Slike stranica

prior to December 1, 1902, they had disposed that price, and received as his share of the of all other partnership holdings and had commission on said sale $310, of which he severed all business relations with one anoth- never offered any part to the defendant. er, except in connection with the Brooks es- "(15) The defendant then asserted his rights tate.

under said option, and to procure the surren“(3) This estate they continued to hold der of the option the owner of the Brooks and manage as partners until November 1, estate paid him $2,000 in August, 1907. 1906, the date of the expiration of said lease. "(16) Shortly afterwards the defendant

"(4) The plaintiff had the management of gave Silverman $600, of which $500 was on said estate from December 1, 1893, to Decem- account of the sum received for the surren

, ber 1, 1902, after which date the defendant der of the option, and $100 was on account took charge.

of the back rents which had not been divided. “(5) The plaintiff is not indebted to the "(17) I rule that said option was for the defendant in any sum on account of his man- benefit of the three lessees and that the agement of the estate during the seven years plaintiff is entitled to recover from the deprior to December 1, 1902.

fendant one-third of the $2,000 paid for its "(6) During 1904 constant efforts were surrender, and one-third of the net rents of made to settle the Cohen suit, and the lessor the Brooks estate which accrued between through his attorney and personally urged November 1, 1906, and August, 1907. the three lessees to pay the $300 required, “(18) The net rents of said estate from Ocfor which they were liable under their lease,tober 1, 1905, to August, 1907, averaged $50

, and promised if they would do this that he a month. would grant them an extension of their "(19) During the period between October lease or a new one on the same terms. 15, 1905, and November 1, 1906, the net rents

"(7) This offer was accepted by each of of said estate amounted to much more than the three lessees, and the plaintiff and Silver-the $300 retained by the defendant to reimman instructed the defendant to pay the les- burse himself for his payment in the Cohen sor $300 and deduct their shares thereof matter, and the plaintiff is entitled to onefrom the net rents of the Brooks estate. third of the surplus, which I find to be $300.

(8) While negotiations for a settlement of the Cohen suit were in progress, the plaintiff, fendant owed the plaintiff on

“(20) September 1, 1907, the dewithout the knowledge or consent of the de- count of the $2,000 paid for the surfendant or Silverman, asked the lessor for render of said option...

$666 66 a new lease of the Brooks estate in his own

“On account of his share of the naine at an increased rent; and the defend- net rents of the Brooks estate beant and Silverman, without the knowledge between November 1, 1906, and Auof the plaintiff, planned to procure a new

gust, 1907, nine months.....

150 00 lease of said premises for themselves, provided Silverman could secure the defendant between October 15, 1905, and No

"On account of the rents accruing by a bond or mortgage. “(9) January 30, 1905, the defendant paid which the defendant was to retain.. 100 00

vember 1, 1906, in excess of the $300 the lessor $300 from his own funds to settle the Cohen suit, and obtained from him either

"Making a total of...

$916 66. the same day directly, or the next day by mail, an option for a new five years' lease of

“(21) September 1, 1907, the plainthe same premises in his own name to begin of the commission received by plain

tiff owed the defendant as his share November 1, 1906.

tiff for sale of the Brooks estate.. 103 33 "(10) In accordance with instructions of the plaintiff and Silverman and before the termination of the lease, he retained from

“(22) The balance due the plaintiff the net rents of the Brooks estate the full from the defendant at that date... $813 33 sum of $300 to reimburse himself for his “(23) The plaintiff is entitled to recover payment to the lessor on account of the joint from the defendant in these proceedings liability of the three lessees in the Cohen $S13.33, with interest from September 1, matter.

1907, amounting at the date of this finding, “(11) Said option for a new lease. of the May 4, 1912, to $1,041.60.” premises was obtained by the defendant for his own use while he was managing the prop

Elisha Greenhood, of Boston, for appellant. erty for the benefit of the partnership, of Young, Hill, Ludden & Marks, of Boston, for which the plaintiff and Silverman were the appellee. other two members.

“(12) The consideration for said option MORTON, J. This is a bill in equity for was the $300 paid to said lessor to settle the an accounting in respect of a partnership Cohen suit, and of this sum the plaintiff and in relation to certain leasehold interests. Silverman paid each one-third.

