In re Roche

• Decision Date: 01 May 1900
• Docket Number: 889.
• Citation: 101 F. 956
• Parties: In re ROCHE. v. MORTGAGE & DEBENTURE CO., Limited. SMITH
• Court: U.S. Court of Appeals — Fifth Circuit

101 F. 956

In re ROCHE.

SMITH v. MORTGAGE & DEBENTURE CO., Limited.

No. 889.

United States Court of Appeals, Fifth Circuit.

May 1, 1900

The appeal in this case was taken by John P. Smith, receiver of the City National Bank of Ft. Worth, Tex., from an order made by the district judge allowing, in the Eugene Roche bankruptcy proceeding pending before him, an attorney's fee of $575 to the Mortgage & Debenture Company, Limited, of London, England. On the 3d day of April, 1894, the bankrupt Eugene Roche, and his wife, executed to the New England Loan & Trust Company their first mortgage bond for the sum of $5,750 borrowed money. To secure the payment of the money they executed on the same day a deed of trust to J. W Bartlett, trustee, conveying to the latter, in trust, a tract of about 630 acres of land. The bond was assigned by the New England Loan & Trust Company to the Farmers' Loan & Trust Company, and by the latter duly transferred and assigned to the appellee, the Mortgage & Debenture Company of London England. Subsequently, in February and March, 1895, Roche borrowed from the City National Bank of Ft. Worth, of which the appellant Smith is the receiver, two several sums aggregating $3,794.90, for which he gave his two promissory notes, and to secure the payment of the same he executed a second deed of trust to N. Harding, trustee, by which he conveyed in trust to Harding the land previously mortgaged to J. W. Bartlett to secure the debt due to the appellee. Roche, later on, mortgaged the same land to several other persons; but, as the sum realized from the sale was insufficient to wholly satisfy the two prior mortgages, the further consideration of the junior ones becomes immaterial. Roche having been adjudicated a bankrupt, the appellee, by its attorney, F. W. Bartlett, filed proof of its claim with the referee, who allowed the entire indebtedness, principal and interest, but excepted out of the allowance the attorney's fees. The claim of the City National Bank was also proved up and allowed for the principal sum due and interest thereon. Upon the application of the trustee of the bankrupt's estate, an order was made by the referee authorizing the real estate embraced in the deeds of trust to be sold at private sale. The sum realized at the sale was $9,800, and the trustee, under an order of the referee, paid out of the proceeds the entire claim of the appellee, except the attorney's fees, and also made a partial payment of $1,000 on the claim of the City National Bank, leaving a large balance due the bank. A sufficient amount was retained in the hands of the trustee in bankruptcy to pay the attorney's fee claimed by the appellee, if it should be ultimately adjudged that it was a valid and subsisting indebtedness against the bankrupt's estate. The question of the allowance of the attorney's fees thereafter again came on for hearing before the referee, who entered the following order disallowing the claim: 'Now, after consideration, it is ordered that the $575 attorney's fees claimed in said proof of debt be disallowed; that the proof of debt in other respects stand as allowed. ' The appellee objected to the rejection of the claim, and the question was certified to the district judge for review. Upon consideration of the matter, Judge Meek set aside the disallowance made by the referee, and passed the following order: 'I am of the opinion that the attorney's fee provided by the terms of the mortgage from Eugene Roche to the Mortgage & Debenture Company, Limited, should be allowed as part of the debt secured by said mortgage. It is therefore ordered that the order heretofore entered by the referee herein, disallowing the same, be set aside, and the referee is directed to proceed in conformity with the views herein expressed. ' From the order thus made, Smith, as receiver of the City National Bank, has appealed to this court.

B. F. Jonas, E. B. Kruttschnitt, H. M. Chapman, Tillman Smith, and Thos. F. West, for appellant.

F. W. Bartlett, for appellee.

Before PARDEE and SHELBY, Circuit Judges, MAXEY, District Judge.

MAXEY District Judge, after stating the case, delivered the following opinion:

The appellee has made a motion to dismiss the appeal in this case on the following grounds:

'(1) The judgment appealed from is a judgment of the court of bankruptcy, made in the exercise of its summary jurisdiction, adjudging the amount due on a secured claim, and is not a judgment allowing or rejecting a claim, within the meaning of section 25 of the bankruptcy act approved July 1, 1898, conferring appellate jurisdiction on this honorable court. (2) Because said section 25 does not authorize an appeal to be taken by one creditor from a judgment allowing a claim of another creditor.'

We think that the order allowing the claim for attorney's fees was a judgment allowing a claim of over $500, and that an appeal would lie therefrom under the twenty-fifth section of the act of 1898, which authorizes an appeal to be taken 'from a judgment allowing or rejecting a debt or claim of five hundred dollars or over. ' Loveland, Bankr. p. 801. The act of 1867, in providing for appeals in similar cases, was to the effect:

'And any supposed creditor, whose claim is wholly or in part rejected, or an assignee who is dissatisfied with the allowance of a claim, may appeal from the decision of the district court to the circuit court for the same district. ' Rev. St. Sec. 4980.

Under this statute there was strong reason for contending that an appeal from a judgment allowing a claim could only be made by an assignee dissatisfied therewith. The act of 1898 is silent as to the party who may take an appeal on the allowance or disallowance of the claim. The omission of the provision above quoted from the act of 1867 is significant, and we are of opinion that the intention of the lawmakers was, not to restrict the right of appeal, but to leave in force the general rule that, where an appeal lies from any judgment or decree, the same may be taken by any party or person injured or affected by the decree or judgment. The record in this case shows that the appellant, as a creditor of the bankrupt, is directly interested in the judgment complained of, not only as a general creditor of the bankrupt, but as having a special lien on the sum in the hands of the trustee. The motion to dismiss the appeal is overruled.

The several specifications of error relied upon by the appellant may be embodied in the following proposition: The court erred in allowing the claim of $575 as attorney's fees, because by the terms of the contract subsisting between Roche, the bankrupt, and the appellee, the fees had not become due and payable.

It is not questioned by counsel for the appellant that, under the laws of Texas, stipulations for the payment of reasonable attorney's fees are valid and binding upon the contracting parties. Adams v. Addington, 16 F. 89; Miner v. Bank, 53 Tex. 559; Washington v. Bank, 64 Tex. 4; Martin Brown Co. v. Perrill, 77 Tex. 200, 13 S.E. 975; Neese v. Riley, 77 Tex. 348, 14 S.W. 65. And it is also settled law that, upon a question affecting the validity and effect of a contract made and to be performed in a state, concerning land in such state, the laws of the state must govern in proceedings to enforce the contract in a federal court held within the state. Bendey v. Townsend, 109 U.S. 665, 3 Sup.Ct. 482, 27 L.Ed. 1065. The contract being valid according to the laws of Texas, it only remains for us to decide how it shall be construed; and that inquiry, as stated by counsel for the appellee, arises upon the following question, certified by the referee to the district judge:

'Is the owner of the bond entitled to such attorney's fees on reduction of the security to money by proceedings in bankruptcy and the payment to him of the principal and interest

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