts, 7 Cranch 202). 1.21. .s+s00- a ae rd = — = nm : 2 ” oN iv > STATUTES CITED @ = = a agit _. PAGE od California Code of Civil Procedure 3 Sey -.3, Pl, 13 a | | § 382.:...... 11, 18 Farm Loan Act..‘..”.. eas 25, 26 97, 28, 29 IZ U. S.C. § 4... ...004: Seeaekeeo? 26 ; Bn ree. 26 ea 26 Sees DA ie Se we 26 po as ecseweanae. ayes 26 SS ee eee 26. 4 . i. Serre © Bee § 744... 5.y.:-. 4, 25,26, 27, 28 : f BOMB ccs ds veaiedecs? Oe ae Se : §771.......6 eres Sikes ae oe 7 gana. SS 47/9, 24, 25, 28 Bi errs eed, Pree 26 —", Federal Reserve Act, i2 U. S.'C: Ds § 502... 20, ‘National Banking Act....... eavvdwestvustee I, 25,28* AU S.C $a... eka eae aoe 28. Peete iiecsu eae oe 25, 27 iat BOW s chavcp si yeves owaedae - 24° Nie York Civil. Practice Act. Se 310, 13; 13, 28 .. ae "4 DeRose wececeayues 15 ~ es : Renta ABS So 13 Ties see ; et 5 a SS ed ga eg 6, 10, 18 _ New York Code of Civil Procedure. +g 304. Mee 15:4 * ae eee oasis APE Per ee ous uote vena e "OTHER AUTHORITIES __ Note (1938) 38 Columbia Law: Review:1472. pee | i ae sat Lag. 8 Of + Petitioners, ss agomst 25 s \Saee Credi e. Justices -of the Supreme Court of the United States: ee ; Ife bent » x pei Court of the ates States . Henry Russet, taieiaiies Mites, Cuances Srezns, and Joun P. W1nG, co-partners, doing business under / the firm name of Russett, MILLer Ayp Carey, and |. | SAMUEL A. PLEASANTS, ff pir Jaws S. Topp, Josern R. “Work aril. Witcarp C. WEIss, co-partners, doing iisiness under the firm ‘name of RS. Topp & Co., If of themselves and’ ae «all other creditors of Tu€/On10 Jornt Stock Lanp / ~ i Bank “ay Cincienars, 110, - : mr FIERY. e : / ea, Soucel ¥. Lasazsioan: Henry Truxton EMERSON, _ Witiarp C. Wess and ALEx. LowENTHAL, as Mem- ' bers of The itor’ Protec oint Stock Land Bank of Cincinnati, ors’ ective raat ia . Intervenors. x vf Petition FOR ‘A WRIT OF CERTIORARI TO “ THE CIRCUIT COURT OF APPEALS FOR THE SECOND. CIRCUIT. , To the Honorable The Cc hief Justice arid the Assoctite.. Geiger ra & Henry Russell, ‘Lawrence Miller, Charles heen. and ie >. . John P. Wing, cO-partners doing busifiess under the firm name of : Russell, Miller and ‘Carey, . and Samuel A. Pleasants, defendants-i -in the above-entitled action, respect- fully petition for a writ of certiorari to review the decision of the Circuit Court of Appeals for the Second Circuit rendered therein’ May 29, 1939 (one Judge dissenting), 104 F(2d) 169, R. 420. This decision ‘affirmed the judg- . 4 Gee * o* : ment of the United States District Court for the Southern ‘ " District of New York rendered in favor of the plaintiffs _— 1938, 20 F: Supp. 936, atti Summary Statement of matted Involved This is a representative action by is S, Todd & Co. on. ; behalf of themselves. and other creditors of the Ohio Joint — - Stock Land Bank of Cincinnati, Ohio, against defendants, ° - holaen of record of certain shares in that Bank (R. 368). The action is brougtit pufguant.to 12 United States Code: _ § 812, providing in | substafice a double liability for share- age holders.of. joint stock land banks. 2 Petitioners were not the beneficial « owners of the ie ’ in question. The petitioners Russell, Miller, Steers and Wing, co-partners in the New York brokerage firm of . Russell, Miller and Carey, received 200. shares of gtock for ~4 af % - the’account of one Grafton W. Minot, a customer, and transferred ihe stock to their names on the ‘books of the | bank (R. 378. The stock was subsequently delivered. to the customer (R. 153). The -petitioner Pleasants was a. “pledgee, ‘whé received 11214 shares of stock as collateral - security for a loan,“and being entitled under the terms of the pledge to have the stock transferred to His name, did SO . (R. 374-6). The Ohio Joint Stock Land Bank was organized or - _ January 12, ‘1923, With a capitalsof $250,000, and had its ' principal place of business at.Cincinnati, Ohio (R.:230). '.-On September 1, 1927, the’ bank failed to pay interest on its bonds, ang in consequence was declared insolvent by the Federal Farm Loan Board (R. 75), its liabilities €x- - ceeding its assets bye more than $250,000 (R.: a, ¥ . la “® o* Pe oF ; - : ° ws} » ee ~ ‘ , P gale . . . ° . -- Ds . 