Hand v. Savannah & Charleston R. R.

The opinion of the court was delivered by Mr. Chief Justice Simpson. The case of Hand v. Savannah and Charleston R. R. Co. et al. has been before the courts for a number of years. The road has been sold, the proceeds of sale collected, and the rights of the parties determined. In fact, all of the questions involved, as between the litigants, have been adjudged. The only matter remaining is as to the fees of counsel, which is now before us under this appeal. In the consideration of this matter, it will not be necessary to review the whole case, or to state fully its entire history. Only so much is needed as may be required to make the questions involved intelligible, and therefore only so much will be given. The case in its progress has been most earnestly and ably fought, and numerous counsel have- been engaged. It has appeared in different forms, and every inch of ground has been vigorously contested. Its history may be divided into three stages : First. The institution of the original action by Daniel Hand; second, the intervention of the comptroller and the attorney general of the state; and, third, the proceedings in re the executors of Cutting. It will be necessary to state some of the facts connected with these three different stages, and to consider the ease somewhat from the standpoint of each. In 1853 the Charleston and Savannah Railroad Company was incorporated. In 1856 the state by act agreed to indorse, upon certain conditions, and guarantee six per cent, bonds of this company, not to exceed §5,000 per mile, with statutory lien on the road. Coupon bonds to the amount of §505,000, payable in 1877, -were issued by the company under this act, and were indorsed by the State. This amount did not prove sufficient to complete the road, and in 1858, with the view to raise an additional sum, the company conveyed the road to certain trustees, and issued additional bonds to the amount of §1,000,000, which completed the road. After the war, the road was found greatly damaged, in fact in ruins; and for the purpose of rebuilding, the trustees above referred to proceeded to foreclose their mortgage, and in December, 1866, the road was sold, subject to the lien of the state under the act of 1856 above. At this sale Geo. W. Williams and others purchased at the price of §30,000. These parties pro — 172 — ceedecl to organize a new company by virtue of an act passed to that end in 1866, the style of this company being the “Savannah and Charleston Railroad Company.” This company being without means to rebuild, and not being able to issue marketable bonds with mortgage on the road so long as the lien of the state under the act of 1856 stood in the way, made application to the legislature to stand aside its lien. This was assented to by the legislature, and accordingly in 1869 an act was passed, authorizing the company to issue seven per cent, bonds to the amount of $500,000, for the purpose of reconstruction ; upon which issue, it was enacted, the lien of the state 'should be postponed and become a second lien. These bonds were then issued, and the road was thereby rebuilt and put into operation. By the third section of the act of 1869 the company was authorized and requested to fund and redeem the coupons for interest of the six per cent, bonds issued by the Charleston and Savannah Railroad Company then past due, or that might fall due, by the first of September, 1869, by issuing an equal amount of their bonds with coupons attached at the rate of seven per cent., payable semi-annually; these bonds to be guaranteed by the state. Under these circumstances, in 1870 there were outstanding as claims against the company the six per cent, bonds issued under the act of 1856, and unfunded coupons upon these bonds; bonds substituted for the funded six .per cent, coupons under the act of 1869 ; the seven per cent, bonds issued under the act of 1869; and certain eight per cent, bonds. In 1870 Daniel Hand, holding unfunded coupons of the six per cent, bonds, to the amount of $27,705, besides interest thereon, instituted his action, in his own behalf “and in behalf of all other creditors of the Charleston and Savannah Railroad Company, standing in the same right, plight, and condition as himself, who shall in due time come in and contribute to the expenses of the action,” demanding judgment : that an account be taken of the amount due to him upon the bonds and coupons held by him, and secured by the statutory mortgage to the state; that the same might be paid with the interest thereon by a certain day; and in default that the road be sold in satisfaction of his claim and of the claims of all standing — 173 — in -the same right, plight, and condition with himself; that said creditors be called in; that injunction, restraining the Savannah and Charleston Railroad Company from appropriating and wasting the funds of the company, be granted; and that a receiver be appointed to take charge of the road until said claims were satisfied or the road sold, &c., &c. This action was commenced by Messrs. Buist & Buist, as plaintiff’s attorneys. To this action the Savannah and Charleston Railroad Company and certain parties, trustees or mortgagees to.secure the $500,000 seven per cent, bonds, were summoned as defendants, and also the state, through the attorney general, appeared as defendant. The company and the trustees appeared by Messrs. Campbell & Seabrook, attorneys. This case being heard upon the Circuit in October, 1873, the Circuit judge decreed that the plaintiff, and other holders of coupons of the six per cent, bonds issued under the act of 1856, were entitled to be paid, with the interest thereon, and he ordered that the case be