the state under whose laws the corporation was formed, even though the creditor and the stockholder sought to be held are nonresidents, and hence a statute of that state relating to the period of limitations where the cause of action arises in another state does not apply.31 A provision that the statute shall not run while the defendant is out of the state is only intended to operate within the state of its creation and upon such parties as are within its jurisdiction, and has no extraterritorial effect.32 The time when the cause of action accrues is to be determined by the laws of the state where the corporation was created,33 as con strued by its highest court.34 State statutes of limitations apply where the suit or action is brought in the federal courts sitting in such state.35 And the federal 208 N. Y. 404, 102 N. E. 634, aff'g 150 N. Y. App. Div. 57, 133 N. Y. Supp. 970, rehearing denied 209 N. Y. 545, 102 N. E. 1113. Under such circumstances the Ohio statute will be adopted into New York with the construction, if any, placed upon it by the Ohio court of last resort. Irvine v. Baker, 225 Fed. 834. The Illinois statute to this effect does not apply where the action would not have been barred in the state where the cause of action arose because of the defendant's absence from that state. Martin v. Wilson, 120 Fed. 202. Under such a provision the courts of the forum will follow the decisions of the courts of the state where the cause of action arose in determining whether it is barred. Mister v. Burkholder, 56 Pa. Super. Ct. 517. 31 Anglo-American Land, Mortgage & Agency Co., Ltd. v. Lombard, 132 Fed. 721, certiorari denied 196 U. S. 638, 49 L. Ed. 630 (mem. dec.). 32 Ramsden v. Knowles, 151 Fed. 721, 10 L. R. A. (N. S.) 897, 151 Fed. 718. As to such provisions generally, see § 4240, supra. 33 Ramsden v. Knowles, 151 Fed. 721, 10 L. R. A. (N. S.) 897, 151 Fed. 718; Ramsden v. Gately, 142 Fed. 912; Whitman v. Atkinson, 130 Fed. 759; Hilliker v. Hale, 117 Fed. 220; Dexter v. Edmands, 89 Fed. 467. 34 Hilliker v. Hale, 117 Fed. 220. The federal court will deem itself bound by the construction placed by the highest court of a state on the laws or the state with reference to the time at which the statute of limitations begins as against the liability of stockholders. Whitman v. Atkinson, 130 Fed. 759. 35 Terry v. Anderson, 95 U. S. 628, 24 L. Ed. 365; Carroll v. Green, 92 U. S. 509, 23 L. Ed. 738; Terry v. Tubman, 92 U. S. 156, 23 L. Ed. 537; Harrison v. Remington Paper Co., 140 Fed. 385, 3 L. R. A. (N. S.) 954, 5 Ann. Cas. 314, certiorari denied 199 U. S. 607, 50 L. Ed. 331 (mem. dec.); Crissey v. Morrill, 125 Fed. 878. A state statute providing that if an action is commenced in time, and the plaintiff fails in it otherwise than on the merits, he may commence a new action within one year after such failure, applies in the federal courts sitting in that state, and such new action may be brought in the federal court although the original one was brought in the state court. Harrison v. Remington Paper Co., 140 Fed. 385, 3 L. R. A. (N. S.) 954, 5 Ann. Cas. 314, certiorari denied 199 U. S. 607, courts will follow the decisions of the highest state courts in construing them.36 The application of state statutes of limitation where it is sought to enforce the liability of stockholders in national banks has been considered in a previous section.37 § 4245. Laches. The right to relief in equity may be barred by laches.88 Mere lapse of time is not sufficient to constitute laches, but in addition thereto the situation of the parties must have so changed as to render the prosecution of the suit inequitable.39 Although courts of equity are not bound by the statute of limitations governing actions at law of like character, they usually act or refuse to act in analogy to it in applying the doctrine of laches.40 Generally a suit will not be stayed for laches before the expiration of the time fixed by the analogous statute of limitations at law,41 and will be stayed after the expiration of that time 42 unless, because of 50 L. Ed. 331 (mem. dec.). See also Lamson v. Hutchings, 118 Fed. 321. 