The case was sent to a master, who made “(13) In August, 1907, the Brooks estate il report in favor of the plaintiff. A decree was offered for sale by the owner at $42,000. was entered confirming the report and order

$ “(14) The plaintiff procured a purchaser at ling the defendant to pay to the plaintiff the sum of $1,041.60, with costs of suit. The de- , for the defendant to take the option in his fendant appealed.

own name and attempt to appropriate the [1] The principal contention of the de- profits thereof to his own use constituted not fendant is that the plaintiff is not entitled only a breach of trust but a fraud upon his to relief because he himself at one time, ac- copartners. cording to the findings of the master, "asked Decree affirmed, with costs. the lessor" "without the knowledge or consent of the defendant or Silverman," "for a new lease of the Brooks estate in his own name

(208 N. Y. 404.) at an increased rent.” In other words, the defendant contends that the plaintiff does

SHIPMAN v. TREADWELL et al. pot come into court with clean hands. But, (Court of Appeals of New York. May 20, to quote from Dering v. Winchelsea, 1 Cox,

1913.) 318, though a man must come into equity 1. CORPORATIONS ($ 253*)-ACTION TO EN

FORCE STOCKHOLDER'S LIABILITY-CONCLUwith clean hands, "when this is said it does

SIVENESS OF FOREIGN JUDGMENT-PERSONnot mean a general depravity; it must have AL DEFENSES. an immediate and necessary relation to the A regularly entered judgment of the court equity sued for.” In the present case there of common pleas in Ohio, having jurisdiction

to proceed against nonresident defendants, not was no such immediate and necessary rela- personally served with process, in a suit to tion between what the plaintiff did or at- wind up the affairs of an insolvent corporation, tempted to do and what the defendant did as and to determine how much each stockholder to render the principle applicable. If the conclusive upon nonresident stockholders as to

should pay to make up the deficiency, was. plaintiff and the defendant had confederated the amount of assets and liabilities of the cortogether to have the defendant obtain a re poration, and the necessity of an assessment newal of the lease in his own name without upon the stock to the extent and in the amount

ordered. the knowledge of and to the exclusion of

[Ed. Note.—For other cases, see CorporaSilverman, with the agreement that any prof- tions, Cent. Dig. 88 1024–1030; Dec. Dig. $ its resulting therefrom should be divided 253.*] between the plaintiff and the defendant, and 2. CORPORATIONS (8 685*) – ACTION TO ENthe defendant for some reason had concluded


RECEIVER IN FOREIGN JURISDICTION. to pay Silverman what would have been his

A foreign receiver cannot merely by virtue share of the profits and had refused to pay of his appointment and the direction to sue the plaintiff and the plaintiff had brought contained therein, maintain an auxiliary suit a bill for an accounting, a case would have in this state to enforce the statutory liability a bill for an accounting, a case would have of stockholders of an insolvent foreign corbeen presented for the application of the poration. principle. But the present is not such a [Ed. Note. For other cases,

(- other cases, see Corporacase. What the plaintiff did was to attempt tions, Cent. Dig. 8 2667; Dec. Dig. § 685.*] without success to get a lease for himself |3. CORPORATIONS (8 685*) - STOCKHOLDER'S without the knowledge of his copartners.


RESIDENT-ACTION BY RECEIVER. And though his conduct shows a readiness

In such case the receiver sues in the on his part to cheat his copartners if he courts of this state as a quasi assignee and could, it does not bring the case within the representative of the creditors, vested with

rights of action against the stockholders, and principle referred to. See Lawton v. Estes,

See Lawton v. Estes, charged with the enforcement of those rights · 167 Mass. 181, 45 N. E. 90, 57 Am. St. Rep. in this state, and having a transitory right of 450; Snow v. Blount, 182 Mass. 489, 65 N. action based on a contract of the defendants E. 845.

to pay the creditors of the corporation on ac

count of their claims a sum equal to the [2-4] Amongst other things on which the amount of the stock which defendants owned. defendant relies is the statute of frauds. It [Ed. Note.-For other cases, see Corporais manifest that that has nothing to do with tions, Cent. Dig. $ 2667; Dec. Dig. 8 685.*] the case. Besides it is not pleaded. The 4. LIMITATION OF ACTIONS (8 65*)-LIABILITY master having found that the plaintiff and


ENFORCE-ACCRUAL. defendant were partners the defendant stood The cause of action in favor of a foreign in a fiduciary relation to the plaintiff and receiver to enforce the liability of resident could not clandestinely take (as the master stockholders does not accrue until a judgment

is rendered, fixing and determining the amount has in effect found that he did take) a re

of the assessment upon the stock. newal of the lease for his own benefit. Leach v. Leach, 18 Pick. 68, 76. The option Actions, Cent. Dig. 88 261, 345-350; Dec. Dig.

