Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division No. IP 74 267 C - James E. Noland, Judge.
Hastings, Senior Circuit Judge, Tone and Bauer, Circuit Judges.
Hastings, Senior Circuit Judge.
By agreement of all parties, this appeal was submitted on the record and briefs filed herein, without oral argument. Plaintiff LaRosa Building Corporation appeals from an order entered May 16, 1975, in the federal district court*fn1 dismissing its complaint, on motion of defendant The Equitable Life Assurance Society of the United States, for (1) lack of subject matter jurisdiction and (2) failure to state a cause of action upon which relief may be granted.
For reasons hereinafter set out, we affirm on the ground that plaintiff LaRosa's claim is barred by the applicable Indiana statute of limitations.
The procedural and factual background of this matter is, of course, to be garnered from the allegations of the amended complaint which was dismissed upon defendant Equitable's motion.
LaRosa brought this action seeking relief under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. LaRosa sought recovery of $73,000 in damages which equalled 25 per cent of Equitable's pro rata share of partnership operating losses, which Equitable allegedly wrongfully required LaRosa to absorb. LaRosa further alleged that Equitable used its superiority during a loan negotiation to create "economic hardship" for LaRosa by imposing numerous pre-conditions that LaRosa would not have agreed to if Equitable had notified LaRosa of its intent to make the loan in the first place. LaRosa charged that Equitable's scheme was to require LaRosa to absorb all partnership operating losses.
It was alleged that Equitable engaged in a course of conduct proscribed by Section 10(b), in that Equitable employed a device, scheme or artifice to defraud LaRosa, made untrue statements of material facts, and engaged in acts, practice or course of conduct which operated as a fraud or deceit upon LaRosa.
It further appears from the amended complaint that these alleged acts commenced on November 27, 1970, at which time Equitable granted LaRosa a construction loan of $2,300,000 in return for LaRosa's promissory note, secured by a mortgage covering LaRosa's interest in the LaRosa Building in downtown Indianapolis, Indiana.
It is also asserted that as a pre-condition of the loan, LaRosa was required to transfer the building premises to a general partnership created on that date under the partnership laws of Indiana. The distribution of equity was 75 per cent to LaRosa and 25 per cent to Equitable. In addition, LaRosa was required to deposit $130,000 of the loan into an escrow account with a title insurance company, no part of which deposit was to be withdrawn without the consent of Equitable.
These were Equitable's pre-condition requirements for granting the construction loan on the LaRosa renovation project which are alleged to have been a scheme to impose "economic hardship" on LaRosa. Finally, it is alleged that the escrow agreement providing for the release of funds only upon consent of Equitable was a means to require LaRosa to absorb all of the partnership losses.
Section 10b and Rule 10b-5 do not contain any limitation of action provision. In a somewhat analogous situation, arising in the Seventh Circuit, it has been held that, when no federal provision governs, the timeliness of a federal action is to be determined, as a matter of federal law, by reference to the appropriate state statute of limitations, leaving, inter alia, the subsidiary question of which of Indiana's limitations provisions ...