5 edie a ‘ - i > Fk Salm i hos ” I Cees AE RE he oe us ° 5 3 ’ ER ee CEE RT eo OE Poe i ; . e.? Re ee Ee PE RT ORT SO Nie % a ‘get - Horton was appointed reeiver pursuant tothe Farm Loan 4 Act '(R. 160-1). | The District Court found’that the cause of action ‘ac- ' erued April 6, 1928 (R. 354) and that plaintiffs herein, amd “the creditors and bondholders, on whose behalf plain- tiffs sue, had notice of the accrual°of said cause of action on or about April 15, 1928” (R. 354)... The Circuit Court, of Appeals accepted this conclusion as a (R. 423, 104 F.. [2d) at 172). : | Thé present action was not cme until more than ‘ cember 16, aap _ three years\ and eight months thereafter, wesath a on De- - ES ce : Basiy of Jurisdiction | | “The jurisdiction of this Court i is invoked under §.240(a) . of the Judicial Code as amended by the Act. -of Weirwary - 13,.1925, 28 United States Code § 347. ee Act §-49 subd. 4 (as tovall petitihers j _ . - The judgment of the Circuit Court of | ——* herein was entered on May 29, 1939 (R, ma heen , New York Civil Practice: Act § 55 and | | eg or is it on the pent ley ally. and exclusively ae in nature? — 2 aa ace 3, In i aonersiling whether the cause’ of action is barred - : by limitations, or whether the conception of laches may be’ applied, is this Court bound by the applicable New York - law? | 4. Are plaintiffs guilty” of laches? aS : §, Are mere record owners of joint stock land bank shares, having no beneficial interest therein but holding the same either as pledgees or as custodians for others, subject to the. double liability imposed upon -shareholders ~ 12 United States. Code ‘§812?— e . 2 ; “Reasons for Allowing the Writ ca The decision of the Circuit Court of Appeals de- ‘termines important questions of .Federal . law, which have , not been but which should be settled by this Court, viz.: (a) That, in an action under 12 United States. ‘Code. § 812, stockholders of joint stock land banks ~ : (and consequently stockholders in national farm Idan ‘ associations, since § 744 is identiéal with § 812) are not entitled to plead ¢n bar arly statute of limitations. ~(b) That holders of record of stock of- joint es: . stock land banks (and of. national farm loan associa- ) tions), who are mere nominal holders for.the-benefit of another or mere. - pledgees, are liable as the owners. of the stock under 8. 812, although the'Federal Farm ~ Loan Act (§§ 641-1129) does not provide for access to stockholders’ lists by creditors, The above questions involve the Siterpiritation of §812 _.. - which restricts liability to “. . . the extent ofthe amount of the stock. owned by. them . Except for one, District - Court and thé. Masechnscts Court,’ there has been no | . adjudication of the meaning of this language. : “ie Siiibateied of like questions of statutory construc-| tion, with regard to the Farm Lédan Act, has. heretofore - been recognized by this Court. in granting certiorari in. Wheeler v. Greene, 279 U. S. 829, ‘and C ie ats at v. Brus- selback, (302 U. S. 672. : | ; zx. The: decision. ‘aan, in ‘holding. defendants not en-- - _ titled to the benefit of the statute | ran etn igduelieved ie to bei in conflict: with . : (a) " Platt v. Wilmot, 19 U. s. 602, which ap- ‘Plied the New York statute| of limitations to an_ . action ‘to enforce the liability of a stockholder he eae , Nebraska bank, and the analogous rulings in Pufahl siskaeeet Oe y v. Estate of Parks, 299 U. S. 217; Curtis v. Connly, e to. Ag 257 U. S.:260; McDonald v. Thompson, 184 U. S. : 3 71; Mc€laine v. Rankin, 197 U. S. 154; and -.(b) Metropolitan Bank v. St. Louis Dispatch : _Gompany, 149 U. S..436, 448, and Baker .v: Cum- . law and im equity, are bound by the statute of limi-" . oN tations.: ‘The Circuit Court of Appeals is believed, in this regard, to have misapplied the rulings in . Wheeler v. Greene, 280 U. S. 49, and Cha } v. Brusselback, 302 U.S. 909, 5s By! ——— : 1See Woolsey, J. in Brusselback v. Ca oC 2A F. 5 524, 534, and Holmberg v. Anchell, 24 F. Lg gh ; Priede Vv. Mackey, 10 N. E. (2) 102 (Massachusets f 937): - me: . PN ey, ; 3. The detain below is ies believed to ‘“ coe (ec) The Pa that pane oo of « q ._ joint stock land banks, who are merely nominal _ . “holders. for the benefit of another, or pledgees, are liable as owners of the stock is believed to be in con- ae . flict with the decision of the Ciscuit Gourt of Ap- ? ~~ -peals for the Eighth Circuit in Heiden. v. Cremin, eb 66 6 F. (24) 943, certiorari re U: St 687, — : ty, x { \« ; ‘ F 5. Th holding “that came emda of joint