1. The liability of the surety on a bond given by a bank to
secure deposits of county funds in Nebraska is not limited by §
6193, Comp.Stats. Nebraska, 1922, forbidding any county treasurer
to have such funds on deposit in any bank in excess of 50% of its
paid up capital stock, but extends to deposits made in violation of
the statute unless otherwise provided in the bond itself. P.
276 U. S.
240.
2. Construction of a state statute by the highest court of the
state accepted by this Court, though made subsequently to the
decision here under review. P.
276 U. S.
240.
3. The attorney's fees which are directed by § 7811, Nebraska
Comp.Stats., 1922, to be allowed and "taxed as part of the costs"
in actions on guaranty and other specified insurance contracts are
not costs in the ordinary sense, and are not taxable as costs under
Rev.Stats. §§ 823, 824, in actions in federal courts, but are to be
allowed in those courts by inclusion in their judgments. P.
276 U. S.
242.
4. For the purpose of fixing a reasonable attorney's fee under
the statute, regard should be had to the amount substantially
involved in the action. P.
276 U. S. 244.
16 F.2d 688 reversed.
Certiorari, 274 U.S. 729, to a judgment of the circuit court of
appeals which reversed in part a judgment of
Page 276 U. S. 239
the district court against the above-named surety company for
the full amount of a bond given to secure deposits of county funds
in a bank, later insolvent, and for an attorney's fee.
MR. JUSTICE STONE delivered the opinion of the Court.
The respondent, a surety company, as surety, and the First
National Bank of Harrison, Nebraska, a designated depository for
county funds, as principal, gave their bond to Sioux County,
Nebraska, the petitioner, in the sum of $30,000. The bond, required
by statute, was conditioned on the payment by the bank, on the
order of the county treasurer, of all sums of money deposited with
it by the county. The bank became insolvent and closed its doors
when the county deposits amounted to $35,395.70. The present suit
was brought in the district court of Sioux county, Nebraska, to
recover from the surety the amount of the bond and a reasonable
attorney's fee, under Comp.Stat. Neb.1922, § 7811, and was removed
to the United States district court for diversity of
citizenship.
The authorized capital of the bank was $50,000, and the defense
relied upon by the surety was a provision of Comp.Stat. Neb.1922, §
6193, which forbade the deposit of county funds by county
treasurers in excess of 50 percent of the authorized capital of the
depository. The district court gave judgment for the full amount of
the bond and for an attorney's fee of $3,000. The Circuit Court of
Appeals for the Eighth Circuit reversed the judgment, disallowing
the attorney's fee and any recovery on the bond
Page 276 U. S. 240
in excess of $25,000, which was one-half of the authorized
capital of the bank.
National Surety Co. v. Lyons, 16 F.2d
688. This Court granted certiorari. 274 U.S. 729.
The circuit court of appeals took the view that the Nebraska
statute, printed in the margin, [
Footnote 1] as construed by the Supreme Court of Nebraska,
operated to limit the liability on the statutory surety bond to
one-half of the authorized capital of the depository.
Cole v.
Myers, 100 Neb. 480;
Blaco v. State, 58 Neb. 557;
In re state Treasurer's Settlement, 51 Neb. 116;
State
ex rel. Davis v. People's state Bank of Anselmo, 111 Neb.
126.
The correctness of this interpretation of the Nebraska decisions
is questioned here, but all doubts on that point have been set at
rest by a later decision of the state court. In
Scotts Bluff
County v. First Nat. Bank, 212 N.W. 617, decided since the
entry of judgment below, the Supreme Court of Nebraska held that
the statute does not have the effect asserted, and that, within the
amount of the bond, a county may recover from the surety the full
amount of the deposit, even though it exceed 50 percent of the
authorized capital of the depository.
We accept this construction of the statute, and accordingly set
aside the conflicting interpretation of the court below, even
though it antedated the determination by the state court.
Hines
Yellow Pine Trustees v. Martin, 268 U.
S. 458;
Bauserman v. Blunt, 147 U.
S. 647. If, as the state court held, the statute is to
be construed as not
Page 276 U. S. 241
affecting the obligation of the surety, we think it plain that
the liability on the bond,
qua contract, is not affected
by the county treasurer's breach of duty. The bond contains no
limitation of the amount which the treasurer may deposit. The
district court was therefore right in allowing a recovery of the
full amount of the bond.
