Opinion · Supreme Court of the United States

Holmberg v. Armbrecht

327 U.S. 392

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1946-02-25
Topic
general

How later courts describe this case

  • holding that equitable doctrine of fraudulent concealment is read into every federal statute of limitations
  • holding that an issue not raised before the IJ or ruled on by the IJ was not properly before the BIA
  • holding that Erie does not require federal courts to apply state tolling doctrines to federal causes of action
  • holding that while state law determines limitations period when no federal limitations period is provided, federal law determines date on which limitations period begins to run
  • concluding that the equitable doctrine of fraudulent concealment “is read into every federal statute of limitation”
  • holding that limitations periods are subject to equitable tolling where tolling is not inconsistent with the statute
  • holding that equitable tolling due to defendant’s fraudulent concealment “is read into every federal statute of limitation”
  • holding that the general equitable tolling doctrine “is read into every statute of limitations”

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Headnotes

  1. Civil Procedure — Statute of Limitations The decision of a suit in a federal court to enforce a federally created equitable right is not controlled by the statute of limitations of the State of the forum; Guaranty Trust Co. v. York, which applies state limitations to state-created rights in diversity suits, is inapplicable to the enforcement of federal equitable rights. 327 U.S. 392, 394
  2. Remedies — Statutes of Limitations — Laches Statutes of limitations are not controlling measures of equitable relief; equity draws upon them only for the light they shed in determining whether the plaintiff has inexcusably slept on his rights so as to make a decree against the defendant unfair. A court of equity may dismiss a suit for want of diligence even though the action is not barred by the applicable statute of limitations. 327 U.S. 392, 396
  3. Remedies — Fraud — Accrual of the Statute of Limitations Under the settled chancery rule, where a plaintiff has been injured by fraud and remains in ignorance of it without fault or want of diligence on his part, the bar of the statute of limitations does not begin to run until the fraud is discovered, even absent special efforts by the wrongdoer to conceal it. 327 U.S. 392, 397
  4. Civil Procedure — Statute of Limitations The equitable doctrine that a limitations period does not begin to run until the plaintiff discovers, or in reasonable diligence should have discovered, the fraud is read into every federal statute of limitations; where Congress has enacted no explicit period for a federally created right, the court will not confine that right within the bare terms of a state statute of limitation unrelieved by that federal equitable doctrine. 327 U.S. 392, 397
  5. Civil Procedure — Federal Courts — Federal Equitable Rights Federal courts, sitting as national courts throughout the country, must apply their own principles in enforcing an equitable right created by Congress; where Congress leaves to the federal courts the formulation of remedial details, they are not expected to break with historic principles of equity in enforcing federally created equitable rights. 327 U.S. 392, 395
HOLMBERGv. ARMBRECHT,327 U.S. 392(1946)
66 S.Ct. 582
HOLMBERG ET AL.v. ARMBRECHT ET AL.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.
No. 505.
Argued February 1, 1946.
Decided February 25, 1946.
1. Decision of a suit in a federal court to enforce a federally created equitable right is not controlled by the statute of limitations of the State of the forum.Guaranty Trust Co. v.York,326 U.S. 99, distinguished. Accordingly, a class suit by creditors of a joint stock land bank to enforce the liability imposed upon shareholders of the bank by § 16 of the Federal Farm Loan Act is not barred by the state statute of limitations. P. 394. 2. Statutes of limitations are not controlling measures of equitable relief, but have been drawn upon by equity solely for the light they may shed in determining that which is decisive for the chancellor's intervention, namely, whether the plaintiff has inexcusably slept on his rights so as to make a decree against the defendant unfair. P. 396.150 F.2d 829, reversed.
From a judgment for the plaintiffs in a suit to enforce a
statutory liability of stockholders of a farm loan bank, the
defendants appealed. The circuit court of appeals reversed.
150 F.2d 829. This Court granted certiorari.326 U.S. 712.Reversed
and remanded, p. 398.
Clarence Friedargued the cause for petitioners. With him on the brief wasEdmund Burke, Jr.Edgar M. Sousaargued the cause and filed a brief for respondents.