stock land banks, who are merély nominal holders for the benefit . of i plédgees, are owners of the stock within the meaning o § 812, the.Circuit Court of Appeals is believed * ta have failed to give effect to the.decision in Pauly v. S tate | CL Trust Co., 165 U. S. 606,.and to have extended =“ é a nisapplied the viii in National Bank. v. Case,.99° S 628, id ee. Fidelity T rust Co., 189 VU. a 242. | © © Kor the foregoing ‘reasons; SSdbich are developed i in more » ‘detaiJ: in the ac mpanyinggbrief,- your petitioners pray , ~—that'a writ of certiorart i sue out of this Court to the United ———--—- States Circuit Court ‘of Appeals for’ the Second Circuit | 3 commanding said Court to certify ard send to this Cougt on a day tobe determined a ‘full and ¢ plete transcript of —the-record of all of the ‘proceedings ; of such Circuit’ Court be = a Appeals had in this cause, to the end that this cause may“ Federal court ‘of equity after the period prescribed by the - of Patterson, D.J., which lay at the basis of this.holding, 4 - was rendered: November 2, 1932, six years before this E Court in Erie ‘R. Co. v. Tompkins, 304 U. S. 64, overthrew the doctrine of Swift v. Tyson. In the Tompkins. case this Court said, 304 U. S. at 78: ; : : “Except in matters governed by the Fedéral — . Constitution or by Acts of Congress, the law tobe applied in any case is the law of the State... . ; ayes is no. federal general common law.” And. at page 79 the Court qtioted with approval the lan- : guage of Holmes, J. in Kuhn v.. Fairmont Coal Co., 215. | - “The common law so far as it is enforced i ina State, whether called common law or not; is not the com- - mon law generally biit the law of. that State ex- _ isting by the authority ef that State without regard " & to what it nad have been i in — or anywhere : else. ” By Ruhlin. v..Neiw Vork ‘i aaa Company, 304 _ U.S. 202, 205, it was pointed out that the doctrine of the Tompkins case extends to suits in equity. ' By its terms the New York statute completely bars the _ action, limiting as it does to three years an action againgt a rere, . 15 “a stockholder 3 a: ance corporation . . . to en- force a liability created . . . by statate.” The double liability ‘sought to be imposed upon the peti- _tioners was creatéd by statute, and-had no antecedent ex- istence either at common law or in equity. The Circuit _ ~ Court of -Appeals acknowledged that “the basis of this. action is purely statutory” (R: 424, 104 F.. [2d] at°172). - In the: ‘State court, the action could not:-have been instituted after ‘April 1931." This Court so indicated in Platt v. Wilmot, 193 U. S. 602, 613, in holding -@ suit to enforce . iy * stockholders’ liability under'a.Kansas statute barred by the New York three-year statute, New York Code: of Gil Procedure § 394°: | _. “We think, within the meaning of Section 394, te this liability was created by statute, as it was by _ virtue of the statutes that’ the contractual liability . arose. The language of the ween plainly includes - this case.” > - The system of limitations: laid down S the New York | statutes not only provides specifically for this action by” _. Civil Practice Act. § 49, but excludes the doctrine of laches "by providing in § 53.for a limitation of ten years upon-ac- - tions. not specifically provided for. The result.of this statutory scheme is to abolish the doctrine of laclies en- tirely in New York. where the relief asked relates to matters - of right. Pollitz v. Wabash R. Co., 207 N. “3 113, 130; Coit v. ata 82.N. Y. 509, 514. ' SThe AE of Givil Practice Act 849, subd. 4, yee at p- 10 above. . . "New York Civil Practice Act §53. “Limitation where none ey prescribed. An action, the limitation of which is not spe- cifically prescribed | in this article, must be commenced / within ten years after the cause of atm accrues.” a ‘oe: » Coidiaiaetai, ‘the re-appearance of the -doctrme - a laches in Federal equity actions in NewYork is contrary to the rule of the Tompkins case. For, while limitation i isa .