In striking down so much of the judgment as allowed an
attorney's fee, the court below was persuaded that § 7811, which
provides for an attorney's fee, authorized it only as costs to be
taxed in the state court. As costs in the federal courts are
regulated exclusively by R.S. §§ 823 and 824, the court concluded
that other costs, authorized only by a state statute, could not be
included in the judgment.
See United States v. Sanborn,
135 U. S. 271,
135 U. S. 282;
The Baltimore,
8 Wall. 377,
75 U. S. 388
et seq. Compare Ex parte Peterson, 253 U.
S. 300,
253 U. S.
314-319.
Both in an earlier case,
Globe Indemnity Co. v.
Sulpho-Saline Bath Co., 299 F. 219,
cert. denied, 266
U.S. 606 (
see also Spring Garden Insurance Co. v. Amusement
Syndicate Co., 178 F. 519), and in a later case,
Business
Men's Assurance Co. v. Campbell, 18 F.2d 223, the same court
applied the Nebraska statute allowing the recovery of attorney's
fees in suits upon insurance policies. When it was argued that no
other costs can be taxed in a court of the United States than those
authorized by federal statute, the circuit court of appeals said in
the latter case (p. 224) that the objection "applies only to
ordinary costs, and not to allowances for attorney's services
provided by state statutes."
State statutes allowing the recovery of attorney's fees in
special classes of actions have been upheld as constitutional by
this Court,
Farmers' & Merchants' Insurance Co. v.
Dobney, 189 U. S. 301;
Missouri, Kansas & Texas Ry. v. Harris, 234 U.
S. 412;
Chicago & Northwestern Ry. v. Nye
Schneider Fowler Co., 260 U. S. 35;
Fidelity
Mutual
Page 276 U. S. 242
Life Assn. v. Mettler, 185 U.
S. 308, and they have been given effect in suits brought
in the federal courts,
Fidelity Mutual Life Assn. v. Mettler,
supra; Iowa Life Insurance Co. v. Lewis, 187 U.
S. 335;
Home Life Insurance Co. v. Fisher,
188 U. S. 726;
Hartford Fire Insurance Co. v. Wilson & Toomer Fertilizer
Co., 4 F.2d 835,
cert. denied, 268 U.S. 704.
In these cases, the local statutes were in effect treated as
creating a statutory liability in which insurers, by accepting
risks after their enactment, had acquiesced, and for the liability
thus assumed a remedy was available in the federal as well as in
the state courts.
Fidelity Mutual Life Assn. v. Mettler,
supra, at
185 U. S.
326.
The present statute, printed in the margin, [
Footnote 2] provides that, in the cases specified,
the court "shall allow the plaintiff a reasonable sum as an
attorney's fee, in addition to the amount of his recovery, to be
taxed as a part of the costs." The direction that the added
liability be included in the judgment as costs does no more in
substance than the provision upheld and applied in the
Mettler case, that the insurance company "shall be liable
to pay . . . all reasonable attorney's fees," or the provision
upheld and applied in
Home Life Insurance Co. v. Fisher,
supra, that the attorney's fees should be added to the
judgment.
Such doubt as there may be as to the meaning and effect of the
statute arises from certain decisions of the Supreme
Page 276 U. S. 243
Court of Nebraska enforcing it in suits upon insurance contracts
entered into before its enactment, in which the statute, attacked
as impairing the obligation of the contract, was characterized as
"remedial" or as a "costs" statute.
Nye-Schneider-Fowler Co. v.
Bridges, Hoye & Co., 98 Neb. 27, 98 Neb. 863;
Ward v.
Bankers' Life Co., 99 Neb. 812;
Reed v. American Bonding
Co., 102 Neb. 113. In
Nye-Schneider-Fowler Co. v. Bridges,
Hoye & Co., supra, the Supreme Court of Nebraska said (p.
867):
"If the question that we are considering was now presented for
the first time, we would hesitate to say that this statute does not
create and add to the contract a legal liability which would not
exist under the contract prior to the enactment of this statute.
The fact that the attorney's fee is to be taxed as costs in the
case is not of itself decisive of the question."