[Ed. Note.-For other cases, see Limitation of was clearly impressed with a trust in favor $ 65.*] of the plaintiff.

5. LIMITATION OF ACTIONS (88 66, 169*) [5] In addition to the trust arising out of

STOCKHOLDER'S LIABILITY-RECEIVER'S ACthe fiduciary relation created by the part

TION TO ENFORCE-LIMITATIONS. nership, a part of the consideration for the action upon the liability of a stockholder must

Under the law of Ohio, providing that an option was furnished by the plaintiff under be brought within 18 months after it becomes and pursuant to an understanding between enforceable, and Code Civ. Proc. § 390a, prothe lessor and lessees, as the master has viding that, where a cause of action arises found that the lessees should have an exten- outside the state, no action can be brought in

a court in this state to enforce it after the exsion of the lease. Under such circumstances,

Under such circumstances, | piration of the time limited by the laws of the

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state in which it accrued, a receiver's cause of an Ohio corporation with the amount of an action to enforce the liability of nonresident assessment upon their stock to pay the debts stockholders, accruing May 6, 1907, the date of the rendition of the judgment in the cred- of the corporation. itor's suit against the stockholder, or on June The Constitution of the state of Ohio, in 1, 1907, the date fixed by such judgment for force at the time the defendants' stock subpaying the_assessment, not brought in this state until December 10, 1908, was barred by scriptions were made, provided that each limitations; the fact that a demand was nec- stockholder in a private corporation should essary not postponing the operation of the stat. be liable over and above the stock owned ute by reason of the express provision of Code by him, and any amount unpaid thereon, to a Civ. Proc. $ 410.

[Ed. Note. For other cases, see Limitation of further sum at least equal to the amount of Actions, Cent. Dig. 88 353-375, 655; Dec. Dig. such stock. Section 3258 of the Ohio Revised $$ 66, 169.*]

Statutes was to the same effect. Under the 6. CORPORATIONS (S 264*) STOCKHOLDER’S | law of Ohio the subscriber for stock in a priLIABILITY-RECEIVER'S ACTION TO ENFORCE vate corporation assumed the liability imposAGAINST NONRESIDENTS- LIMITATIONS.

The Ohio Constitution (Const. art. 13, § 3), ed by the Constitution and Revised Statutes in force at the time defendant's stock sub as part of his subscription agreement. But scription was made, provided that each stocks the liability was secondary and contingent holder should be liable over and above the stock owned, and any amount unpaid there- upon an insufficiency in the assets of the on, to a further sum at least equal to the corporation to pay its debts. amount of such stock, and Rev. St. Ohio 1908, Sections 3260 et seq. of the Revised Statutes $ 3258, was to the same effect, and thereunder of Ohio provide that a creditor of a corporacourts of that state had held that an action to enforce the liability of stockholders was tion, seeking to charge the stockholders theresubject to the six years' statute of limitations. of with the liability aforesaid, may file his By Act April 29, 1902 (95 Ohio Laws, p. 312) complaint for that purpose in any court of the section which is now section 3258 of Rev. St. 1908 was amended to limit the liability of common pleas having jurisdiction. The court stockholders who had in good faith assigned is authorized to take an account, and appoint their stock before the debts of the corporation a receiver of the corporation. All the stock. became enforceable against them, and section holders may be made parties to the action, 3258a was added, providing that an action up

the liability of stockholders should be and nonresident stockholders may be brought bronght within 18 months after the debt should in by publishing notice of the action. IC become enforceable against them. The amend the assets of the corporation are not suffiment to section 3258 was declared unconstitutional, and in 1903 the Constitution was cient to pay its debts, the court is directed amended by striking out the provisions im- to ascertain the liability of the stockholders, posing double liability, and making the liabil- adjudge the amount payable by each, and ity only for the amount unpaid on subscrip-enforce the judgment as in other cases. The tions, which amendment was held to repeal by implication section 3258, and thereafter the receiver appointed in such proceeding is a Legislature re-enacted section 3258 in the same quasi assignee, invested with the creditors'

