CASES ADJUDGED

IN THE

SUPREME COURT OF THE UNITED STATES

AT

OCTOBER TERM, 1929

KANSAS CITY SOUTHERN RAILWAY COMPANY v. GUARDIAN TRUST COMPANY ET AL.

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

No. 22.. Argued January 15, 16, 1930.-Decided February 24, 1930.

1. When used without qualification in a decree of a federal court, the word " costs" means the amounts taxable as such under Acts of Congress, rules promulgated by its authority and practice established consistently with governing enactments. P. 9.

2. In equity costs not otherwise governed by statute are given or withheld in the sound discretion of the court according to the facts and circumstances of the case. Id.

3. A decree merely allowing costs to be taxed does not mean that anything is to be included on account of counsel fees in addition to the nominal amounts specified in the statute (U. S. C., Title 28, §§ 571, 572) as attorney's fees. Id.

4. Even if it be assumed that federal equity courts have jurisdiction to allow costs as between solicitor and client and to include therein attorney's fees in excess of the amount prescribed by statute, the purpose to authorize such costs and to make such allowance should be clearly expressed in the decree. Id.

5. Where a decree of the Circuit Court of Appeals reversing the District Court with directions to enter a specific decree with costs, to be taxed under the principles, rules and practice in equity, was entered after a rehearing at which, for the first time, it was sug

98284-30-1

1

Argument for Respondent.

281 U.S.

gested that the defeated party should be found guilty of bad faith in instigating and prosecuting the litigation, and, on that ground, should be taxed with solicitor's fees and other expenses incurred by the prevailing party, as part of its costs, held, construing the decree in connection with the opinion of the court and with regard to the issues before it on appeal, that the decree did not authorize or permit the taxation of costs as between solicitor and client. P. 10. 6. The District Court can not vary a mandate of this Court requiring the execution of a decree of the Circuit Court of Appeals, or give any further relief. P. 11.

28 F. (2d) 233, reversed; District Court affirmed.

CERTIORARI, 279 U. S. 827, to review a decree of the Circuit Court of Appeals which reversed a decree of the District Court refusing to tax counsel fees and other expenses as costs in favor of the Trust Company as part of a decree entered under an earlier ruling of the Circuit Court of Appeals. See also 210 Fed. 696; 240 U. S. 166; 146 Fed. 337; 171 id. 43.

Mr. Samuel W. Moore, with whom Messrs. Frank H. Moore, Cyrus Crane and A. F. Smith were on the brief, for petitioner.

Mr. Justin D. Bowersock, with whom Messrs. Robert B. Fizzell and John F. Rhodes were on the brief, for respondent.

The District Court had power to effect reimbursement of the Trust Company without regard to any other principle justifying the imposition of solicitor and client costs, for the reason that it was defending the Belt collateral against the attack of the Southern Company upon the title of its pledgor.

The mandate of this court on the former appeal dealt only with party and party costs, and not with solicitor and client costs, and has no bearing upon the issues herein. The Act of February 26, 1853, regulates party and party costs only.

1

Argument for Respondent.

The federal courts are, by the Constitution, vested with the equity powers possessed by the High Court of Chancery in England at the time the Constitution was adopted.

The English authorities allow solicitor and client costs even in the absence of a fiduciary relationship, where charges of gross fraud and misconduct have been made and not sustained. Ex parte Simpson, 15 Ves. Jr. 476 (1809); Passingham v. Sherborn, 9 Beavan 424 (1839); Ibberson v. Worth, 1 Jur. (N. S.) 440 (1855); D'Oechsner v. Scott, 24 Beavan 239 (1857); Forester v. Read, L. R. 6 Ch. App. 40 (1870); Kevan v. Crawford, L. R. 6 Ch. D. 29 (1877); Fane v. Fane, L. R. 13 Ch. D. 228 (1878); Bruty v. Edmundson, L. R. (1917) 2 Ch. 285; cf. Mayhew v. Phoenix Insurance Co., 23 Mich. 105.