But the question before the Nebraska court in the cases cited
was not that with which we are now concerned. Whether this
liability for an attorney's fee, assumed by entering into an
insurance contract after the enactment of the statute providing for
the liability, may be enforced in the federal courts does not
depend on any nice distinctions which may be taken between the
right created and the remedy given. Disregarding mere matters of
form, it is clear that it is the policy of the state to allow
plaintiffs to recover an attorney's fee in certain cases, and it
has made that policy effective by making the allowance of the fee
mandatory on its courts in those cases. It would be at least
anomalous if this policy could be thwarted and the right so plainly
given destroyed by removal of the cause to the federal courts.
That the statute directs the allowance, which is made to
plaintiff, to be added to the judgment as costs are added does not
make it costs in the ordinary sense of the traditional, arbitrary
and small fees of court officers, attorneys'
Page 276 U. S. 244
docket fees and the like, allowed to counsel by R.S. §§ 823,
824.
The present allowance, since it is not costs in the ordinary
sense, is not within the field of costs legislation covered by R.S.
§§ 823, 824. That the particular mode of enforcing the right
provided by the state statute --
i.e., by taxing the
allowance as costs -- is not available to the federal courts under
R.S. §§ 823, 824, does not preclude the recovery. Since the right
exists, the federal courts may follow their own appropriate
procedure for its enforcement by including the amount of the fee in
the judgment. R.S. § 914.
Compare Mexican Central Ry. v.
Pinkney, 149 U. S. 194;
Indianapolis & St. Louis R. Co. v. Horst, 93 U. S.
291;
Manitowoc Malting Co. v. Fuechtwanger, 196
F. 506;
Boatmen's Bank v. Trower Bros. Co., 181 F.
804.
It is said that the fee customarily allowed in Nebraska is not
less than 10% of the amount involved,
O'Shea v. North American
Hotel Co., 111 Neb. 582;
Wirtele v. Grand Lodge, 111
Neb. 302;
Central Nebraska Millwork Co. v. Olson & Johnson
Co., 111 Neb. 396, and that, as directed by the statute, an
additional fee should be allowed here for the appeal in the circuit
court of appeals and to this Court. The district court, in allowing
$3,000, apparently assumed that the full amount of the bond,
$30,000, was involved. In a technical sense, this was true, since
the defendant, by its pleading put in issue the right to recover
the whole amount. But, in point of substance, the only defense was
directed to the $5,000 by which the amount of the bond exceeded
one-half the bank's authorized capital. For the purpose of fixing a
reasonable sum, regard should be had for the amount substantially
involved. For that reason, we think that the fee to be allowed in
all courts should not exceed $2,000. The judgment of the circuit
court of appeals will be reversed, and the cause
Page 276 U. S. 245
remanded with directions to reinstate so much of the district
court's judgment as awarded to petitioner the amount of the bond
with interest, aggregating $33,492.50; interest on that amount at
the rate of 7 percent will be allowed from September 22, 1925, the
date of the district court's judgment, and the sum of $2,000,
without interest, will be allowed as an attorney's fee.
Reversed.
[
Footnote 1]
Neb.Comp.Stat. (1922) § 6193:
". . . The treasurer shall not have on deposit in any bank at
any time more than the maximum amount of the bond given by said
bank in cases where the bank gives a guaranty bond, nor in any bank
giving a personal bond more than one-half of the amount of the bond
of such bank, and the amount so on deposit at any time with any
such bank shall not in either case exceed fifty percent of the
paid-up capital stock of such bank. . . ."
[
Footnote 2]
Neb.Comp.Stat. (1922) § 7811:
"In all cases where the beneficiary, or other person entitled
thereto, brings an action at law upon any policy of life, accident,
liability, sickness, guaranty, fidelity, or other insurance of a
similar nature, or upon any certificate issued by a fraternal
beneficiary association, against any company, person or association
doing business in this state, the court, upon rendering judgment
against such company, person or association, shall allow the
plaintiff a reasonable sum as an attorney's fee in addition to the
amount of his recovery, to be taxed as part of the costs, and if
such cause is appealed, the appellate court shall likewise allow a
reasonable sum as an attorney's fee for the appellate
proceedings."