36 Irvine v. Elliott, 203 Fed. 82; Harrison v. Remington Paper Co., 140 Fed. 385, 3 L. R. A. (N. S.) 954, 5 Ann. Cas. 314, certiorari denied 199 U. S. 607, 50 L. Ed. 331 (mem. dec.); Crissey v. Morrill, 125 Fed. 878. 37 See § 4242, supra. 38 Gilmore's Ex'rs v. Bank of Cincinnati, 8 Ohio 62. See Coyle v. Taunton Safe Deposit & Trust Co., 216 Mass. 156, 103 N. E. 288, where the suit was held not to be barred. A bill by a receiver of a national bank against the distributees of a deceased stockholder must be brought within a reasonable time after the claim matures, and unreasonable delay will constitute laches which will bar the suit. Rankin v. Big Rapids, 133 Fed. 670. In First Nat. Bank of Omaha v. Cooper, 91 Neb. 624, 136 N. W. 1023, the right of creditors to apply for a further judgment against certain stockholders to make up a deficiency arising from a failure of other stockholders to pay the amount adjudged against them was held not to be barred. 39 The right to sue in equity is not barred where the statutory period of limitation has not run, and there is no basis for any claim of estoppel and no equitable circumstances are shown why any shorter period should bar the suit. Moore v. United States One Stave Barrel Co., 238 Ill. 544, 87 N. E. 536, aff'g 141 Ill. App. 104. Absence of the administratrix from the state was held to be a sufficient excuse for delay in prosecuting a suit to enforce the liability of a deceased stockholder against his estate. Schwartz v. Loftus, 216 Fed. 320. 40 Wyman v. Bowman, 127 Fed. 257. And see cases cited in the following notes. 41 Wyman v. Bowman, 127 Fed. 257. See also Moore v. United States One Stave Barrel Co., 238 Ill. 544, 87 N. E. 536, aff'g 141 Ill. App. 104. 42 Terry v. McLure, 103 U. S. 442, 26 L. Ed. 403; Carrol v. Green, 92 U. S. 509, 23 L. Ed. 738; Wyman v. Bowman, 127 Fed. 257; Hale v. Coffin, 120 Fed. 470, aff'g 114 Fed. 567; Thomp unusual conditions or extraordinary circumstances, such a course would be inequitable. The defense of laches is not available to bar an action at law brought within the period fixed by the statute of limitations.44 § 4246. Set-off of debts due to stockholders. According to the weight of authority, when the statute imposes upon stockholders a several liability for corporate debts to the extent unpaid on their stock, or to a certain additional extent, and allows any creditor to sue any stockholder to recover a judgment to the extent of his liability, and a single creditor proceeds against a stockholder to enforce his liability, the stockholder is entitled in equity to set off against his liability a bona fide debt due from the corporation, or to set up the debt as a defense, or defense pro tanto, in an action at law.45 And son v. German Ins. Co., 76 Fed. 892; Com. v. Cochituate Bank, 3 Allen (Mass.) 42; Baker v. Atlas Bank, 9 Metc. (Mass.) 192; Washington Sav. Bank v. Butchers' & Drovers' Bank, 107 Mo. 133, 28 Am. St. Rep. 405, 17 S. W. 644; Van Hook v. Whitlock, 3 Paige (N. Y.) 409; Bank of Poughkeepsie v. Ibbotson, 24 Wend. (N. Y.) 473. 43 Wyman v. Bowman, 127 Fed. 257. If the "suit is brought within the time fixed by the analogous statute, the burden is on the defendant to show, either from the face of the bill, or by his answer, that extraordinary circumstances exist, which require the application of the doctrine of laches. And when such suit is brought after the statutory period has elapsed, the burden is on the complainant to show that it would be inequitable to apply it in his case." Wyman v. Bowman, 127 Fed. 257. 