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Trustees v. Greenough

Supreme Court of the United States · 1881 · Civil Procedure

Civil ProcedureCostsEquityCommon fundcostsattorney's feesequitytrust fund

Facts

The original bill was filed by Francis Vose, a large holder of bonds of the Florida Railroad Company, on behalf of himself and other bondholders, alleging that trustees of the Internal Improvement Fund of Florida were wasting and destroying the fund and seeking to rescue the fund and place it under court administration. The litigation succeeded in securing and saving a large amount of the trust fund, bringing money into court, and producing dividends that other bondholders accepted. Vose bore the burden of the litigation and advanced substantial sums for counsel, court costs, and related efforts to protect and reclaim the trust property. The circuit court allowed him payment from the fund not only for litigation-related expenses and fees, but also for his personal services over many years and his travel and hotel expenses.

Issue

When one bondholder, suing on behalf of himself and others with a common interest, successfully preserves and restores a trust fund for the benefit of all, may a court of equity reimburse him from the fund for his litigation expenses and counsel fees? If so, may the court also award him compensation for his personal services and private expenses, and were the allowance orders sufficiently final to be appealable?

Rule

A court of equity administering a fund under its control may, in its discretion, allow a party who, at his own expense, takes proper proceedings to save, reclaim, or restore a trust fund for the common benefit, reimbursement from the fund for reasonable costs, counsel fees, charges, and expenses fairly incurred in that effort. The fee-bill governs taxable costs between party and party, but does not strip equity courts of power to make such allowances from a fund in court. However, a creditor or similar litigant who is not a trustee may not charge the fund for his personal services or private expenses.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Maya Ortiz, a holder of revenue bonds issued for a public canal project in Louisiana, filed an equity suit in New Orleans on behalf of herself and all similarly situated bondholders. She proved that the project trustees were diverting pledged land-sale proceeds, and the court placed the assets under a receiver; after that, many bondholders accepted distributions from the recovered fund.

May the court, in its discretion, award Maya reasonable counsel fees and litigation expenses from the fund in the receiver’s hands?

Explanation. A court of equity administering a fund under its control may allow reimbursement from that fund when a party sharing a common interest with others, at personal expense, takes proper proceedings to save, reclaim, or restore the fund for the common benefit. The majority held that formal trustee status is unnecessary where the litigant effectively acted to preserve the fund for all, and that the fee-bill does not eliminate equity’s power to make such allowances from a fund in court.