Briefs were filed asamici curiaebySolicitor GeneralMcGrath, Robert L. Stern, Roger S. Foster, Milton V. FreemanandArnold R. Ginsburgfor the United States, and bySaul J.LantzandIsadore H. Cohenfor the Trustees of Central States Electric Corporation, urging reversal.Page 393
MR. JUSTICE FRANKFURTER delivered the opinion of the Court.
This is a suit in equity by petitioners on behalf of themselves and all other creditors of the Southern Minnesota Joint Stock Land Bank of Minneapolis to enforce the liability imposed upon shareholders of the Bank by § 16 of the Federal Farm Loan Act, equal to one hundred percent of their holdings.39 Stat. 360, 374, 12 U.S.C. § 812.1The Bank closed its doors in May, 1932. Its debts exceeded its assets by more than $3,000,000, the amount of its outstanding stock. Suit was accordingly brought in the United States District Court for the District of Minnesota for determining and collecting the assessment due under § 16.Holmbergv.Southern MinnesotaJoint Stock Land Bank,10 F. Supp. 795. Armbrecht, a New York stockholder, was sued there. The suit failed on procedural grounds and was dismissed without prejudice to further action.Holmbergv.Anchell,24 F. Supp. 594,598. Not until 1942, so it is alleged, did petitioners learn that Jules S. Bache had concealed his ownership of one hundred shares of the Bank stock under the name of Charles Armbrecht. The present action against Armbrecht and Bache was begun in the Southern District of New York in November, 1943. Bache died during pendency of the suit and his executors were substituted as parties.

The respondents made two defenses: (1) they invoked a New York statute of limitation barring such an action after ten years, New York Civil Practice Act, § 53; (2) they urged laches, claiming that petitioners had undulyPage 394delayed commencement of the suit. Neither defense was sustained in the District Court, and judgment went against the respondents. The judgment was reversed by the Circuit Court of Appeals.150 F.2d 829. That court did not reach the defense of laches because it held, relying onGuaranty Trust Co. v.York,326 U.S. 99, that the New York statute of limitation was controlling and that the mere lapse of ten years barred the action. Since the case raises a question of considerable importance in enforcing liability under federal equitable enactments, we brought it here for review.326 U.S. 712.

InGuaranty Trust Co. v.York, supra, we ruled that when a State statute bars recovery of a suit in a State court on a State-created right, it likewise bars recovery of such a suit on the equity side of a federal court brought there merely because it was "between Citizens of different States" under Art. III, § 2 of the Constitution. The amenability of such a federal suit to a State statute of limitation cannot be regarded as a problem in terminology, whereby the practical effect of a statute of limitation would turn on the content which abstract analysis may attribute to "substance" and "procedure." We held, on the contrary, that a statute of limitation is a significant part of the legal rules which determine the outcome of a litigation. As such, it is as significant in enforcing a State-created right by an exclusively equitable remedy as it is in an action at law. But in theYorkcase we pointed out with almost wearisome reiteration, in reaching this result, that we were there concerned solely with State-created rights. For purposes of diversity suits a federal court is, in effect, "only another court of the State."Guaranty Trust Co. v.York, supra, at 108. The considerations that urge adjudication by the same law in all courts within a State when enforcing a right created by that State are hardly relevant for determining the rules which bar enforcement of an equitable right created not by a State legislature but by Congress.Page 395

If Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of the matter. The Congressional statute of limitation is definitive. See,e.g., Hergetv.Central Bank Co.,324 U.S. 4. The rub comes when Congress is silent. Apart from penal enactments, Congress has usually left the limitation of time for commencing actions under national legislation to judicial implications. As to actions at law, the silence of Congress has been interpreted to mean that it is federal policy to adopt the local law of limitation. SeeCampbellv.Haverhill,155 U.S. 610;Chattanooga Foundry Pipe Worksv.Atlanta,203 U.S. 390;Rawlingsv.Ray,312 U.S. 96. The implied absorption of State statutes of limitation within the interstices of the federal enactments is a phase of fashioning remedial details where Congress has not spoken but left matters for judicial determination within the general framework of familiar legal principles. SeeBoard of Comm'rsv.United States,308 U.S. 343,349-50,351-52.

