Great Western Telephone Company v. Purdy/Opinion of the Court

By article 4, § 1, of the constitution of the United States 'full faith and credit shall be given in each state to the public acts, records and judicial proceedings of every other state. And congress may, by general laws, prescribe the manner in which such acts, records and proceedings shall be proved and the effect thereof.' In the exercise of the power so conferred, congress, besides providing the manner in which the records and judicial proceedings of the courts of any state shall be authenticated, has enacted that 'the said records and judicial proceedings, so authenticated, shall have such faith and credit given to them in every court within the United States, that they have by law or usage in the courts of the state from which they were taken.' Act May 26, 1790, c. 11; 1 Stat. 122; Rev. St. § 905.

The plaintiff relied on the order of assessment made by a court of the state of Illinois, as a judgment of that court, entitled to the effect of being conclusive evidence of the plaintiff's right to maintain this action against the defendant. The supreme court of the state of Iowa denied it that effect. The question whether that court thereby declined to give full faith and credit to a judicial proceeding of a court of another state, as required by the constitution and laws of the United States, was necessarily involved in the decision.

This court therefore has jurisdiction of the case, but must judge for itself of the true nature and effect of the order relied on. Armstrong v. Treasurer of Athens Co., 16 Pet. 281, 285; Texas & Pac. Ry. v. Southern Pac. Co., 137 U.S. 48, 11 Sup. Ct. 10; Machine Co. v. Radcliffe, 137 U.S. 287, 11 Sup. Ct. 92; Carpenter v. Strange, 141 U.S. 87, 11 Sup. Ct. 960; Huntington v. Attrill, 146 U.S. 657, 666, 683-686, 13 Sup. Ct. 224, and cases cited.

By the original contract between the parties, made in the state of Iowa on February 16, 1869, Purdy, the present defendant, agreed to take 50 shares, of the par value of $25, in the plaintiff company, and to pay 5 per cent. (which he did), and 'the balance as the directors from time to time may order'; and the company agreed to issue the shares to him as soon as forty per cent. had been paid.

On November 19, 1869, Purdy and other subscribers for shares filed in a court of the state of Illinois a bill in equity to compel the company to issue shares to them, and to set aside as fraudulent a contract by which the company had agreed to transfer all its capital stock to one Reeve; and upon that bill, on November 16, 1872, obtained a decree, setting aside that contract, and ordering shares to be issued to the subscribers as prayed for, and a new board of directors to be chosen. By that decree all the objects of the suit were accomplished, so far as Purdy was concerned, and he does not appear to have had any notice of, or part in, any further proceedings. That bill did not ask for the appointment of a receiver, or for any order of assessment upon stockholders.

The subsequent proceeding, begun sEptember 19, 1874, alleging mismanagement and fraud of the new officers, and the insolvency of the company, was by other stockholders, and, although entitled a 'supplemental bill,' and permitted by the court to be filed in the former cause, was a distinct proceeding, in which Purdy had and took no interest. The orders of the court upon this proceeding, appointing on October 7, 1874, a receiver, and on July 10, 1886, making a 'call or assessment' upon the stockholders of the company, were entered without any notice to him, or consent on his part. He was not personally a party to this proceeding, nor named therein. The receiver was appointed almost 2 years, and the assessment ordered more than 13 years, after Purdy had ceased to have any connection with the litigation.

There can be no doubt that, as heretofore declared by this court, 'after a decree disposing of the issues and in accordance with the prayer of a bill has been made, it is the prayer of a bill has been made, it is out a service of new process or appearance, to institute further proceedings on new issues and for new objects, although connected with the subject-matter of the original litigation, by merely giving the new proceedings the title of the original cause. If his bill begins a new litigation, the parties against whom he seeks relief are entitled to notice thereof, and without it they will not be bound.' Smith v. Woolfolk, 115 U.S. 143, 148, 5 Sup. Ct. 1177.

The question, therefore, is of the effect, as against Purdy, of the order for an assessment made by the Illinois court in a proceeding to which the corporation was a party, but to which he personally was not.

The order of that court was in effect, as it was in terms, simply a 'call or assessment' upon all stockholders who had not paid for their shares in full. It was such as the directors might have made before the appointment of a receiver; and in making it, the court, having by that appointment assumed the charge of the assets and affairs of the corporation, took the place and exercised the office of the directions. Scovill v. Thayer, 105 U.S. 143, 155; Hawkins v. Glenn, 131 U.S. 319, 329, 9 Sup. Ct. 739; Lamb v. Lamb, 6 Bis. 420, 424, Feb. Cas. No. 8,018; Glenn v. Saxton, 68 Cal. 353, 9 Pac. 420; Telegraph Co. v. Gray, 122 Ill. 630, 636, 640, 14 N. E. 214; Telegraph Co. v. Loewenthal, 154 Ill. 261, 40 N. E. 318.