44 Sadler v. Nicholson, 49 S. C. 7, 26 S. E. 893. 45 Florida. Hood v. French, 37 Fla. 117, 19 So. 165. Georgia. Boyd & Son v. Hall, 56 Ga. 563. Kansas. Van Pelt v. Strickland, 60 Kan. 584, 57 Pac. 498; Pierce v. Topeka Commercial Security Co., 60 Kan. 164, 55 Pac. 853; Crocker v. Ball, 10 Kan. App. 364, 59 Pac. 691; Kendall v. Underhill, 8 Kan. App. 521, 56 Pac. 544; Musgrave v. Glen Elder Ass'n, 5 Kan. App. 393, 49 Pac. 338; Ramsden v. Keene Five Cents Sav. Bank, 198 Fed. 807; Fidelity Insurance, Trust & Safe-Deposit Co. v. Mechanics' Sav. Bank, 97 Fed. 297; Brown v. Trail, 89 Fed. 641; Broadway Nat. Bank V. Baker, 176 Mass. 294, 57 N. E. 603; American Freehold Mortg. Co. V. Brower (Miss.), 32 So. 906; Ball v. Anderson, 196 Pa. St. 86, 79 Am. St. Rep. 693, 46 Atl. 366 (under Kansas statute). See also Anglo-American Land, Mortgage & Agency Co., Ltd. v. Lombard, 132 Fed. 721, certiorari denied 196 U. S. 638, 49 L. Ed. 630 (mem. dec.). The stockholder may interpose a judgment in his favor against the corporation in reduction of his liability. Manley v. Mayer, 68 Kan. 377, 1 Ann. Cas. 825, 75 Pac. 550. Kentucky. Stockholders in an insolvent bank who are also depositors may set off ratably against their liability whatever pro rata may be found to be due them as depositors. Barnes v. Scott, 168 Ky. 121, 181 S. W. 984. This holding was reversed on rehearing, 168 Ky. 640, 181 S. W. 1199, but the latter opinion was subsequently where this rule obtains, it applies when a creditor sues a stockholder in another state.46 "If the stockholder sued," it was said in a New York case, "is himself such creditor to an amount equaling his statutory liability, he has quite as good a right to the fund which is pursued, as the pursuer. Indeed, he has the better right, because it is already. in his possession, and it would be inequitable to take it from him for the benefit of another creditor who has no superior equity."4 courts, however, have held that no withdrawn and the original opinion left to stand, 171 Ky. 115, 186 S. W. 904. Maryland. Strauss v. Denny, 95 Md. 690, 53 Atl. 571; Cahill v. Original Big Gun Beneficial & Pleasure Ass'n, 94 Md. 353, 89 Am. St. Rep. 434, 50 Atl. 1044. See also Matthews v. Albert, 24 Md. 527. Missouri. Washington Sav. Bank v. Butchers' & Drovers' Bank, 130 Mo. 155, 31 S. W. 761; Jerman's Adm'r v. Benton, 79 Mo. 148; Webber v. Leighton, 8 Mo. App. 502. New York. Mosler Safe Co. v. Guardian Trust Co., 208 N. Y. 524, 101 N. E. 786, modifying and aff'g judgment 153 App. Div. 117, 138 N. Y. Supp. 298; Bulkley v. Whitcomb, 121 N. Y. 107, 24 N. E. 13, 49 Hun 290, 1 N. Y. Supp. 748; Wheeler v. Miller, 90 N. Y. 353; Agate v. Sands, 73 N. Y. 620; Mathez v. Neidig, 72 N. Y. 100; United States Trust Co. of New York v. United States Fire Ins. Co., 18 N. Y. 199, 227; Garrison v. Howe, 17 N. Y. 458; Christensen v. Colby, 43 Hun 362; Richards V. Crocker, 19 Abb. N. Cas. 73; Remington v. King, 11 Abb. Pr. 278; In re Empire City Bank, 8 Abb. Pr. 192; Richards v. Kinsley, 14 Daly 334, 14 N. Y. St. Rep. 701, 12 N. Y. St. Rep. 125. "A stockholder, who is also a creditor in a class which would entitle him to enforce the personal liability of other stockholders, may properly offset this right against his liability. Such a creditor should not be re VII Priv. Corp.