referred to a referee, with instructions to call by advertisement upon all persons holding past due coupons of said bonds to present and prove their claims on or before a certain day, and to the end that such further order as might be necessary should be passed, that the referee file his report immediately after the day fixed for the proof of claims. From this decree, the defendant, the Savannah and Charleston Railroad Company, appealed through James B. Campbell, attorney. This appeal was dismissed for irregularity without prejudice. On the return of the case to the Circuit Court, a consent order was passed, by which the road was put into the hands of a receiver, with an.advisory board of nine, to be operated, with quarterly reports to the court; the net profits to be applied quarterly to the six per cent, “coupons reported by the referee as proved under the previous order. 2. To all outstanding, unpaid, or unsatisfied coupons for interest then due and payable, or to fall due, in the order of their rank and right of payment, the right of payment or priority of lien to be referred to and determined by the court whenever they may arise after full hearing.” 3. If any surplus of net profits should remain, the same to be applied to any other liens, if any, and then ratably to the unsecured debts of said company, the costs and disbursements of the cause to be — 174 — taxed and paid by the receiver, also proper counsel fees to both plaintiff and defendants, to be ascertained by a referee as thereafter to be ordered. Charles T. Mitchell was appointed receiver under this order, with salary to be fixed by the advisory board, and to hold his office until the maturity of the six per cent, bonds, unless sooner removed upon the recommendation of the advisory board, and not otherwise, with leave to the Savannah and Charleston Railroad Company, at any time pending the case, upon showing that all interest coupons in arrear were paid, and all other unsecured debts arranged, to have the said railroad and property restored to them, with leave also to the receiver to hold the said road open to private sale upon terms to be reported to the court, at the same time enjoining all creditors who failed to come in under this proceeding from interfering in any way, by suit or otherwise, with said management. While this action was in progress, the comptroller general undertook to take possession of the road under the act of 1869, § 5, 14 Stat., 202, and afterwards the attorney general instituted proceedings to foreclose the statutory lien to the state. In 1875, the executors of Cutting, holding seven per cent, bonds issued under the act of 1869, supra, filed a petition, in re Daniel Hand, claiming that they were secured by the first and prior mortgage on the road, and prayed a foreclosure thereof. To this petition the Savannah and Charleston Railroad Company, Andrew Simonds, IT. H. DeLeon, and Edwin Bates, trustees under the second mortgage to secure eight per cent, bondholders, Henry Gourdin, trustee, and Robert Adger, holders of said bonds, William B. Smith and James Conner, holders of the six per cent, bonds, and other creditors of the said company, were made parties defendant. Messrs. Memminger & Jervey filed this proceeding as attorneys for the executors of Cutting. Mr. Campbell answered for the receiver, Hon. A. G. Magrath for Simonds and other trustees, and Mr. Thomas M. Hanckel for William B. Smith. No other answers were filed. In this petition, after stating that the petitioner ivas the holder of a large amount of the seven per cent, bonds issued under the act of 1869, and secured by mortgage to William Aiken and others, — 175 — and also other indebtedness in New York, further stated, in paragraph 4, that besides these bonds and mortgages there is also the issue of $505,000 in bonds on the Charleston and Savannah Railroad Company, at an interest of six per cent., which is secured by the statutory lien of the act of 1856, as amended by the act of March 2, 1869, and of which the bonds and coupons held by Daniel Hand, are part and parcel, and that certain other bonds are in the hands of W. B. Smith and James Conner, and of certain other persons too numerous to be made parties, &c., &c., and the petitioner prayed that process might issue against all parties having interests in the premises who have not already become parties to the suit, to wit, certain persons naming them, among them W. B. Smith and James Conner, styled holders of some of the six per cent, bonds. As has been stated, Mr. Hanckel appeared and answered for W. B. Smith. The case remained in this condition for a year or more, with negotiations for sale and compromise pending, but without any decisive action; when in 1877 an order referring the matter to Hon. W. Alston Pringle was made with instructions to call in all creditors both of the Savannah and Charleston Railroad Company and the Charleston and Savannah Railroad Company having claims secured by mortgage or other liens upon the property belonging to the Savannah and Charleston Railroad Company to prove their claims, &c. The reference under this order was extended several times, and after all claimants had presented and proved their different demands, the real contest began between the sixes and sevens as to the effect of the act of 1869 postponing in favor of the sevens the statutory lien created by the act of 1856, which had secured the sixes. In this conflict, it is conceded on all hands that Mr. Hanckel was at least the leader on the question presented in behalf of the sixes, with a most formidable array against him on the other side. He was the first in the field, by virtue of the fact that his client, W. B. Smith, was the only one of the sixes