The present case concerns not only a federally-created right but a federal right for which the sole remedy is in equity.Wheelerv.Greene,280 U.S. 49;Christopherv.Brusselback,302 U.S. 500;Russellv.Todd,309 U.S. 280,285. And so we have the reverse of the situation inGuarantyTrust Co. v.York, supra. We do not have the duty of a federal court, sitting as it were as a court of a State, to approximate as closely as may be State law in order to vindicate without discrimination a right derived solely from a State. We have the duty of federal courts, sitting as national courts throughout the country, to apply their own principles in enforcing an equitable right created by Congress. When Congress leaves to the federal courts the formulation of remedial details, it can hardly expect them to break with historic principles of equity in the enforcement of federally-created equitable rights.Page 396

Traditionally and for good reasons, statutes of limitation are not controlling measures of equitable relief. Such statutes have been drawn upon by equity solely for the light they may shed in determining that which is decisive for the chancellor's intervention, namely, whether the plaintiff has inexcusably slept on his rights so as to make a decree against the defendant unfair. SeeRussellv.Todd, supra, at 289. "There must be conscience, good faith, and reasonable diligence, to call into action the powers of the court."McKnightv.Taylor, 1 How. 161, 168. A federal court may not be bound by a State statute of limitation and yet that court may dismiss a suit where the plaintiffs' "lack of diligence is wholly unexcused; and both the nature of the claim and the situation of the parties was such as to call for diligence . . ."Benedictv.City of New York,250 U.S. 321,328. A suit in equity may fail though "not barred by the act of limitations . . ."McKnightv.Taylor, supra;Alsopv.Riker,155 U.S. 448.

Equity eschews mechanical rules; it depends on flexibility. Equity has acted on the principle that "laches is not like limitation, a mere matter of time; but principally a question of the inequity of permitting the claim to be enforced — an inequity founded upon some change in the condition or relations of the property or the parties."Galliherv.Cadwell,145 U.S. 368,373; seeSouthern Pacific Co. v.Bogert,250 U.S. 483,488-89. And so, a suit in equity may lie though a comparable cause of action at law would be barred. If want of due diligence by the plaintiff may make it unfair to pursue the defendant, fraudulent conduct on the part of the defendant may have prevented the plaintiff from being diligent and may make it unfair to bar appeal to equity because of mere lapse of time.

Equity will not lend itself to such fraud and historically has relieved from it. It bars a defendant from setting upPage 397such a fraudulent defense, as it interposes against other forms of fraud. And so this Court long ago adopted as its own the old chancery rule that where a plaintiff has been injured by fraud and "remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party."Baileyv.Glover, 21 Wall. 342, 348; and seeExploration Co. v.United States,247 U.S. 435;Sherwoodv.Sutton, 5 Mason 143.

This equitable doctrine is read into every federal statute of limitation. If the Federal Farm Loan Act had an explicit statute of limitation for bringing suit under § 16, the time would not have begun to run until after petitioners had discovered, or had failed in reasonable diligence to discover, the alleged deception by Bache which is the basis of this suit.Baileyv.Glover,supra; Exploration Co. v.United States, supra; United Statesv.Diamond Coal Co.,255 U.S. 323,333. It would be too incongruous to confine a federal right within the bare terms of a State statute of limitation unrelieved by the settled federal equitable doctrine as to fraud, when even a federal statute in the same terms would be given the mitigating construction required by that doctrine.

We conclude that the decision in theYorkcase is inapplicable to the enforcement of federal equitable rights. The federal doctrine applied inBaileyv.Glover, supra, and in the series of cases following it, governs. When the liability, if any, accrued in this case,cf. Rawlingsv.Ray, supra, at 98, and whether the petitioners are chargeable with laches, seeFosterv.Mansfield, C. L.M.R. Co.,146 U.S. 88,99;Southern Pacific Co. v.Bogert, supra, at 488, are questions as to which we imply no views. WePage 398leave them for determination by the Circuit Court of Appeals to which the case is remanded.Reversed and remanded.

MR. JUSTICE JACKSON took no part in the consideration or decision of this case.
MR. JUSTICE RUTLEDGE, concurring.
I agree with the result and with the opinion, reserving however any intimation, explicit or implied, as to the full scope to which the doctrine ofGuaranty Trust Co. v.York,326 U.S. 99, may be applied in diversity cases. Many of the considerations now stated by the Court for refusing to extend that doctrine to cases concerning federally created rights, relating to the flexibility of remedies in equity either to cut down or to extend the state statutory period of limitations, seemed to me to be applicable whenever a federal court might be asked to extend the aid of its equity arm, whether in its diversity jurisdiction or other. The ruling in theYorkcase however may be accepted generally for diversity cases and, moreover, rejected for extension to cases of this sort, without indicating that there may not be some cases even of diversity jurisdiction to which federal courts may not be required to apply it. With this reservation I join in the Court's action.Page 399
  1. Page 393 "Shareholders of every joint stock land bank organized under this Act shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such bank to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares." ↩