@ ‘ procedural matter not embraced. within the rule of the | pee: ‘Tompkins case, laches on the contrary is a matter of sub- | stantive law. It rests on affirmative doctrines of conscience, good faith, atid reasonable diligence, and requires on the facts of each case an affirmative determination of prejudice - a resulting frofft delay. Thig=Court has repeatedly pointed - out that laches turns not rely updm lapse of time but also "upon the nature and evidence of the plaintiff’s rights, all ~ the circumstances of the case, and the nature.and: strength ed { a intervening rights and equities. See for example. Galli- * her y. Cadwell,.145 U. S. 368, 371-2; Penn Mutual Life Insurance Company v. Austin, 168 U. S. 685, 697; Graham v. Boston etc. R. Cv., 118 U.S. 161, 179. . , .. Although the question & one of: novel impression such as would hardly have arisen before Erie R. Co. v. Tomp- kins drew the liné between substantive law and procedure,” ~'y, laches seems clearly to be a doctrine-of substantive law. As ‘the conclus no such doctrine i is recognized in the State of the forum, it is submitted ‘that the rule of the Tompkins. case. does not " permit it to be applied by. -the Federal courts in that State as @ part of any Federal general common law. If this ‘were’ ~ not so, the effect would be, contrary to the doctrine of the. - - Tompkins case, to import into the Federal law rules of sub- stantive law nat recognized by the State in which the court sits. The fact that the State statute of limitations: is uni- - formly See as procedural, does not in any way warrant Cf. Note in 1938 Columbia Law Review p. "1472." e - reached by the cqurts below that those courts ig “and that: ; “The only means of pS A the liability left ‘to . a. y We 2 e ° might continue to apply in- aii the substantive law doc- .. ' trine of laches not oe in ‘the State | seca i ° B. Under existing Federal precedents application of the 4 PR Ranged nirsin geese sree , + ice of.a concurrent jurisdiction in law and equity. _ It was conceded by the Circuit Court that, in the event | of concurrent jurisdiction at aw and in equity, the bar of: limitations at law cannot. be esgaped by a plaintiff through .-S the selection of the equitable remedy® (R. 423, 104 F. [2d] _ at 172). But that Court erroneously concluded that. con- Ved: jurisdiction did not exist,and that the present ac- tion is exclusively. equitable in both form and substance. - This error 8rose.from.a misinterpretation of ‘the ‘an- guage ‘used by this Court in Christopher .v. Brusselback, 302.U. S. 500, 502. There i in describing ‘the decision in Wheeler ¥. Greene, 280 U.S. 49, this Court pointed out: ' that the means for enforcement of the liability of the stock- holders of national banks provided by the National Bank- ” ing Act, did not exist with hee to joint stock land banks, creditors of a Joint Stock Land Bank, as the pointed out in the Wheeler Case, is an adversary suit in equity against the Kocnendrs wherever they, may. be found.” e The opinion of Holmes, J., in the. Wheeler case referred to was less sweeping in its description of the equitable sematy, saying merely (280 U. S. at a a vy _ *See Metropolitan National Bank v. . St. Louis Dispatch Co., 149 ° - ¥: S. 436, “8; Baker v. Cammings, 169.U. S. - _ diction at law. In fact; jurisdiction primarily lies at law by Ne F ~ ‘ j “The, stockholders are to be held only | ‘equally _-s and ratably’. ‘And, to say the least, the bill inequity — is the most likely way of reaching that result.” A Neither the description by Holmes, J. of the equitable. y as the most likely way nor that by Stone, J. asthe | only mearis of enforcing the liability left to creditors-of a ._ joint stock land bank, necessarily excludes concurrent juris- eee «. __, virtue of the fact that] money is the measure ofthe liability. 3 mo . imposed upon ‘the endants by the statute, and by virtue of the fact that the déficiency in the assets of the Ohio Joint | Stock Land Bank tly exceeded its $250,000 capital - (R. 370). Under these circumstances, an. accounting .as_ among the “defendants and other stockholders or an ac- éounting as against the. defendants was alike unnecessary ~4 / for the due enforcement of the fnghe money liability im- » posed by statutg. . Oe : The liability of the defendants as stockholders being * determinable in a fixed t of money by virtue of the statute and the financial — This is of course the New York hw, as shown by i the cases: cited at p. 19° above. The same analysis’ of this kind of action is adopted by the California court and hy _the Federal courts sitting in California in applying to such actions the California three-year Statute of limitations. - Miller y. Lane, 160 