Dodge v. Tulleys

144 U.S. 451, 12 S. Ct. 728, 36 L. Ed. 501, 1892 U.S. LEXIS 2089

• Court: Supreme Court of the United States
• Decided: April 11, 1892
• Docket: 222
• Status: Published

Opinion

Mr. Justice Brewer,

after stating the case, delivered the opinion of the court.

Appellants, allege several matters as ground's for reversal.. They claim , that the commission notes represent unlawful interest, or that in any event they should be credited with rebates. Adding the commission notes to the interest named in the bond aggregates only-8| per cent on the money actually loaned, and ten per’-cent is-allowable under the laws of Nebraska. (Comp. Stats. of Nebraska, p. 483, c. 44, sec. 1.)

The claim of a credit for rebates springs from these facts. The title to the land at the time the loan was contracted for and the securities given- was only partly in the defendants. One tract of it was school and another railroad land, in respect to which they had only a contract of purchase, and upon which balances were still due to the State and tvo the railroad company. These were paid by the lender out of the loan, and deeds perfecting title obtained. Then a portion of the loan was handed over to the defendants. ' Three thousand dollars was.by agreement retained on account of a judgment against the defendant, F. C. Dodge, which was a lien upon the land, but which had been appealed by him to- the Supreme Court. . After this judgment had been affirmed by that court, it ¡was paid out of the moneys thus retained.’ Dates and amounts are as follows: The securities are dated February 1, 1886, and call for interest from that time. They' were not' in fact executed until February 17. The amount due' the State was $1417.25, and wás paid March 4. That due the. railroad company, $1388, and paid March 11. On June 8, $4194.75 was sent to defendants; and the judgment, $2466, was paid October 8. On the face of the papers, interest was due from February 1. There was no agreement between the lenders and the borrowers with respect to a different date for its-commencement. The borrower knew ■ the -condition of his title, and the fact of a judgment lien. The moneys due the 'State and the railroad company were paid within a reasonable time, and as soon as title could be obtained from the vendors. In the absence of an express agreement to the contrary it must be assumed that the borrower, knowing that there would be some short delay in making payments and perfecting title, intended and agreed that such delay should work no .change as to the time at which interest was to commence to run. The same is true of the $3000 retained by express agreement for the judgment. It cannot be that the lenders were to hold that money without interest, waiting his pleasure in respect to the judgment. The delay was for his accommodation, and at his.instance. But with respect'to the moneys given to Him on June 8, we think equity requires a rebate of interest on account of the long delay in' the matter. When a loan is 'negotiated, the' understanding is that the money is to be paid promptly after the execution of. the papers.' As the. parties lived in different' cities, of course a little time for transfer would be expected, and the perfecting of the title is implied ; but there is no excuse for such a long delay as this. The judgment, which was a lien upon the property, justified the lenders in retaining enough money to satisfy it. It was only $2000 in the first instance, and by agreement $3000 was retained in order to cover interest and costs; but the balance of the loan should have been promptly forwarded to the borrower. Because it was not so forwarded, we think the defendants are entitled to a rebate on the amount due to Burnham, Tulleys & Co., for the interest on the sum withheld during the time it was so withheld, a period of about three months-. Eighty-five dollars would be a fair amount to thus credit.

Another claim of appellants is that they had in fact paid all of the interest due at the time -the suit was commenced. It appears that the $3000 retained for the judgment was sent in a, single draft to West & Schlodtfelt, real- estate men at Grand Island, through whom the application of defendants had come to Burnham, Tulleys & Co. Out of that they paid the judgment, $2466. The balance, $534, they, retained. Why it was retained is not fully disclosed by the testimony. It would seem that they had rendered some services to the borrowers, and an inference is possible that there was a dispute as to the matter of compensation. Be that as it may, and although West & Schlodtfelt wrongfully retained the money, the burden of this'wrong must be borne by the defendants, and is not .chargeable to Burnham, Tulleys & Co., for they sent the money to West & Schlodtfelt upon the written direction of the borrowers; and there is no evidence that West & Schlodtfelt ever paid the interest, as the defendant, Freeman Dodge, testifies they promised to do..