summoned who answered; James Conner, for satisfactory reasons to himself, finding that he could not ally himself with the sixes, and the other sixes, on account of their number, not having been specially summoned. They — 176 — were, however, called in, and were represented by their respective attorneys afterwards. The referee finally reported in favor of the sixes. This report, after a most serious, earnest, and able contest, both in the Circuit and Supreme Court, was sustained, and the fruits thereof were awarded to the sixes by the court of last resort. Mr. Hanckel’s appearance in the case was by authority of Mr. Smith, who had been selected by the petitioners, executors of Cutting, as a defendant representing the class of sixes to which he belonged; and having thus become a leader in the beginning, he so continued to the end, and his voice was the first and the last heard in behalf of the common right of the sixes. It is stated that he was greatly aided by Messrs. Buist & Buist, Mr. Brawley, and Mr. Lord, and by the respective attorneys of the different holders of the sixes, other than W. B. Smith, after their ,bonds had been proved; or at least that all of these attorneys rendered valuable services in support of the position taken by the sixes, that the act of 1869 postponing the statutory lien was unconstitutional. But Mr. Ilanckel’s client was the only one of the sixes who had been made a representative defendant, or, to use the language of the counsel, a “head creditor.” He had been especially summoned by process; the others had been called in by advertisement, and made themselves parties by responding to the call, except Daniel Hand and those already in court in his action, upon which the executors of Cutting had engrafted their proceeding which precipitated the conflict between the sixes and sevens, and out of Avhich this appeal now comes. In the meantime, while the case of Daniel Hand was pending, and before the executors of Cutting intervened, and in fact before the appointment of the receiver above, a question arose as to the liability of the road for taxes, and a proceeding was instituted in ■the United States Court by Mr. H. E. Young, attorney, at the instance of Mr. Miller, “a large stockholder,” it is said, to restrain the collection of these taxes, the amount involved being very large. An injunction was obtained on the Circuit; but after reaching the Supreme Court of the United States, the case was abandoned. The question again arose in the state courts, but finally the road was declared exempt. Several matters of litiga — 177 — tion growing out of claims of certain parties, Potter & Trenholm, and others, to land affecting the road-bed and right of way, also came up, in which it seems that Mr. Young represented the company, or the receiver. For services in these respects up to October, 1874, it seems that Mr. Young was allowed and paid out of the income of the road the sum of $3,850, under an order of Judge Beed dated April 16, 1875, directing the receiver to pay the same, and other expenses and counsel fees embraced in a report made by Wilmot Gr. DeSaussure on these matters. This amount, in the claim now made by Young, has been credited on his account for services rendered on the question of taxes, and his present claim consists in additional services as to that question and the other matter above referred to. Some time in 1876, one Bichardson, having purchased .at a tax sale a large tract of land, consisting of some 2,000 acres, located in Beaufort county, belonging to the Savannah and Charleston Bailroad Company, and this fact being reported by the superintendent to Mr. H. E. Young, as one of the solicitors of the road, Mr. J. W. Moore, attorney at Hampton, was employed by Mr. Young, representing the company, to bring action for the recovery of this land, the terms being that the receiver would pay actual outlay and one-half of the recovery, land and damages. This land was ultimately recovered, and has been sold .as a portion of the property of the company, the proceeds being incorporated in the general fund held for distribution among the sixes. Mr. Moore has presented a claim of fee of $600, which upon the testimony has been allowed in the decree of Judge Cothran. The above presents the facts of the case now before us, upon which the questions of law as to the fees of the different attorneys arise. Judge Cothran ordered the master “to pay out of the common fund in his hands to Messrs. Hanckel, Buist, Brawley, and Lord, upon their joint receipt, the sum of $10,000 as a fee for professional services rendered by them in the above entitled' cause,” and to Mr. Moore the sum of $600, “and that the several counsel representing other successful sixes have leave to file their claims in the office of the master, stating specifically, &c., the sums claimed by them for their services, and exhibiting such as deem to sustain them.” He also — 178 — ordered “costs to be taxed for the counsel above named, to whom fees are allowed by the decree.” Messrs. Simonton & Barker, Hayne & Ficken, and Asher D. Cohen, representing successful sixes, appealed upon exceptions. These exceptions raise three questions: 1. That the common fund in court ought only to be charged with the payment of the fees of such counsel as had authority to represent the successful sixes as a class. 