Many authorities allow solicitor and client costs, even in the absence of a fiduciary relationship, where the litigation is so baseless and unwarranted as to justify an implication of bad faith. The Apollon, 9 Wheat. 362; Patterson v. Ball, 18 Fed. Cas. No. 10,823; The Elizabeth Frith, 8 Fed. Cas. No. 4361; In re Wright, 16 Fed. 482; Gulf & S. I. R. Co. v. Walker, 104 Miss. 363; Joslyn v. Parlin, 54 Vt. 670; Spring Garden Insurance Co. v. Amusement Syndicate Co., 178 Fed. 519; J. E. North Lumber Co. v. Gary, 83 Miss. 640; Bank of Philadelphia v. Posey, 130 Miss. 530; O'Neal v. Spivey, 145 S. E. 71; North Missouri R. Co. v. Lackland, 25 Mo. 515; Beach v. Macon Grocery Co., 125 Fed. 513; In re Lacov, 142 Fed. 960; In re Wentworth Lunch Co., 191 Fed. 821; Myers v. Frankenthal, 55 Ill. App. 390; St. Louis v. St. Louis Gas Light Co., 11 Mo. App. 237; Weston v. Watts, 45 Hun. 219; Hernandez v. Brookdale Mills, 232 N. Y. 552; Anderson v. Marietta National Bank, 93 Okla. 241; Delcambre v. Murphy, 5 S. W. (2d) 789; Atlantic Trust Co. v. Chapman, 208 U. S. 360; Buell v. Kanawha Lumber Corp., 201 Fed. 762; Ephriam v. Pacific Bank, 129 Cal. 589; In re Shockett, 177 Fed. 583.

Opinion of the Court.

281 U.S.

A public policy in favor of the imposition of solicitor and client costs against one who instigates an unwarranted and baseless suit, is evidenced by various statutes and rules of court imposing costs and attorneys' fees in certain cases where unreasonable or unwarranted claims or defenses are insisted upon.

Where a fiduciary relation exists between the parties, expenses occasioned by baseless and unwarranted litigation are taxable as solicitor and client costs against the offending party.

Various fiduciary relationships were involved, and the Southern Company itself was trustee for the Trust Company. There was a fund in court.

MR. JUSTICE BUTLER delivered the opinion of the Court.

The question is whether the Guardian Trust Company, in addition to amounts taxable as costs between party and party, is entitled to recover anything on account of counsel fees or other expenses as costs between solicitor and client.

In a judgment creditor's suit brought in the United States Circuit Court for the Western District of Missouri by the Cambria Steel Company against the Kansas City Suburban Belt Railroad Company, receivers were appointed for the latter. It had given its notes for large amounts to the Trust Company and pledged stocks and bonds as collateral security. The Kansas City Southern Railway Company had acquired on mortgage foreclosures the properties of the Belt Company, and of the Kansas City, Pittsburg & Gulf Railroad Company.

The Trust Company claimed that the Southern Company, having succeeded to the properties of the Belt Company and of the Gulf Company on terms that preferred shareholders to creditors, became liable for their

debts. It brought three suits in a Missouri court to compel the Southern Company to pay the debts owing to it by them. Thereupon the Southern Company brought two suits against the Trust Company in the United States court to enjoin prosecution of the state court cases. One related to the actions on the debts of the Belt Company (146 Fed. 337) and the other to all the actions. 171 Fed. 43. Injunctions granted by the lower court were dissolved by the Circuit Court of Appeals.

In the creditor's suit, the Belt Company and its receivers filed an ancillary bill against the Trust Company to have the claims of the latter against the former declared invalid, to recover the collateral security, and to have an accounting. The Southern Company intervened, claiming under the foreclosure, and sought to recover the collateral security and other property from the Trust Company. The decree of the Circuit Court, except as to matters not important here, denied relief against the Trust Company, established its claims against the Belt Company and, notwithstanding the Trust Company's contention that the issue was not before the court, adjudged that the Southern Company was not liable therefor, and ordered that one-third of the costs be borne by the Trust Company and two-thirds by the Southern and Belt Companies.

The matters adjudged in favor of the Trust Company were not taken to the Circuit Court of Appeals for review. The Trust Company appealed. It insisted that the lower court erred in holding that the Southern Company was not indebted to it. Preferring to pursue that company in the actions pending in the state court, it had not prayed judgment in this suit against the Southern Company. It

*Northern Pacific Ry. v. Boyd, 228 U. S. 482, decided while this case was pending in the Circuit Court of Appeals on the first appeal.