Cal.,90, 116 Pac. 58; Schram v. Poole, 97 F.. (2d) 566,-571 (C.C. A. 9, 1938; receiver’s: bill in equity to enforce statutory liability of stockholders of na- tional bank); Lord v. Morris, 18 Cal. 482, 486, per Field, J.” _ It is submitted that the authorities do not sustain the - conclusion reached by the majority below on this point (R. 424;-104 F. [2d]. at 172), and that the scholarly dissent of . - Judge Clark states the sound view (R. 430-4, 104 F. (24) at 175-6). | ) e D. The ‘Present case clearly /illustrates the inequity _ which will arise from. the application of so-called equitable | | principles. - Ns a4 eau ses o \ : The statutes of limitation of New York and California - whick we believe to govern “this case, are definite expres- sions by the respective Legislatures of the public policy af- fected by belated attentpts to enforce the drastic double lia- _ bility, provisions of many banking laws. . That the public - policy so-found and expressed is a salutary one deserving of the favor of the courts, has often been pointed out. See 1°See- to the same effect Marshall, C. J. in Wilson v. Kesuté, 7 ~ Cranch 202, Hale v. Coffin,.114 F.°567, 575, aff'd 120 F. 470, and | ' Andrews v. Bacon, 38 F. 777, 778, although the first two are prob-- ” ably cases of concurrent jurisdiction, Guaranty Trust C apts v. United States, 304 U. S. 126, 136. sy _ By the principle of limitations, th e rights of the parties © 2 ? are determined with clarity and certainty by the mere lapse . " assist an unjust enrichment. of time, The injustice which arises in this case from appli- - cation of the supposedly superior equity principle-of laches, on the other hand, is startling. The doctrine of laches is _ * supposed to be based on equity and good conscience; yet the record in this case shows that the plaintiffs have already been over-paid. They paid for their ‘Ohio Joint Stock Land Bank bonds a price of only 50 (R. 373), and have already received thereon dividends: of 62.86% of the face amount (R. 317), i.e. substantially more than they invested! Their : whole investment represents a speculative interest in litiga- - tion, as the dissenting Judge aa nee out (R. 434, 104 F. [2d] at 177). These facts sharply illustrate the irisubséantial; seth , « cal, and wholly traditional character of the principles of equity which. respondents successfully invoked below to escape the effects of the local statutes of limitation. So far as the plaintiffs are concerned, equity is here being used to &3 POINT ib Fe. Pethitasenee are not owners, within the mean- ing of the statute, of the Ohio Joint Stock Land Bank stock registered in their names. . None of the petitioners is or was a beneficial owner of | the stock in respect of which the statutory liability is sought to be imposed. The petitioners Russell, Miller, Steers and Wing were a partnership who held 200 shares of the stock se 24. as brokers for a customer, the owner thereof (R. 376)... ; . The petitioner Pleasants was the pledgee of 112% shares -of the stock owned by a Maryland corporation, and held q the stock to secure a loan made by_him to the owner (R. | 374-6). On the books of the Ohio Joint Stock Land Bank 4 the respective shares of stock were registered i inthe names | of the petitioners. : The statutory liability was staat by the courts below upon the petitioners, although not the beneficial owners, because of the rule with respect to record holders of na- tional bank stock under 12 United States Code:§§ 63 and 64. *See National Bank v. Case, 99 U..S..628. The theory of the holding below on this point (R. 422-3; 104 F. [2d] . at 171-2) was that the principle established by the decisions under the National Banking Act, 12 U.S. C. A. §§ 63, 64, © - applies likewise to joint stock land banks despite the strik- - ing difference in the phraseology of that statute, Le U.S. C. A. § 812. | The two statutes begin i in the, same: way. Section 63 provides : “The shareholders of. every national tanking: association shall be held individually responsible: for “all contracts, debts, and engagements of such asso-/ ciation, to the extent of the amount of their stock therein,-at the par value thereof, in addition to the ‘ amount invested in such shares... .”