Another defect claimed is that the citizenship of Hesse, the obligee in the bond, is not alleged; but this is unnecessary. The suit is in the name of Tulleys, trustee, to whom the legal title was conveyed in urust, and who was, therefore, the proper party in whose name to bring suit for foreclosure. It happens in this case that there was but one party beneficiary under the trust deed; but it often is the case, as in railroad trust deeds, that the beneficiaries are many. But whether one or many, the trustee represents them all, and in his name the litigation is generally and properly carried on. The fact that the beneficiary in a tWst deed may be a citizen of the same State as the grantor, would - not, if the trustee is a citizen of a 'different State, defeat the jurisdiction of the Federal court. In any event, the bond being negotiable, the citizenship of the obligee becomes immaterial after transfer of title from him, Mersman v. Werges, 112 U. S. 139; School District v. Hall, 113 U. S. 135. Hesse had, by the allegations of the bill, parted-with his interest in the bond, and it was unnecessary to either make him a party or allege his citizenship. It may be that the allegation of the transfer of the mortgage from Burnham,' Tulleys & Co. to. Tulleys is defective, and perhaps it would have been more correct to have made them parties defendant, and permitted theip to set up their mortgage by. cross-bill; but they were by permission of the court -made parties, and with the Cornell University, the present holder of the bond, appeared in the case and asserted their rights and interest in the property. While the proceedings may have been somewhat irregular, yet no objection seems to have been taken to the manner in which this was done." As all the parties in. interest were parties to the record, and all the facts.fully disclosed by the testimony, it would be sacrificing substance to. form to set aside the decree because of a mere irregularity in the arrangement of the parties, or the.frame of the pleadings. So far as Cornell University is concerned, .its' citizenship, if it were necessary, is sufficiently disclosed- by the allegation that it is a corporation duly organized under the laws of the State of New; York.

The remaining proposition of appellants, is that the court erred in allowing a solicitor’s fee of $1000. There is a stipulation in the trust deed for the payment of an attorney’s fee' of $1000, in case of foreclosure, but such stipulations have been held by the Supreme Court of Nebraska to be unauthorized. Dow v. U pdike, 11 Nebraska, 95; Hardy v. Miller, 11 Nebraska, 395. seems that in 1873 an act passed the legis lature of Nebraska, 'expressly authorizing in any written instrument Lor the payment of money a stipulation for' not exceeding ten per cent as an attorney’s fee in case of suit. Neb. Gen. Stats. 98. This act was repealed in 1879. Laws of Neb. 1879, p. 78. In the cases cited, the Supreme Court of the State held that by the repeal of the statute the contract' right to recover attorney’s fees was taken away. So, as this court follows the decisions of the highest court of the State in such matters; (Bendey v. Townsend, 109 U. S. 665,) the provision' in the trust deed for the payment of $1000 as attorney’s •fees cannot be regarded. as of binding force. But while contract fights are settled by the law of the .State, that law does not determine the procedure of courts of the United States sitting as courts of equity, or the costs which are taxable there, or control the discretion exercised in matters of allowances. Those courts acquire their jurisdiction and powers from another source-than the State.' There is no statute of Nebraska in respect to the matter. Even if there were one expressly pro--, hibiting courts of equity from making allowances to trustees or their counsel, such prohibition would not control the proceedings in Federal equity courts. They proceed according to the general rules of equity, except so far as such rules are changed-, by the legislation of Congress, and while they may enforce-special equitable rights of parties given by state statutes, (Holland v. Challen, 110 U. S. 15,) yet their general powers as; courts of equity are not determined and cannot be cut off by any state legislation. It is the general rule: of equity, that a trustee called upon to discharge any duties in' the administering of his trust is entitled to compensation therefor, and included therein is a reasonable allowance for counsel fees. This is constantly enforced in the Federal courts in !the various railroad foreclosures that have been and are proceeding therein; and this, irrespective of any state legislation. The subject was exhaustively considered by Mr. Justice Bradley, in the case of Trustees v. Greenough, 105 U. S. 527. The English' and American authorities were fully reviewed, and the power and duty-of the court to make reasonable, allowances (including counsel fees) to trustees or others acting in that capacity was affirmed. See, also, Central Railroad v. Rettus, 113 U. S. 116. It is unnecessary to more than refer to these decisions.

In the case before us, a trustee comes into a court of equity and asks its aid in enabling him to discharge the duties of his trust; and, according to the settled law of this court, he is entitled to an allowance for reasonable counsel fees. But we think $1000 is too much. Indeed, in the bill of complainant, the trustee alleges that $500 is a reasonable attorney’s fe.e for the foreclosure of the trust deed; and we think that under the circumstances no more should be allowed.

The decree will, therefore, be modified by reducing the amount found due' Burnham, Tulleys &. Company to $1094.16, and the attorney’s fee from $1000 to $500. In other respects the decree will be affirmed. The appellants will ¿recover-their costs in this court. Affirmed as modified.