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Opinion of the Court.

to support the assessment. The Board held the Commissioner had adequately sustained the burden of showing fraud or malfeasance or misrepresentation of fact, and did not err in setting the agreement aside.

The matter then went to the Circuit Court of Appeals, Third Circuit, which ruled there was no adequate evidence to support the conclusion and judgment of the Board. The facts are much discussed in a majority and dissenting opinion, 105 F. 2d 552. Another narration of them seems unnecessary.

Under the rule often announced, the function of the Board of Tax Appeals is to weigh the evidence and declare the result as to matters properly before it. Upon review the court may not substitute its judgment of the facts for that of the Board. When there is substantial evidence to support the conclusion of the latter this must be accepted. Helvering v. Rankin, 295 U. S. 123, 131; General Utilities Co. v. Helvering, 296 U. S. 200, 206; Elmhurst Cemetery Co. v. Commissioner, 300 U. S. 37, 40.

Here, upon evidence which we think is substantial (the dissenting member of the court below held the same view), the Board found fraud in fact which affected the closing agreement, and that the Commissioner properly set the contract aside. The court below should have accepted this finding of fact. As it failed so to do the challenged judgment must be reversed. The ruling of the Board is affirmed.

Reversed.

RUSSELL ET AL., CO-PARTNERS, v. TODD ET AL., CO-PARTNERS.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.

No. 329. Argued January 12, 1940.-Decided February 26, 1940.

1. The shareholders' liability, "equally and ratably," for the debts of a joint stock land bank, under § 16 of the Federal Farm Loan Act, is enforceable only by a single representative suit in equity in behalf of all the creditors, in which the existence and extent of insolvency, and the ratable shares of the contribution by shareholders, can be ascertained and an equitable distribution made of the fund recovered. P. 285.

The suit is not any the less in equity because it turns out that the liability of the shareholders equals the full par-value of their stock. P. 286.

2. The test of the inadequacy of the legal remedy prerequisite to resort to a federal court of equity is the legal remedy which federal rather than state courts afford. P. 286.

The jurisdiction of federal courts of equity, as determined by that test, is neither enlarged nor diminished by the names given to remedies or the distinction made between them by state practice. 3. The Rules of Decision Act embraces rules established by judicial decision as well as statutory rules, but does not apply to suits in equity. P. 287.

4. Equity provides its own rule of limitations through the doctrine of laches, in the absence of any statute of limitations made applicable to equity suits. P. 287.

5. When consonant with equitable principles, federal courts of equity apply as their own the local statutes of limitations applicable to equitable causes of action. P. 288.

6. Even though there is no state statute applicable to similar equitable demands, when the jurisdiction of the federal court is concurrent with that at law, or the suit is brought in aid of a legal right, equity will withhold its remedy if the legal right is barred by the local statute of limitations. P. 289.

7. Where the federal equity jurisdiction is exclusive and is not exercised in aid of a legal right, state statutes of limitations barring actions at law are inapplicable; and in the absence of any state statute barring the equitable remedy in like cases, the federal court

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Argument for Petitioners.

is remitted to and applies the doctrine of laches as controlling. P. 289.

8. In the absence of a controlling Act of Congress, federal courts of equity, in enforcing rights arising under federal statutes, will, without reference to the Rules of Decision Act, adopt and apply local statutes of limitations which are applied to like causes of action by the state courts. P. 293.

9. Sec. 49 of the New York Civil Practice Act, barring in three years actions against directors or stockholders of moneyed corporations or banking associations to enforce a liability created by the common law or by statute, appears to have been construed by the state courts as inapplicable to suits where the remedy is exclusively equitable. Held, that the present equitable cause of action given by § 16 of the Federal Farm Loan Act is not barred by the three year statute of limitations prescribed by that section. Pp. 290, 293.

10. The extent to which federal courts, in the exercise of the authority conferred upon them by Congress to administer equitable remedies, are bound to follow state statutes and decisions affecting those remedies, is not considered. P. 294.

104 F. 2d 169, affirmed.

CERTIORARI, 308 U. S. 541, to review the affirmance of a decree, 1 F. Supp. 788; 20 id. 930, 936, which overruled a plea of the statute of limitations and granted relief to the plaintiffs in a suit to enforce shareholders' liability for debts of an insolvent joint stock land bank.

Mr. Ralph M. Carson, with whom Messrs. Samuel A. Pleasants and John B. Coleman were on the brief, for petitioners.

The three-year limitation bars the action.