2. That the judgment of the Supreme Court, April 12, 1879 (12 S. 0., 314), severed the rights of the several sixes, and that the only issue thereafter was an individual contest, and that the “common fund wras not thereafter chargeable with fees for services rendered by the counsel of the individual bondholders;” and 3. That his honor erred in decreeing that costs should be taxed in favor of Messrs. Hanckel, Buist, Brawley, and Lord, instead of to the counsel representing the successful sixes. Mr. Asher D. Cohen, in addition to the above, - filed other exceptions as attorney for the executor of Townsend. These exceptions, however, are in substance the same as the above, and embracing an exception to the fee of Mr. Moore out of the common fund. Messrs. Mitchell & Smith excepted upon several grounds, all turning, however, upon the point that the common fund should not have been charged with the fees allowed, as these attorneys were not authorized representatives of the sixes; and Messrs. Whaley and Magrath excepted for William Aiken et al, trustees, and for James B. Campbell, on the ground mainly, that their clients being trustees in possession, and necessary parties, it was their duty to resist the efforts of the comptroller general to seize the property in dispute, which successful resistance enured to the benefit of the sixes, and the expenses, counsel fees, &c., should be chargeable on the common fund, decreed to the sixes. The underlying principle in all these cases, where one has been allowed compensation out of a common fund belonging to others, for expenses incurred and services rendered in behalf of the common interest, is the principle of representation or agency. Where such compensation has been allowed, the party claiming has been in some way the recognised and authoritative representative of the — 179 — whole and therefore authorized to contract for the whole. Thus, executors, administrators, and other trustees, being the legal representative of the parties interested in the trust fund or property, have been usually allowed credit for all necessary and reasonable charges incurred by them in the proper management and protection of the trust fund. So, too, where the parties having a common interest, or are very numerous, and one of the class institutes proceedings for himself and all others belonging to .that class, these latter afterwards coming in and claiming to share in the successful result, the law, regarding the first party as the representative of the latter, has recognized his right to charge to the common fund or property such reasonable and proper expenses, including counsel fees, as he may incur for the common and general interest. This principle has been frequently enforced in behalf of a plaintiff in creditors’ bills, and it also applies where the common interest belongs to the defendants, who being so numerous that one is selected and brought in by regular process as a representative of the class, while the others are called in by advertisement, who may come in or not as they choose; but if they do come in, must do so under the principle that the common fund shall be taxed with the reasonable expenses incurred bv the representative. Thus it will be seen that such charges are allowed not simply and alone because services have been rendered which have been beneficial to the common interest, but upon the ground that they were rendered by the authority of those having the common interest exercised by the representative, the compensation for which was to be chargeable to the fund protected or recovered. No one can legally claim compensation for voluntary services to another, however beneficial they may be, nor for incidental benefits and advantages to one, flowing to him on account of services rendered to another, by whom he may have been employed. Before legal charge can be sustained, there must be a contract of employment either expressly made or superinduced by the law upon the facts. And thus it is, as we have said above, that in the case of executors, administrators, and other trustees, and in creditors’ bills, and suits of that nature, where the representative of a class — 180 — is the principal and first actor, either as plaintiff or defendant, the class being so numerous as not to be conveniently made parties individually, the law superinduces a contract on the part of all having a common interest, that the common property shall be chargeable with the reasonable contracts as to fees, expenses, &c., of the representative. Section 140 of the code provides, that “when the question is one of a common or general interest of many persons, or when the parties are numerous, and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole.” See Mr. Pomeroy’s discussion of this section, and the former equity practice. Pom. Rem., §389 etseq. This is the principle, as we understand it, upon which the questions involved here must be determined. The class which has been successful at the end of this protracted and vigorously conducted contest, is the class known throughout the case under th'e name and style of the sixes. They had a common interest in the struggle, and the property has been sold and the proceeds adjudicated to them. They were not all summoned into the court by individual process; on the contrary, the most of them came in under the call by advertisement — all except Daniel Hand and those who stood with him, having unfunded coupons of the six per cents., they being already in court, and W. B. Smith and James Conner, the two last being especially summoned as holders of sixes. Now, who of these parties was the representative of the sixes ? No one but Smith, James Conner having declined to appear for them. Daniel Hand and those who stood with him in possession of unfunded coupons of the sixes, it is true, were interested in the question upon which the case ultimately turned, but Daniel Hand’s proceeding was expressly for himself and “those who stood in the same right and plight with himself.” He did not in any way claim to act for the benefit of the sixes generally, nor did he ask that they