- = Section 812 begins: O ale - “Shareholders of every joint-stock land) pram ws 4 organized under this chapter shall be held individ- ually responsible, equally and ratably, and not one for. another, ‘for, all contracts; debts, and engage- “ments of such bank to the extent . At that point, instead of employing the generalized expres- sion applicable to any typeof ownership, “their stock there- in”, Congress differentiates the situdtion of joint stock land bank shareholders, by Concluding the statute as follows':’ é . to’ the, extent of the amount ‘of stock pone by them at the par value thereof, in addition to the amount paid in and represented by their shares.” Despite this divergence in the.statutes, the holding be- ele was that’ they mean the same in legal effect ; that stock “owned” by shareholders was no other than “their” stock; and that record owners not having beneficial ownership are hit by the Farm Loan Act just as by the National Banking © Act.. *. It i is submitted that thie holding was erroneous for two reasons... : : In the first place, the decisive digslchnes of: the chiding which in the Farm Loan Act, § 812, Congress ‘made’ over \ /the National Banking Act, § 63, is shown by an examina- . tion ‘of: § 744 in its context. Section 744 of BU: S.:C. A. is part of a series of provisions, §§ 741-61, dealing? with ; national farm loan associations. ‘hese: provisions corre- spond generally to the provisions made at a subsequent point . _in the statuté, §§ 810-24, with respect to joint stock land banks, membership i in a national farm loan dssociation-be-__ ing a prerequisite to the obtaining of a loan from a Federal - jand bank and § 812, relative to the liability of shareholders -~of- joint stock land banks, being identical in terms with § 744. Under these circumstances, if the words “stock owned by them” in § 744 import beneficial ownership and beneficial ownership only, then it would seem a practical be certainty that the same words in the same context in.§ 812 are confined to the same meaning. eee .— 0. «Phe intention of Congress honies appears in its use of the | __words “owner” and “owned” in six other sections. of the — ‘peculiar structure and functions which Congress gave to _ tory scheme would be defeated or impaired by a separation 4 from liability of the shareholder. banks (§§ 720, 741). While not organized for ‘profit , association as collateral security for the loan’ (§ 733). Ii the association suffered losses, they could be paid from its 4 ‘Now it.is quite certain that by the phrase “owned by © them” in § 744 Congress did intend to use a technical word — in a technical serise.. This appears wean the definition of the “owner” in § 733 which provides : a “If the application for membership [in a catia a farm loan association] is accepted and the loan is — granted, the applicant shall, upon full payment there- for, become the owner of Gne share ofrcapital stock © /in said farm loan association for each 100 of the ’’ face of his loan.” Act, §§, 716° 717, 694, 745, 853, 771, in contexts where the significance of absolute ene ds ee ques- — tion. . The reason tor this strict nd limited use ‘of “owned” and “owner” in the National Farm Loan Act, lay in the © the farm loan associations. These were such that the statu-. of ownership of the stock from ownership. of: the land. and: The national farm loan associations under the Act were intermediaries between the farmer-borrowers and the land (§ 711), the associations were required to assume liabili- ties. To create a fund for this purpose, it was provided that $5 of each $100 of every loan should be withheld (§ 733) and 2 stock certificate should be: issued to represent the | amount withheld. This certificate was deposited with the — the loan was paid, the stock was retired -(§ 733). If: 4 ita is dinisierniaeinetenail each share was for an amount equal to the face value of the share’ (§ 744). Hence, thé cost Of the loan to the _ ' farmer-borrower could-never exceed 10% of the loan, 2.9., $5 per hundred as the cost of stock and $5'per share as the amount of the assessment. f Cider tes: er dalhetel ik tenn euiecdadion | itself’ was the only possible pledgeeof its stock. If a - pledgee, the association might also make itself record owner, . just as the petitioner Pleasants did in this case. But to subject the association as pled bility to assessment on the half of the required safety f by the assessment could be insolvency of the associati tion would be unable to