People of Sioux County, Neb v. National Surety Co

• Decision Date: 20 February 1928
• Docket Number: No. 196,196
• Citation: 48 S.Ct. 239,72 L.Ed. 547,276 U.S. 238
• Parties: PEOPLE OF SIOUX COUNTY, NEB., v. NATIONAL SURETY CO
• Court: U.S. Supreme Court

276 U.S. 238

48 S.Ct. 239

72 L.Ed. 547

PEOPLE OF SIOUX COUNTY, NEB.,

v NATIONAL SURETY CO.

No. 196.

Argued Jan. 19, 1928.

Decided Feb. 20, 1928.

In view of the state court's construction of Comp. St. Neb. 1922, § 6193, county may recover from surety of insolvent depository full amount of its deposit after bank's insolvency, not exceeding amount of bond, even though such deposit exceeded 50 per cent. of authorized capital of depository, contrary to the statute.

In action against surety on bond of depository of county moneys, surety held liable for attorneys' fees, to be included in judgment, under Rev. St. U. S. § 914 (28 USCA § 724; Comp. St. § 1537), under provision for allowance of such fees as costs in Comp. St. Neb. 1922, § 7811, notwithstanding that costs in federal courts are regulated exclusively by Rev. St. U. S. §§ 823, 824 (28 USCA §§ 571, 572), since such allowance is not 'costs' in ordinary sense.

For purpose of fixing reasonable sum for attorney's fees, for which surety on bond of depository of county funds is liable in action on bond under Comp. St. Neb. 1922, § 7811, regard should be had for amount substantially involved.

Mr. Charles S. Lobingier, of Washington, D. C., and Mr. Edwin D. Crites, of Chadron, Neb., for petitioner.

Mr. Edwin G. Davis, of Washington, D. C., for respondent.

Mr. Justice STONE delivered the opinion of the Court.

The respondent, a surety company, as surety, and the First National Bank of Harrison, Neb., 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 per cent. 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 in excess of $25,000, which was one-half of the authorized capital of the bank. National Surety Co. v. Lyons (C. C. A.) 16 F.(2d) 688. This court granted certiorari. 274 U. S. 729, 47 S. Ct. 587, 71 L. Ed. 1319.

The Circuit Court of Appeals took the view that the Nebraska statute, printed in the margin,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, 160 N. W. 894; Blaco v. State, 58 Neb. 557, 78 N. W. 1056; In re State Treasurer's Settlement, 51 Neb. 116, 70 N. W. 532, 36 L. R. A. 746; State ex rel. Davis v. People's State Bank of Anselmo, 111 Neb. 126, 196 N. W. 912, 198 N. W. 1018.

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 per cent. 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, 45 S. Ct. 543, 69 L. Ed. 1050; Bauserman v. Blunt, 147 U. S. 647, 13 S. Ct. 466, 37 L. Ed. 316. If, as the state court held, the statute is to be construed as not 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 section 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 (28 USCA §§ 571, 572), 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, 282, 10 S. Ct. 812, 34 L. Ed. 112; The Baltimore, 8 Wall. 377, 388, et seq., 19 L. Ed. 463. Compare Ex parte Peterson, 253 U. S. 300, 314-319, 40 S. Ct. 543, 64 L. Ed. 919.

Both in an earlier case, Globe Indemnity Co. v. Sulpho-Saline Bath Co. (C. C. A.) 299 F. 219, certiorari denied 266 U. S. 606, 45 S. Ct. 92, 69 L. Ed. 464 (see, also, Spring Garden Insurance Co. v. Amusement Syndicate Co. (C. C. A.) 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 (page 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, 23 S. Ct. 565, 47 L. Ed. 821; Missouri, Kansas & Texas Ry. v. Harris, 234 U. S. 412, 34 S. Ct. 790, 58 L. Ed. 1377, L. R. A. 1915E, 942; Chicago & Northwestern Ry. v. Nye Schneider Fowler Co., 260 U. S. 35, 43 S. Ct. 55, 67 L. Ed. 115; Fidelity Mutual Life Ass'n v. Mettler, 185 U. S. 308, 22 S. Ct. 662, 46 L. Ed. 922, and they have been given effect in suits brought in the federal courts, Fidelity Mutual Life Ass'n v. Mettler, supra; Iowa Life Insurance Co. v. Lewis, 187 U. S. 335, 23 S. Ct. 126, 47 L. Ed. 204; Home Life Insurance Co. v. Fisher, 188 U. S. 726, 23 S. Ct. 380, 47 L. Ed. 667; Hartford Fire Insurance Co. v. Wilson & Toomer Fertilizer Co. (C. C. A.) 4 F.(2d) 835, certiorari denied 268 U. S. 704, 45 S. Ct. 639, 69 L. Ed. 1167.

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 Ass'n v. Mettler, supra, at page 326.

The present statute, printed in the margin,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 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, 151 N. W. 942; Id....