should be made parties either by process or by call, and but for the interposition of the executors of Cutting, Daniel Hand’s case might have terminated without the sixes appearing. We do not see in the “Case” that the sixes as a class had any standing in court until the sevens raised the main question involved between themselves and the sixes and summoned — 181 — W. B. Smith as one of the holders of the sixes, omitting to serve the others because too numerous. -Under these circumstances we must regard Smith as the representative of the sixes, and their only representative as a class, and consequently the only party authorized to charge the common fund with expenses. Mr. Hanckel_ seems to have been the attorney employed by Smith. He answered for Smith, and i.t appears from several indorsements on the papers connected with the different references that he signed his name as the attorney of the sixes. Upon these facts we think that Mr. Hanckel is entitled to a proper fee out of the common fund in court other than that portion going to Daniel Hand and those who stood with him with unfunded coupons of the six per cent, bonds. No doubt it is true, that after the conflict commenced between the sixes and sevens, that Messrs. Buist & Buist and Brawley, who were representing unfunded coupons of the sixes, and Mr. Lord, did valuable and able services on the question of the unconstitutionality of the act of 1869, postponing the statutory lien of the state in favor of the sevens, but at whose instance, and by whose authority was this done ? Was it done by the authority of the sixes or their representative, W. B. Smith? Can these parties come in under the principle we have laid down above ? Do not they rather occupy the position of rendering an incidental service, to parties not repre- ' sented by them, but derived to them because their rights were involved in the same question, as to which they had been engaged for others ? It may be that, inasmuch as Daniel Hand’s suit was in the nature of a creditor’s bill for those holding unfunded coupons, his attorneys, Messrs. Buist & Buist and Brawley (if the latter was engaged by Daniel Hand), would be entitled, under the above principle, to proper fees out of so much of the common fund as the holders of such coupons may be entitled to. Mr. Lord, it appears, represented those of the sixes who at one time had been represented by Mr. Brawley, and who had been turned over to Mr. Lord by Mr. Brawley, when he came to the conclusion that they were in conflict with the unfunded coupons standing with Daniel Hand. Mr. Lord, it is admitted, rendered most effective and valuable — 182 — assistance in the interest of the sixes, but the question again recurs, upon whose authority? Was it by contract, either express or implied, made by one who could bind the common fund of the sixes? We do not find any allegation or statement of that kind in the case, and we do not see, therefore, how the claim, however meritorious in other respects, can be sustained against the protests of the sixes. This court has no power to subject the property of citizens to claims, except such as may be founded upon legal or established equitable principles making such property liable. It has no power to adjust claims upon grounds of abstract moral equity. On the contrary, a claim to be sustained by the courts must amount to a cause of action under some settled legal or equitable principle. Where are the facts in this case which would constitute a cause of action by these attorneys against the sixes ? The same principle which excludes Messrs. Buist & Buist, Brawley, and Lord will also exclude Mr. Young. His services in protecting the road from taxation and other claims may have enured to the ultimate advantage of the sixes. Yet it was one of those incidental advantages sometimes following acts which go beyond the object of the immediate employment and redound to the benefit of others besides the party authorizing it and for whom the act was performed. The same may be said as to the claim of William Aiken and Geo. W. Williams, and their attorney, Mr. Campbell. For such benefits the law has given no pecuniary compensation. The claim of Mr. Moore, we think, occupies a different position from those we have been discussing. He was employed by the receiver or the solicitors of the company to sue for a tract of land, claimed by the company, then in the possession of another. He undertook the service under a special contract, to wit, one-half of the recovery, land and damages. He succeeded in recovering the land, which has been incorporated into the general property, his half as well as the other. The land has been sold and the proceeds are now in the common fund. After the recovery of the land, his special contract was subject to specific performance, and he might no doubt have claimed a partition. This was not done, however. On the contrary, as we have said, the — 183 — land has been sold and the proceeds are in court. We think he may pursue these proceeds and establish his claim against the fund instead of the land, which has been done substantially; and therefore there was no error in allowing his claim. Such costs as the statute prescribes should be taxed in favor of the successful parties. We repeat that it is not hereby intended to intimate that any of the gentlemen engaged in this case did not render valuable services for which as between attorney and client they should be paid, but simply to announce who are entitled by law to have a judgment of the court for fees out of the common fund. It is the judgment of this court that the decree of the Circuit Court be modified as herein stated, and that the case be remanded to be carried out in accordance herewith.