The order of assessment, whether made by the directors as provided in the contract of subscription, or by the court as the successor in this respect of the directors, was doubtless, unless directly attacked and set aside by appropriate judicial proceedings, conclusive evidence of the necessity for making such an assessment, and to that extent bound every stockholder without personal notice to him. Hawkins v. Glenn, 131 U.S. 319, 9 Sup. Ct. 739; Glenn v. Liggett, 135 U.S. 533, 10 Sup. Ct. 867; Glenn v. Marbury, 145 U.S. 499, 12 Sup. Ct. 914.

But the order was not, and did not purport to be, a judgment against any one. It did not undertake to determine the question whether any particular stockholder was or was not liable in any amount. It did not merge the cause or action of the company against any stockholder on his contract of subscription, nor deprive him of the right, when sued for an assessment, to rely on any defense which he might have to an action upon that contract.

In this action, therefore, brought by the receiver in the name of the company, as authorized by the order of assessment, to recover the sum supposed to be due from the defendant, he had the right to plead a release, or payment, or the statute of limitations, or any other defense going to show that he was not liable upon his contract of subscription.

In each of the three cases last cited above the defense of the statute of limitations was entertained and passed upon. Hawkins v. Glenn, 131 U.S. 332, 9 Sup. Ct. 739; Glenn v. Liggett, 135 U.S. 547, 10 Sup. Ct. 867; Glenn v. Marbury, 145 U.S. 506, 12 Sup. Ct. 914.

The whole effect of the order of assessment being to fix the amount which any stockholder liable under his contract of subscription should pay, and to authorize the receiver to bring suits against stockholders for the same, but not to determine whether the present defendant, or any other particular stockholder, was liable for anything, the Iowa court, by sustaining the defense of the statute of limitations, did not deny to the judicial proceeding of Illinois the full faith and credit to which it was entitled.

The statute of limitations of the state of Iowa provides that 'the following actions may be brought within the times herein limited respectively after their causes accrue, and not afterwards, except when otherwise specially declared.'

'(4) Those founded on unwritten contracts those brought for injuries to property, or for relief on the ground of fraud in cases heretofore solely cognizable in a court of chancery, and all other actions not otherwise provided for in this respect, within five years.

'(5) Those founded on written contracts, on judgments of any courts, except those courts provided for in the next subdivision, and those brought for the recovery of real property, within ten years.

'(6) Those founded on a judgment of a court of record, whether of this or of any other of the United States, or of the Federal courts of the United States, within twenty years.'

Code Iowa, 1873, § 2529.

This action was not brought on a judgment, for there had been no judgment. But it was brought on the defendant's written contract of subscription, and was, therefore, by the terms of the Iowa statute, barred in 10 years after the cause of action accrued. The action was brought more than 10 years after the contract, but within 10 years after the order of assessment.

In many jurisdictions the cause of action, within the meaning of a statute of limitations, would be held to have accrued at the time of the order for an assessment, and not before. It has been so held by the supreme court of the state of Illinois, where this company was incorporated, and the order of assessment made, as well as by this court in cases coming up from circuit courts of the United States, and unaffected by decisions of the highest court of the state in which those courts were held. Telegraph Co. v. Gray, Hawkins v. Glenn, Glenn v. Liggett, and Glenn v. Marbury, above cited.

But the supreme court of Iowa, in the present case, held that, as it rested with the directors of the corpor tion to make that order, the delay in making it could not suspend the operation of the statute of limitations; and that the case was within the rule, established by a series of decisions of that court, that when a plaintiff could at any time, by making a demand, or giving a notice, acquire a right to recover against the defendant, the statute of limitations began to run when he might have done so. Telegraph Co. v. Purdy, 83 Iowa, 430, 433, 50 N. W. 45, and cases cited.

The limitation of actions is governed by the lex fori, and is controlled by the legislation of the state in which the action is brought, as construed by the highest court of that state, even if the legislative act or the judicial construction differs from that prevailing in other jurisdictions. McElmoyle v. Cohen, 13 Pet. 312; Bauserman v. Blunt, 147 U.S. 647, 13 Sup. Ct. 466; Metcalf v. City of Watertown, 153 U.S. 671, 14 Sup. Ct. 947; Balkam v. Woodstock Iron Co., 154 U.S. 177, 14 Sup. Ct. 1010.

Neither the statutes nor the decisions of the state of Iowa upon this subject have made any discrimination against the citizens, the contracts, or the judgments of other states, or against any right asserted under the constitution or laws of the United States. The case is thus distinguished from Christmas v. Russell, 5 Wall. 290, cited at the bar.

The question at what time the cause or action accrued in this case, within the meaning of the statute of limitations of Iowa, was not a federal question, but a local question, upon which the judgment of the highest court of the state cannot be reviewed by this court.

Judgment affirmed.