No distinction is made between actions in equity and those at law. Civil Practice Act, § 49; Wright v. Russell, 269 N. Y. 683; Reisman v. Hall, 257 App. Div. 892; Nettles v. Childs, 281 N. Y. 636; Schram v. Cotton, 281 N. Y. 499. The ten-year limitation is inapplicable.

Under New York law laches alone is not a defense against a claim of right. Pollitz v. Wabash R. Co., 207 N. Y. 113. Laches now subsists in New York as an equitable defense only, in cases where the favor or discretion of the court is sought, and serves to shorten, but

Argument for Petitioners.

309 U.S.

never to extend, the time limited by the statute of limitations. Groesbeck v. Morgan, 206 N. Y. 385, 389; Calhoun v. Millard, 121 N. Y. 69, 82; Goldberg v. Berry, 231 App. Div. 165, 170; Coghlan v. Coghlan & Shuttleworth, Inc., 226 App. Div. 764. The concept of laches supplanting limitations and thus extending the period in which an action would otherwise be barred by the statute has been since at least 1848 utterly foreign to the law of New York. A fixed limitation of time has been imposed upon every remedy, legal and equitable. Gilmore v. Ham, 142 N. Y. 1. The New York courts have applied these limitations strictly, and have refused to vary them even in cases of hardship. Schmidt v. Merchants Dispatch Co., 270 N. Y. 287; Matter of City of New York, 239 N. Y. 220, 225; Erickson v. Macy, 236 N. Y. 412, 415; Gilmore v. Ham, supra; Engel v. Fischer, 102 N. Y. 400; Streeter v. Graham & Norton Co., 263 N. Y. 39.

Laches is a matter of substantive law. It affects the right, not merely the remedy. To apply such a doctrine of substantive law in a State where it is no longer recognized, to govern claims of right, is a plain violation of the rule of Erie R. Co. v. Tompkins, 304 U. S. 64, and Ruhlin v. New York Life Ins. Co., 304 U. S. 202. The doctrine of laches relied upon below is based upon the theory of a general federal equity jurisprudence, and must fall with it.

Independently of the New York rule, existing federal precedents required the application to this case of limitations, rather than laches, by reason of the concurrent jurisdiction of law and equity.

Jurisdiction herein lies primarily at law by virtue of the fact that money is the measure of the liability imposed upon petitioners by the statute, 12 U. S. C. § 812. Weeks v. Love, 50 N. Y. 568, 570; Van Hook v. Whitlock, 3 Paige Ch. 409, 416, 417. True, the statute imposes liability upon the shareholders "equally and ratably, and not

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Counsel for Respondents.

one for another." In some cases this language might be deemed to require an accounting among all the shareholders in order to assure the proportionate payment of his liability by each, but any such possibility is excluded here by the fact that the assessment required is 100%. Each of the defendant shareholders was liable in full.

Under New York Civil Practice Act, § 195, which at the inception of this action was available to the plaintiffs under the Conformity Act, 28 U. S. C. § 724, the plaintiffs could have stated a representative claim at law in the District Court for the benefit of all the creditors, without resort to equity. McKenzie v. L'Amoureux, 11 Barb. 516; Kirk v. Young, 2 Abb. Pr. 453; Cherry v. Howell, 4 F. Supp. 597, 599.

The only reason adduced for maintaining the exclusive jurisdiction of equity in this case is that the receiver of a joint stock land bank can not himself sue to enforce the shareholders' statutory liability. Wheeler v. Greene, 280 U. S. 49.

The jurisdiction of equity herein is at most concurrent and does not affect the operation of the statute of limitations at law. Curtis v. Connly, 257 U. S. 260; McDonald v. Thompson, 184 U. S. 71; Morgan v. Hamlet, 113 U. S. 449.

This Court has applied the statute of limitations at law to equitable actions in form indistinguishable from the present. Pollard v. Bailey, 20 Wall. 520; Terry v. Little, 101 U. S. 216; Carrol v. Green, 92 U. S. 509; Godfrey v. Terry, 97 U. S. 171; Clarke v. Boorman's Executors, 18 Wall. 493, 505, 506; Bacon v. Howard, 20 How. 22, 26; Boone County v. Burlington R. Co., 139 U. S. 684, 692; Pearsall v. Smith, 149 U. S. 231, 237; Wilson v. Koontz, 7 Cranch 202, 205–6.

Mr. George A. Spiegelberg for Todd et al., respondents, and Lissenden et al., intervener-respondents.