, that an action upon the liability of the stock right of action to enforce the liability of the holders "under the last preceding section" stockholders, and the court may direct the should be brought within 18 months after the receiver to prosecute suits in his own name, debt should be enforceable against stockhold- as may be necessary, in other jurisdictions ers. Held, that Rev. St. 1908, ss 3258, 3258a, were intended to preserve the double liability to collect from any stockholders. of the stockholders existing prior to the con- By sections 5651 et seq. of the Revised stitutional amendment, 'and hence that a re-Statutes it is provided that a corporation ceiver's action to enforce such liability, not may be dissolved if insolvent, or, if the obbrought within the 18 months was barred. [Ed. Note. For other cases, see Corpora-jects of the corporation have failed, upon

, tions, Cent. Dig. 88 1084–1098, 2274; Dec. the application of a majority of the stockDig. § 264.*]

holders, and a distribution made of its assets Appeal from Supreme Court, Appellate among those entitled thereto. Division, Third Department.

The corporation concerned in the case now Action by Leonard H. Shipman, as receiver before the court was declared insolvent in of the F. Gray. Company, against George proceedings instituted by a majority of its Curtis Treadwell and another. From a judg- stockholders under section 5651 of the Rement of the Supreme Court, Appellate Divi- vised Statutes on April 16, 1901, and an orsion, Third Department (150 App. Div. 57, der was then made dissolving the corpora. 133 N. Y. Supp. 970), reversing a judgment of tion. the Special Term (73 Misc. Rep. 587, 131 N. Thereafter and on June 22, 1901, an action Y. Supp. 67) in favor of the plaintiff, and was brought in the court of common pleas ordering a new trial, plaintiff appeals. Af- of Miami county by a creditor of the corpofirmed.

ration against all the stockholders including See, also, 150 App. Div. 895, 897, 134 N. Y. these defendants, under section 3260 of the Supp. 1146; 102 N. E. 1113.

Revised Statutes, and a receiver of the corAndrew J. Nellis, of Albany, for appellant. porate property was appointed. Notice of James F. Tracey, of Albany, for respondents such action was given to these defendants

by publication thereof, pursuant to an order CUDDEBACK, J. This action was brought of the court. The defendants are residents to charge the defendants as stockholders ofl of this state. They were not personally

•For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep'r Indexen served with process in the action brought and after the time of payment fixed by the in the court of common pleas, and did not judgment. appear in such action. The defendant George It is the claim of the plaintiff that the C. Treadwell had subscribed for and held 72 creditor's cause of action against the stockshares of stock in the company, and the de holders accrued at the time the corporation fendant Wilhelmina W. Collins 50 shares. was declared insolvent and dissolved on April

On May 6, 1907, a final judgment was ren-16, 1901, and that it was subject to the limi. dered by the court of common pleas in the tation of the general six-year statute of the creditor's action against the stockholders, de state of Ohio. Inasmuch as the creditor's termining the amount of the indebtedness suit against the stockholders was instituted of the corporation after exhausting its assets, on June 22, 1901, it was brought in time. and the amount that would be required as an To sustain this position, the plaintiff cites assessment upon each of the solvent stock - Barrick v. Gifford, 47 Ohio St. 180, 24 N. E. holders to pay the deficiency in such indebt- 259, 21 Am. St. Rep. 798, and Younglove v. edness. In and by such judgment the sum Lime Co., 49 Ohio St. 663, 33 N. E. 234. The of $4,458.24 was assessed against the de- plaintiff also claims that this action is merefendant Treadwell, and $3,096 against the de- ly ancillary to the creditor's suit in Ohio. fendant Collins, and they were ordered to I think the cases cited by the plaintiff pay those amounts to the receiver of the show that the action begun in Ohio by the company, the plaintiff in this action, on or creditors against the stockholders was timely before the first day of June, 1907.