-9 Some right of set-off exists even under quired to contribute to a fund in which he is entitled to share except to the extent of the difference between what is owing to him and what he owes." Mosler Safe Co. v. Guardian Trust Co., 208 N. Y. 524, 101 N. E. 756, modifying and aff'g judgment 153 N. Y. App. Div. 117, 138 N. Y. Supp. 298.. "The claim of the stockholder is not a set-off in its technical legal sense, but it is an equitable defense which he is entitled to make. When he becomes a bona fide creditor of the corporation he is clothed with the same equity as contract creditors." Pierce v. Topeka Commercial Security Co., 60 Kan. 164, 55 Pac. 855, quoted with approval in Cahill v. Original Big Gun Beneficial & Pleasure Ass'n, 94 Md. 353, 89 Am. St. Rep. 434, 50 Atl. 1044; Ramsden v. Keene Five Cents Sav. Bank, 198 Fed. 807. See also, to the same effect, Anglo-American Land, Mortgage & Agency Co., Ltd. v. Lombard, 132 Fed. 721, certiorari denied 196 U. S. 638, 49 L. Ed. 630 (mem. dec.); Sargent v. Stetson, 181 Mass. 371, 63 N. E. 929; Broadway Nat. Bank v. Baker, 176 Mass. 294, 57 N. E. 603. In French v. Busch, 189 Fed. 480, which was an action by the receiver of a New Jersey corporation against a New York stockholder on an assessment levied by a New Jersey court, a counterclaim was held to be sufficient on demurrer. 46 See § 4250, infra. 47 Judge Finch, in Wheeler v. Millar, 90 N. Y. 353. such circumstances.48 And no such right of set-off exists i an action at law in the federal courts, where the distinction between actions at law and suits in equity is still observed, since the right is an equitable one because the stockholder's liability is to the creditors and not to the corporation, and the corporation could not maintain an action to enforce it.49 Nor does a right of set-off exist in favor of a stockholder who does not belong to the class of creditors entitled to share in the fund resulting from the enforcement of the liability.50 According to the weight of authority, no right of set-off exists where the liability imposed by the statute is not a liability which can be enforced by an action at law by any creditor against any stockholder, but is a liability to be enforced by a suit in equity or other proceeding to raise a fund for the common benefit of all the creditors ratably; but in such a suit or proceeding the stockholder must pay into the fund the full amount of his statutory liability, and then come in as a creditor and share ratably with the other creditors in the distribution of the fund.51 Reasons given for this rule are that the two 48 Thebus v. Smiley, 110 Ill. 316; Thompson v. Meisser, 108 Ill. 359; Buchanan v. Meisser, 105 Ill. 633; Gentry v. Alexander, 16 Ind. 471; Tama Water-Power Co. v. Hopkins, 79 Iowa 653, 44 N. W. 797; Boulton Carbon Co. v. Mills, 78 Iowa 460, 5 L. R. A. 649, 43 N. W. 290; Singer v. Given, 61 Iowa 93, 15 N. W. 858; Lauraglenn Mills v. Ruff, 57 S. C. 53, 49 L. R. A. 448, 35 S. E. 387. 49 This is true although a set-off would be allowed in the courts of the state of the corporation's domicile. Harrison v. Remington Paper Co., 140 Fed. 385, 3 L. R. A. (N. S.) 954, 5 Ann. Cas. 314, certiorari denied 199 U. S. 607, 50 L. Ed. 331 (mem. dec.); Anglo-American Land, Mortgage & Agency Co., Ltd. v. Lombard, 132 Fel. 721, 196 U. S. 638, 49 L. Ed. 630 (mem. dec.); Crissey v. Morrill, 125 Fed. 878. 50 As where he has not reduced his claim to judgment and had an execution returned unsatisfied. Mosler Safe Co. v. Guardian Trust Co., 208 N. Y. 524, 101 N. E. 786, modifying and aff'g adgment 153 N. Y. App. Div. 117, 138 N. Y. Supp. 298. Maryland. Matthews v. Albert, 24 Md. 527. See Cahill v. Original Big Gun Beneficial & Pleasure Ass'n, 94 Md. 353, 89 Am. St. Rep. 434, 50 Atl. 1044. Massachusetts. See Burnap v. Haskins Steam-Engine Co., 127 Mass. 586. Minnesota. This is true in a suit by a receiver to enforce the liability of a stockholder in a Minnesota corporation. Hale. Calder, 113 Fed. 670; Burget v. Robinson, 113 Fed. 669, certiorari denied 188 U. S 739, 47 L. Ed. 677 (mem. dec.); Robinson v. Brown, 126 Fed. 429. A stockholder's claim against the corporation is not a proper counterclaim in a creditors' suit to enforce the stockholders' liability, but it should be presented by petition or complaint filed in the original action. Helm v. Smith-Fee Co., 76 Minn. 328, 79 N. W. 313. |