Hodgman v. Atlantic Refining Co. , 20 F.2d 949 ( 1927 )

MORRIS, District Judge.

In this stockholders’ suit against Atlantic Refining Company and Superior Oil Corporation for the benefit of the latter company, a decree was entered by this court setting aside the transactions between the corporations complained of in plaintiffs’ bill. 300 F. 590. Upon appeal the decree here entered was reversed. (C. C. A.) 13 F.(2d) 781. By the mandate it was ordered and adjudged that the decree below be “reversed, with costs, with direction to the said District Court to dismiss the bill of complaint”; that the Atlantic Refining Company recover against the appellees $76.-80 “for costs herein expended,” and have execution therefor; and that the Superior Oil Corporation recover $61.35 for like costs.

The matter now before the court has to do with the allowance of eosts in this court by the final decree now to be entered. The Atlantic Refining Company desires that that decree shall provide that it recover of the plaintiffs its disbursements of $9,566.50 for printing the transcript of record on appeal, $1,-385.50, being one-half of stenographer’s charges for the record of proceedings at the trial, and $816.35 for certifying the transcript on appeal. To these three items the plaintiffs object, contending that the allowance of costs is within the discretion of the court, and that such discretion should be exercised against the allowance of these items.

The defendant asserts, however, that notwithstanding the mandate contains no provision with respect to the eosts in this court, yet rule 29, clause 3, of the' Circuit Court of Appeals, deprives this court of any discretion and makes it mandatory that eosts be allowed the appellants. This clause provides:

“In cases of reversal of any judgment or decree in this court costs shall be allowed to the plaintiff in error or appellant, unless otherwise ordered by the court. The cost of the transcript of the record from the court below shall be taxable in that court as costs in the case.”

Rule 29 deals with costs in the court above, and not with costs in this court, save that the last sentence of clause 3 provides that the cost of the transcript shall constitute an item of costs in the court below and not in the court above. It was in effect so determined by the Circuit Court of Appeals of the Second Circuit in Romeike v. Romeike, 251 F. 273, 275, in which, the decree of the court below in favor of the plaintiff having been reversed, with costs, that court, holding it had no discretion, refused to consider the defendant’s application for eosts, and simply dismissed the bill. On petition to direct the District Court to allow defendant’s application for eosts, the Circuit Court of Appeals said :

“ * * * In suits in equity and admiralty, costs being discretionary, when the decree of the court below is reversed or modified by this court, with costs, the eosts of this court are meant; the court below having a discretion as to the costs there, unless the mandate otherwise provides.” *

The first sentence of clause 3 of rule 31 of the Second Circuit is identical with the first sentence of clause 3, rule 29, of this circuit. Again, in Jourolman v. East Tennessee Land Co., 85 F. 251, the Circuit Court of Appeals of the Sixth Circuit said:

“By the decree of this court the reversal was in terms with costs, without more, and this was the form of the mandate. This left the question of the costs in the court below subject to the power of that court.”

Clause 1 of rule 27 of that court was substantially the same as the first sentence of clause 3, of rule 29 as quoted above. As the mandate of the Circuit Court of Appeals did not, in the case at bar, deprive this court of its discretion in the matter of the allowance of the eosts in this court, that discretion still exists. That discretion, however, is not an arbitrary one. In its exercise this court must be governed by the rules pertaining thereto.

The general principle is that in suits in equity, as in actions at law, the prevailing party is entitled to costs. Gold v. Gold, 187 F. 273 (C. C. A. 2); Blassengame v. Boyd, 178 F. 1, 21 Ann. Cas. 800 (C. C. A. 4); Wostfeldt v. North Carolina Min. Co., 377 F. 132 (C. C. A. 4). This principle must be bore applied, unless the losing party can show that equity and good conscience require a different judgment. Peirsoll v. Elliott, 6 Pet. 95, 8 L. Ed. 332; Westfeldt v. North Carolina Min. Co., supra. The reasons advanced by the plaintiffs to move the court to exercise its discretion In favor of the plaintiffs are that the suit was brought in good faith by minority stockholders of Superior Oil Corporation, and that their claim that injuries had been done their company by the Refining Company was sustained by this court; that the Refining Company, by its failure to produce documents at the trial, made necessary the calling of a large number of witnesses by the plaintiffs and a consequent increase in the length of the record; that the Refining Company incumbered the record with immaterial and irrelevent documents; that throughout the trial the Refining Company endeavored to prevent the plaintiffs from obtaining and presenting to the court evidence touching the transactions complained of; and that the new question of law touching the no par value stock justified the action of the plaintiffs in instituting the suit, regardless of its outcome. Hiner v. C. G. Aldrich Co. (D. C.) 255 F. 785; Westfeldt v. North Carolina Min. Co., supra; Grattan v. Appleton, 3 Story, 755, Fed. Cas. No. 5707.

While it seemed to me upon final hearing that not only had the suit been instituted in good faith, but that the plaintiffs had satisfactorily sustained by the evidence the causes of action alleged, yet the clear and unanimous view of the Circuit Court of Appeals that the Refining Company was blameless deprives, I think, the first assigned reason for not allowing the Refining Company all its costs, of any weight. The last reason is likewise removed for the Court of Appeals found the question of law to have been already satisfactorily settled.

The remaining grounds assigned are, however, I think, well taken. It is true that the plaintiffs, as well as the defendants, added much unnecessarily to the length of the record. The fault .of the Refining Company in this regard was, however, I think, much greater, for the facts were in its possession, while the plaintiffs were minority stockholders seeking to uncover and establish those things which, upon information, they believed to be facts. Again, facts which should have been readily available to the plaintiffs were, because of defendant’s attitude, obtained by them only with the greatest difficulty and at the expense of a greatly lengthened-record. It seems inequitable that the Refining Company should be permitted to recover as costs from the plaintiffs ’the added expense for obtaining, certifying, and printing the record thus lengthened.

Consequently the Refining Company will be permitted, by the final decree now to be entered, to recover from the plaintiffs only three-fourths of its disbursements for certifying transcript on appeal, stenographer’s charges, and printing of record.