McINTOSH v. WARD et al., 159 F. 66

BAKER, Circuit Judge (after stating the facts as above). Appellees insist that nothing is involved but a matter of costs, and therefore that the appeal will not lie. The assertion quite evidently begs the question. The record presents the reviewable inquiry whether certain items that are embodied in the final judgment against appellant are or are not taxable costs as between the parties. By the ancient common law items of expense in the conduct of litigation, paid or incurred by one party, were not allowable in the judgment against the other. Such allowances were of statutory origin.

Our statute of 1853 (sections 823 and 983, Rev. St., [U. S. Comp. St. 1901, pp. 632, 706]) provides what shall, as costs, “be included in and form a portion of a judgment or decree against the losing party.” And in Trustees v. Greenough, 105 U. S. 527, 26 R. Ed. 1157, it was said that costs as between party and party are confined to the matters allowed by the fee-bill act. The challenged items are not within the statute; but appellees claim that the Circuit Court as a court of equity had power to include them in the judgment as costs.

Though at law the losing party is adjudged to pay to his adversary the latter’s taxable costs laid out and expended in the litigation, in equity the chancellor has a broad discretion respecting the allowance and apportionment of such costs between the parties. Courts of equity also have a wide discretion in making and controlling allowances from the fund for services and expenses in conserving and administering a fund that has been brought into court.

And when the appointment of a receiver is determined to be void, or when the fund proves insufficient, it has been held that a court in the exercise of its equity powers may compel the party who procured the receiver to be appointed to pay into court a sum sufficient to meet the expenses of the receivership. Gluck & Becker on Receivers (2d Ed.) pp. 510, 541; Smith on Receivers, pp. 587, 588; Beach on Receivers (2d Ed.) §§ 773, 774.

But. in our opinion, the discretion of a court of equity does not authorize it to require one party (and the sureties on his cost bond) to pay to the other, under the name of costs, items paid from the fund for services and expenses in administering a fund properly in court, nor any other items not within the fee-bill act. A theory is advanced that, though there be no liability on the cost botid, a final adjustment of the equities of the case warranted the inclusion of the disputed items.

The theory is that because the suit and the receivership were made necessary by appellant’s wrongful and fraudulent conduct, because appellees had a lien upon the assets for the equalization of the partners’ accounts, and because the fund was not sufficient for that purpose and had been reduced by the allowances for the receiver’s compensation and expenses, therefore appellees were entitled to judgment against appellant for the amounts so taken from the fund.

All the equities between the parties from the beginning of the partnership down to November 29, 1899, when the receiver was appointed, were determined and adjusted in the accounting. The bill charged appellant with fraud and misconduct. Eor damages on account of all breaches of duty to the firm he was answerable in the accounting. Bates on Partnership, § 780; Bindley on Partnership (2d Ed.) p. 305 et seq. Under the first decree (which in this respect has now become conclusive on both parties) all appellant's wrongs and frauds upon the firm were merged in the account as stated.

After November 29, 1899, the business was in the hands of the court. No injury to assets or business by appellant after that date was claimed. For depreciation under the receiver’s care and management appellant was not responsible. So the court could not, on any principle of law or equity, give to appellees further damages for the merged wrongs and frauds by adding to the account the amount the court had been expending from the partnership fund for conserving and carrying on the partnership business.

In the respects complained of, the decree must be reversed at appellees’ costs, and the cause remanded to the Circuit Court. Reversed.