Farmers' Loan & Trust Co. v. Green

TOULMIN, District Judge, after stating the case as above, delivered the opinion of the court. In our view of this case, we need only to consider the question whether Green is entitled to any allowance for counsel fees and expenses to be paid out of the funds in the hands of the receiver, without regard to the question whether he was an innocent purchaser, free from laches or fault in the premises. There is no question as to the power of a court of equity, in cases of administration of funds under its control, to make such, allowance to those who have instituted proceedings for the benefit of the fund as justice and equity may require. It is a well-recognized rule of equity that when a trust fund is brought into court for administration and distribution, it must bear the expense incurred in proper proceedings taken for the purpose. This expense necessarily includes the fees of the counsel Tylio brings the suit, and who is considered as representing all persons having a common interest in the fund brought into court by it, and who avail themselves of its benefits, and of counsel who may be employed by authority of the court to perform services beneficial to the trust fund. Trustees v. Greenough, 105 U. S. 527; Jacksonville, T. & K. W. Ry. Co. v. American Const. Co., 6 C. C. A. 249, 57 Fed. 66; Bound v. Railway Co., 59 Fed. 509; Insurance Co. v. Dellatorre, 17 C. C. A. 310, 70 Fed. 643. But this rule does not apply in favor of one who sets up an independent right to participate in the funds in litigation, and whose claim involves an antagonistic interest to that of the complainant in the suit, and those of the same class or of like interest. Insurance Co. v. Dellatorre, supra; Bound v. Railway Co., supra; Strong v. Taylor, 82 Ala. 213, 2 South. 760; Grimball v. Cruse, 70 Ala. 534; Ryckman v. Parkins, 5 Paige, 545. The contention of the Farmers’ Loan & Trust Company and others is that Green’s cáse does not belong to that well-defined and limited class of cases in which courts of equity have allowed a successful litigant to be paid his counsel fees and expenses out of a trust fund under the control of the court; that the proceedings for the counsel fees and expenses in which Green now seeks an allowance were not brought to create or preserve any fund in which the complainant or intervening bondholders are interested, but that Green’s attitude in [225] such litigation has always and necessarily been adverse and hostile to the complainant and the bondholders. The litigation between the complainant and the interveners, the bondholders, on the one side, and Green, the purchaser, on the other, was a contest as to the right of the former to liare the sale confirmed and the purchase completed, and of the latter to have the sale set aside, and to be released from his bid. Clearly, this litigation involved antagonistic interests, and the parties to it occupied adverse posi! ions in reference to its subject-matter. A purchaser under a decretal sale is one of the parties litigant, where lie resists, as lie has the right to do, the confirmation of the sale. He occupies the position, respecting costs and expenses, of any other party litigant. If causes exist why the sale should be set aside, and it is for equitable reasons set aside, the party unsuccessful in the litigation should pay the costs. It will not do to invite or encourage the purchaser to resent any effort to have the sale confirmed, and to compel him to comply with Ids bid, upon the idea that lie will incur no cost or expense in the litigaüon. The purchaser under a judicial sale submits himself to Hie jurisdiction of the court, and may be compelled to carry out his contract, but he is also entitled to the protection of the court in respect to the avoidance of the purchase if by reason of imperfections in the title or otherwise he is freed from his bid. He should be treated fairly, and, being discharged from his purchase, he is entitled (o have his deposit restored to him, and to have his costs.—the ordinary taxable costs which are chargeable as between party and party. 2 Jones, Mortg. § 1648; Morris v. Mowatt, 2 Paige. 586; Ryckman v. Parkins, supra. To direct the payment to the purchaser in this case of any allowance for counsel fees and disbursements out of the funds in the hands of the receiver would be tantamount to taxing if against the bondholders. The practical question, then, is, shall the bondholders bear the burden of the litigation arising out of this contest between the parties? Must they pay the fees of the purchaser's counsel, who were not employed or controlled by them? AA'e see no reason why the bondholders should be required to do more than pay the legal, taxable costs, like any other unsuccessful litigant, and we know of no principle of law or of equity which authorizes the court to tax as a part of the costs the counsel fees and disbursements of Hie successful party in the litigation. The Uniied States supreme court, in the case of Oelrichs v. Spain, 15 Wall. 211, after staling that the rule at law in debt, covenant, and assumpsit was against the allowance of counsel fees, held that counsel fees were not recoverable on an injunction bond, and said that: “In equity cases, where there is no injunction bond, only the taxable cos is are allowed to the complainants. Tlie same rule is applied to the defendant, however unjust the litigation on the other side, and however large the expensa litis to which he may hare boon subjected. The parties, m this respect, are upon a footing of equality. When both client and counsel know that the fees arc to be paid by tin' other party, there is danger of abuse. * * * We think the principle of disallowance rests upon a solid foundation, and that the opposite rule is forbidden by the analogies of the law and sound public policy.” Suppose the circuit court had not concluded to render the decree of March 5, 1895, releasing Green from his purchase and directing a resale of the property, but had maintained the correctness of the decree [226] of March 14,1893, confirming the sale and denying Green relief therefrom-, could it be reasonably claimed, or even suggested, that the complainant and the interveners should recover from Green their counsel fees, and incidental expenses incurred by them, in resisting his application to be released from his purchase, and in prosecuting their motion to have him comply therewith, or that he should be taxed with such fees and expenses as a part of the costs of the contest? Clearly not, and, if not, then the parties to the litigation were not "upon a footing of equality” if Green’s claim is well made. But it was submitted in the argument of Green’s counsel that the disbursements by him for counsel fees, and for other expenses incurred by him in securing a release from his purchase, resulted in curing many defects in the foreclosure proceedings, the correction of which necessarily benefited the trust property, and increased its salable value. If it be admitted that Green’s counsel, in representing the interest which retained him, incidentally contributed to the benefit of the trust fund, and to the common interest of the bondholders, still he can legally claim from them no compensation for his services. They were voluntary services, as far as they were concerned. They were not rendered under any contract of employment, either expressly made by them, or superinduced by the law upon the facts of the case, and they were rendered with no view or purpose of benefiting the bondholders or the trust fund. To make such services a charge on the trust fund they must have been rendered for the purpose of benefiting that fund. Bound v. Railway Co., supra; Grimball v. Cruse, 70 Ala. 544, 545; Trustees v. Greenough, supra. The supreme court of South Carolina, in Hand v. Railroad Co., 21 S. C. 179, in stating the rule, said: “No one can legally claim compensation for voluntary services to another, however beneficial they may he, 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 a legal charge can he sustained, there must he a contract of employment, either expressly made or superinduced by the law upon the facts.” Our opinion is that the decree appealed from is erroneous in so far as it overrules the exceptions to the master’s report filed by the complainant: and the interveners, and decrees an allowance to E. H. R. Green for counsel fees and expenses to he paid out of the funds in the hands of the receiver. The case must accordingly he reversed, and the cause remanded, with directions to the circuit court to srt aside its former decree, and, in lieu thereof, to make and enter a decree consistent with this opinion. The decree to be entered by the circuit court pursuant to the mandate of this court should order, adjudge, and decree that the exceptions of the Farmers’ Loan & Trust Company and the interveners, Collis P. Huntington, Moran Bros., and Henry K. McHarg, to the report of the said special master, be sustained; that it should further order, adjudge, and decree that said Green be denied any allowance to cover counsel fees and expenses other than the ordinary taxable costs of court which are provided for in the decree from which these appeals were taken. Reversed and remanded.