brought, but I am also of the opinion that The judgment also authorized and empow the receiver's action in this state is barred ered the receiver to prosecute, in his own by the 18 months' statute of limitation. name as receiver, actions against nonresident [1] The suit in Ohio has a double aspect. stockholders in the jurisdictions where they It was a suit to wind up the affairs of the might be found, to collect the amount due insolvent corporation and apply its assets in from them. Subsequently and on October payment of its debts, and, if a deficiency 5, 1908, the plaintiff, as receiver, was special- existed, to determine how much each stockly directed by the court of common pleas holder should pay to make up deficiency. to sue these defendants in this state; they To that extent, the court had jurisdiction having failed to pay their assessments on de- to proceed against the defendants not permand.

sonally served with process. But as to the The trial court found, as matter of fact, defendant stockholders who were personally the laws of Ohio and the proceedings in its served, the court could and did go further courts as hereinbefore set forth. They are and render a judgment against them in persubstantially the facts alleged in the com- sonam for the amount of their liability. plaint, and it has been held by this court that Under the decisions both of this court and the complaint states a cause of action. Ship- the United States Supreme Court, and upon man v. Treadwell, 200 N. Y. 472, 93 N. E. the facts found by the trial judge as to the 1104.

laws of the state of Ohio and the proceedings The defendants, however, now plead the in its courts, it must be held that the judg. statute of limitations contained in section ment rendered in the court of common pleas 3258a of the Ohio Revised Statutes, viz.:

is binding and conclusive upon the defend"Sec. 3258a. An action upon the liabil-ants in this action so far as it determined the ity of stockholders under the last preceding amount of assets and liabilities of the insolsection (3258) can only be brought within vent corporation and the necessity of making eighteen months after the debt or obliga- an assessment upon the stock to the extent tion shall become enforceable against stock- and in the amount ordered. Matter of Emholders."

pire City Bank, 18 N. Y. 199; Shipman v. Upon this section (3258a), taken in connec- Treadwell, 200 N. Y. 472, 477, 93 N. E. 1104; tion with section 390a of our Code of Civil Howarth v. Angle, 162 N. Y. 179, 56 N. E. Procedure, the defendants mainly rely to 489, 47 L. R. A. 725; Bernheimer v. Converse, defeat the plaintiff's claim. Section 390a 206 U. S. 516, 27 Sup. Ct. 755, 51 L. Ed. 1163; of the Code of Civil Procedure provides in Converse v. Hamilton, 224 U. S. 243, 32 Sup. substance that, where a cause of action aris-Ct. 415, 56 L. Ed. 749. ing outside the state is barred by lapse of These defendants, of course, remained free time in the state or country where the cause to show any defense personal to themselves of action arose, it is also barred in this state. against the creditor's claim. Lazier v. West

It is the claim of the defendants that the cott, 26 N. Y. 146, 82 Am. Dec. 404; Durant plaintiff's cause of action arose in the state v. Abendroth, 97 N. Y. 132; Bernheimer v. of Ohio on May 7, 1907, the date of the rendi- Converse, 206 U. S. 516, 518, 27 Sup. Ct. 753, tion of the judgment in the creditor's action 51 L. Ed. 1163. against the stockholders, or, at the latest, The fact, however, that such personal deon June 1, 1907, the date when the defend-fenses remained to the defendants is not ants were required to pay their assessments very important at this time because the deto the receiver. The action in this state was fense of the 18 months' statute of limitabegun December 10, 1908, more than 18 tion does not controvert anything decided by giving full faith and credit to the judicial, the Ohio Revised Statutes, and section 390a proceedings of another state as required by of the Code of Civil Procedure. the federal Constitution. The defense now [6] The plaintiff contends that section urged is a defense which has arisen since the 3258a does not apply to his cause of action, judgment of the Ohio court was made.

for the reason that it has reference only to [2] The question is, when did the receiver's the liability of the stockholders "under the cause of action against these defendants ac- last preceding section,” which is section 3258. crue? In determining that question, it is The plaintiff says that this action is not necessary to understand clearly the position brought under section 3258 as it now stands. which the receiver occupies in our courts. This is a statement in another form of the The receiver, the plaintiff, is not here as an plaintiff's claim that his action is ancillary officer of the Ohio court, seeking by an aus. to the creditor's suit in Ohio. fliary suit to enforce the judgment of that In order to understand the matter, it is court. If such were his standing, the action necessary to look somewhat into the history could not be maintained. Hale v. Allinson, of sections 3258 and 3258a. As has been 188 U. S. 56, 23 Sup. Ct. 244, 47 L. Ed. 380; said, the Constitution of the state of Ohio Great Western M. & M. Co. v. Harris, 198 U. (Const. art. 13, § 3), in force when the deS. 561, 25 Sup. Ct. 770, 49 L. Ed. 1163. fendants' stock subscriptions were made, pro

