Case ID: pr-fed_7/html/0101-01.html
Source: Caselaw Access Project
Author: {"author": "HamiltoN, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

H. V. GROSCH v. CENTRAL VANNINA, INC.
    San Juan,
    Equity,
    No. 945.
    On Jtjbisdiction and Dismissal.
    Practice — Motion as to Jurisdiction.
    1. It is never too late to raise the question of jurisdiction, Rut when once raised and decided the court will not usually entertain it again.
    Jurisdictional Defects — Demurrable Defects.
    2. Jurisdiction relates to the power of the court, the allegations as to the suit, the power over the parties. None of these can be supplied by amendment. The omission of facts or careless stating of facts are matters of demurrer or motion, and can be amended.
    Debt — Trial by Jury.
    3. Under the 7 th Amendment to the Federal Constitution a debt cannot be tried in any form on the equity side of the Federal court.
    Equity — Creditors’ Bill.
    4. The jurisdiction as to creditors’ bills is still in a formative stage. It proceeds upon the principle of marshaling the different assets of a trust fund for the benefit of creditors.
    Same — Dismissal.
    5. The court will grant a motion for dismissal joined by both parties only if the expenses, whether of court or receivership, have been satisfied.
    Same — Receivers of Another Court.
    6. Where a court in possession by receivers judicially knows that receivers have also been appointed by another court, it will not, upon the dismissal of the ease, turn the property over to the defendants, but will await application by the other receivers.
    Opinion filed May 27, 1914.
    
      Mr. Francis N eagle for complainant.
    
      Messrs. Francis H. Dexter and Damian Monserrat, Jr., for defendant.
   HamiltoN, Judge,

delivered the following opinion:

1. This cause comes up upon what is called a motion to dismiss for want of jurisdiction. It has already been argued upon a plea to the jurisdiction, and is brought up' anew on the theory that the matter of jurisdiction can always be raised. This is true in one sense. It is never too late to raise the question of jurisdiction, and tbe court may ex mero motu raise tbe question for itself. But there is a limitation to tbe number of times •one can exercise tbe right. As this case involves a peculiar •state of affairs, tbe court has entertained this motion; but it is not to be regarded as a precedent. Questions of jurisdiction should be raised at an early stage by a plea or a motion, and thereafter tbe same question will not be entertained, no matter by whom raised.

2. It is further to be remarked that tbe questions of juris'dictional and demurrable defects are often confounded. It would seem that such is tbe case at present. Any defect may lead to tbe dismissal of a cause, since, if the pleading is defective, tbe merits cannot be passed upon. But a defect of jurisdiction is a very different thing from a mere defect of allegation. Tbe first is amendable and tbe second is not.

Jurisdiction is generally said to concern two things,- — tbe subject-matter and tbe person. Perhaps it would be more correct to say it relates to three things. First, tbe power of tbe court itself as declared by law. Second, tbe allegations of tbe original pleading, which must show facts bringing the plaintiff within "the scope of tbe powers of tbe court. And third, there is tbe right of tbe court over tbe parties, particularly over tbe defend.ant. These three elements are fundamental, and are therefore ■called jurisdictional. On tbe other band, tbe omission of a fact which can be supplied, or tbe careless stating of a fact which ■can be rectified, are not matters of jurisdiction, but are defects to be raised formerly by demurrer, and now by motion. There is an intermediate class of questions which are raised by a motion to dismiss for want of equity. This comes up when the case is perfect on the face of it, but the powers of the court cannot be invoked because the facts are cognizable in the first place by some other court, suck as where there is an adequate remedy at law. This class of defects cannot be called jurisdictional, particularly under the new Equity Rule 22. The jurisdiction is complete, but the party has selected the wrong forum. This defect, however, can, like a matter of jurisdiction, be raised at any stage of the proceeding, but also only when not fully raised before. The court cannot be trying the same question over and over again.

3. The matters complained of at present are of this last character. The defect alleged is that a creditors’ bill cannot be maintained in a Federal court because of the provisions of the 7th Amendment to the Constitution, which requires a trial by jury whenever that could be had at common law. The decisions are that a debt cannot in any form be tried in equity, but must go before a jury. Consequently, a court of equity cannot at the suit of a creditor permit him to prove his claim and have a writ against the defendant’s property to satisfy it. This has been remedied by legislation in many states, but only to a limited extent by the legislation of Porto Rico. Cates v. Allen, 149 U. S. 451, 37 L. ed. 804, 13 Sup. Ct. Rep. 883, 977.

4. It may very well be, however, that this does not apply to the case at bar. In the first place it has been shown to this court by clear evidence that the defendant not only admitted that it could not pay its debts, but by its proper officers passed a resolution submitting to a receivership, should any creditor bring suit for that purpose. The creditor having brought suit for that purpose, it may well be that the defendant is estopped from making a defense in this court which it does not seem disposed to make in another court, and at all events tbe allegations of tbe bill seem to develop wbat is called a general creditors’ bill, maintainable in tbe Federal court as well as in any other court. This rests fundamentally upon tbe necessity for marshaling tbe assets of a corporation which is at least temporarily insolvent, ascertaining tbe priorities of tbe creditors, all of whom must be invited in by tbe bill, and distributing tbe assets according, to these priorities. Tbe principle is one inherent in all courts of equity and does not need specific legislation. Tbe property of a corporation is a trust fund in tbe bands of its officers, first, for tbe payment of creditors and, second, for distribution among tbe stockholders. Tbe jurisdiction proceeds rather upon tbe principles of a trust than anything else, and is still in tbe formative stage. Pennsylvania Steel Co. v. New York City R. Co. 117 C. C. A. 550, 198 Fed. 737, 738.

5. Before tbe conclusion of tbe argument, however, it is now announced that tbe complainant and defendant have settled their differences. Tbe defendant has paid, the claim of tbe complainant, and they unite in asking that tbe case be dismissed. A dismissal, of course, has to be technically by tbe court, but tbe court is never unwilling to have parties adjust their disputes. Interest reipublicce ut sit finis litium. The only proviso to tbe court’s acquiescence is that tbe expenses which have been incurred by tbe litigation, whether costs of, court or expenses of receivership, must be satisfied before the decree can be final. Tbe parties profess themselves ready to comply with this reasonable requirement.

6. Tbe court being in possession by its receivers, and knowing judicially that similar claims are in course of administra■tion in tbe insular district court of San Juan, would not feel .justified in turning tbe property over to tbe defendant. It is ■conceivable that there might be some hiatus which would be improper. It will be necessary, therefore, that the Federal ■receivers, in connection with a dismissal of the case, turn the property over to the receivers of the local court. This will be provided for in the order.

An order will be entered, therefore, that upon filing the receipt of the receivers of the local court in this court, the receivers of this court are authorized to turn over all property ■of the defendant company which has come to their hands, and that thereupon this suit shall stand dismissed and the bond of the receivers heretofore given shall be discharged.