upon only in the event of In: such-event the associa- and the whole statutory e and record owner to lia- ce would deprive it of one- scheme would be in danger. a contingency must have | been foreseen by Congress, which had before it the judicial ‘construction of the words “their stock” in the National. Banking Act. As a departure from that precedent Congress - employed in the Farm Loan Act the word ‘ ‘owned” in fix- ing the liability of shareholders of national farm loan asso- ciations, thereby relating assessment liability to beneficial cwnership and authing coy, end diminating stare Hodges mere record owners, and the like." : ‘ "It is noteworthy ant the Federal Reserve Act, two _years before ‘the enactment of the Farm Loan Act, Congress also scoveaponiien ontihes al the tekaal Act, 12 U. S. C. § 63, but again varied the expressed measure ike lability (“to the a. of ph myeiont their a for: the | +. pting it to t special structure o ederal , The new phrase employed in this connection a +o ae ‘such stock re ag a : ; i ALE MOR IORI LEI REN I TIE TN te — ae It therefore seems to us incontestable that in the very 7 specialized structure of the national farm loan associations _ _ the phrase “stock owned by: them” had and was intended to 7 have the strict meaning of beneficial ownership only. : In 4 Wheeler v. Greene, 280 U. S. 49, 51, this Court by Mr. % Justice Holmes has already pointed out the weight which @ should be given to changes of draftsmanship in the Farm | Loan Act as compared with that of the prototype, the Na-* tional Banking Act. It is submitted that the dissent below % was right in giving due weight to this point (R. 433; 104 © ' F..[2d] at 176), which the majority ignored. E _ Tf. the above reasoning is correct with respect to the § meaning of the phrase “owned by them” in §-744 (and the © respondents practically admitted below: that it was), then 3 it seems to us impossible to contend that the identical lan. | _ guage in § 812, relating to joint stock land banks, has any @ different or wider méaning. a In the second place, it is submitted that the courts below 7 ‘overlooked another definite clue to the intention of Congress ~ in employing the phrase “owned by them” in § 812. That © is, that the Farm Loan Act does not make provision, as the | National Banking Act does, 12 U. S. C; A. § 62, for the % inspection of stockholders’ lists by creditors. The absence . | . of such a provision in the Farm Loan Act removes one | . factor of the greatest importance in connection with the’ ; imposition. of double liability on record owners, i.e. the fac 7 tor of representation and estoppel.. While the courts be. @ thereof i in addition to the amount subscrited”. 12 U.S.C. $502. it 4 ©eannot be disputed that this expression has a different meaning from = the language employed in the prototype, although it is contended ir 4 the instant case that the variation oon eee Farm Loan Ac. oh on vary Se ey i t low seem’ to have felt that there were factors remaining * which would justify the broadening of liability to include. others than beneficial owners, we believe it is significant - that this Court under the National Banking -Act has laid -. emphasis principally on representation and estoppel. Cf... Pauly-y. State Loan Trust Company, 165 U.S. 606. In coun holding that representation and estoppel i is not the essen- - tial-basis for the rule adopted under the ‘National Banking Act (R. 423; 104.F. [2d] at 171), the Court below is at odds with the Eighth Circuit Court of Appeals which has held that the etitire basis of the liability of shareholders of national banks is estoppel based on the showing of owner- ship on books made available to the inspection of creditors. Heiden v. Cremin, 66 F. (2d) 943, 947; ‘certiorari denied © 290 U. S. 687. ‘ com CLUSION This case invelves matters of aed Pana aay € -sion and of importance in the construction of | the Farm Loan Act and in the proper correla- tion of Federal and State law, which should be | reviewed by this Court, and a writ of certiorari ‘should be issued for that purpose | as prayed in the — petition. Respectfully submitted, oe eu on ' RALPH M. Comicon, ' SAMUEL A. PLEASANTS, ~ . “Counsel for Petitioner. Dated, New York, N. Y., August 22, 1939. ~ --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386401_0265%3A02. Public record. Not legal advice.