[3] The plaintiff is here as a quasi assignee vided the double liability now sought to be and representative of the creditors, invested enforced against them. Section 3258 of the with their rights of action against the stock - Revised Statutes was an enactment followholders, and charged with the enforcement ing substantially the language of the Conof those rights in the courts of this state. stitution. Under the Constitution and secConverse v. Hamilton, supra. He has a tran- tion 3258 of the Revised Statutes the courts sitory right of action, based on a contract of of Ohio held that an action to enforce the the defendants to pay the creditors of the cor- liability of the stockholders was subject to poration on account of their claims a sum the general six-year statute of limitations. equal to the amount of the stock which the Barrick v. Gifford; Younglove v. Lime Co., defendants own. Ibid.

supra. Thus the law stood on June 22, 1901, [4] Many cases involving the power and when the creditor's action was brought in authority of such receivers in jurisdictions the court of common pleas. foreign to the place of their appointment On April 29, 1902 (95 Ohio Laws, p. 312) have been before the United States Supreme section 3258 was amended so as to limit the Court, and it has been held among other liability of stockholders who had in good things that the cause of action in favor of faith assigned their stock before the debts the receiver does not accrue until the judg- of the corporation became enforceable against ment is rendered, fixing and determining them. By the same act section 3258a was the amount of the assessment upon the stock. added to he Revised Statutes as follows: Glenn v. Marbury, 145 U. S. 499, 12 Sup. Ct. "Sec. 3258a. An action upon the liability of 914, 36 L. Ed. 790; Bernheimer v Converse, stockholders can only be brought within 206 U. S. 516, 27 Sup. Ct. 755, 51 L. Ed. eighteen months after the debt or obligation 1163; Hawkins v Glenn, 131 U. S. 319, 9 shall become enforceable against stockholdSup. Ct. 739, 33 L. Ed. 184; Glenn v. Liggett, ers." 135 U. S. 533, 10 Sup. Ct. 867, 34 L. Ed. 262. The amendment to section 3258, whereby

[5] These cases are decisive of the ques- the attempt was made to limit the liability tion. The receiver's cause of action accrued of stockholders, was declared unconstitution. on May 6, 1907, the date of the rendition of al. See cases cited in Sheets Mfg. Co. v. the judgment in the creditor's suit against Neer Mfg. Co., 4 Ohio N. P. (N. S.) 201. the stockholders, or on June 1, 1907, the date Afterwards, on November 23, 1903, the Confixed by such judgment for paying the as- stitution of the state of Ohio was amended sessment. The judgment contained the di- by striking out the provision imposing the rection that the plaintiff, as receiver, sue double liability on stockholders and making the nonresident stockholders in the jurisdic-them liable only for the amount unpaid on tions where they might be found. The sub- their stock subscriptions. It was held that sequent order of the court of common pleas, the amendment to the Constitution repealed made October 5, 1908, ordering the receiver, by implication section 3258 of the Revised specially to sue these defendants on their Statutes. Sheets Mfg. Co. v. Neer Mfg. Co., refusal to pay the assessments, was a mere supra. Then there was no provision of the

. direction to the officer of the court that would Ohio Revised Statutes preserving the liaprotect him in expending the trust funds in bility of stockholders in cases where it had his hands, and did not confer on him addi- existed before the constitutional amendment tional power. Nor did the fact that a de- of 1903. In order to supply, this omission. mand was necessary postpone the operation the Legislature on April 25, 1904, re-enacted of tie statute of limitations (Code of Civil section 3258 in the form, however, in which Procedure, $ 410).

it had been declared unconstitutional), with Inasmuch as the plaintiff receiver delay- a proviso that the section should not apply to ed in bringing this action until December debts incurred by any corporation after No10, 1908, he delayed too long, and his suit is vember 23, 1903, the date of the constitubarred by the provisions of section 3258a of I tional amendment. The act also amended

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