Case ID: pr-fed_11/html/0245-01.html
Source: Caselaw Access Project
Author: {"author": "IíamiltoN, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BANCO COMERCIAL DE PUERTO RICO, Complainant, v. COMPAÑIA AZUCARERA DE LA CAROLINA, JOSÉ D. RIVERA, AND MANUEL V. DOMENECH, as Receivers for the Compañia Azucarera de la Carolina, Dfts. SOBRINOS DE EZQUIAGA, Interveners.
    Equity,
    No. 1022.
    ANOillary Foreclosure.
    Equity — Pleading.
    1. A bill must contain sufficient allegation directly or by reference to make out a complete case.
    Bankruptcy Court — Diverse Citizenship.
    2. Where the litigation concerns property in custodia legis it makes no difference whether the parties interested are residents dr nonresidents. The custody of the res draws to it all controversy connected with the res.
    Bankruptcy — Foreclosure before Adjudication.
    3. Where property is in' the custody of the bankruptcy court by receivership before adjudication the bondholders may be permitted by the court to foreclose their mortgage.
    Equity — Double Beceivership.
    4. Except in special cases the court will not grant a second receivership where property is already in its custody by receivers,
    Opinion filed April 25, 1919.
    
      Mr. O. Goll Cuchi for defendants.
    
      Messrs. J. H. Brown and A. ¿Sarmiento for complainants.
    
      
      Mr. F. H. Dexter for interveners.
   IíamiltoN, Judge,

delivered the following opinion':

The property of the defendant being in the custody of this court, under an application by’creditors for an adjudication of bankruptcy, the plaintiff herein, trastee under a mortgago given by the defendants, obtains leave to file a bill to foreclose the mortgage. There is also an intervening creditor, who files a motion to dismiss the bill for lack of jurisdiction, alleging that both plaintiff and the principal defendant are Porto Pican corporations. The case has been submitted on this motion.

1. How far such a bill may be entertained depends in part upon its allegations. Each .suit must contain enough directly, or by reference, to make out a complete case. In the case at bar this would seem to have been done. The bill not only seeks to foreclose the mortgage, but shows that the property covered -fry the mortgage is in custody of this court by its receivers pending adjudication of the issue of bankruptcy. The case is not merely one of foreclosure, but contains enough allegations to show that it concerns properties in bankruptcy.

2. The point relied.upon in the motion is that there is no diverse citizenship between the parties, both plaintiff and de^ fendants being Porto Picans, while this court has original jurisdiction only where one side is not domiciled in Porto Pico. This, however, is not an original bill. Its allegations show that the property which would be sold upon foreclosure, if granted, is in custodia legis. There is no question that when a court, and a fortiori a court of bankruptcy, takes charge of property, no one can take any steps affecting the title or ownership thereof without permission of tbe court. In tbe case at bar, for instance, it was necessary for tbe plaintiff to get permission to file bis bill. Tbis being so, it would be idle to ast diversity of citizenship. It is just as much a contempt for anyone domiciled in Porto Pico to interfere with tbe custody of tbis court' as for a foreigner to do so. Indeed, if there is any distinction, ■ it might be worse for someone on tbe spot to act rather than a casual stranger. At all events tbe rule is settled that when it comes to ancillary proceedings, citizenship or residence is immaterial. Tbe custody of tbe res draws to it all controversy connected with the res. And it is not necessary, provided permission be bad, that tbe controversy.be conducted by petition in tbe main suit, unless tbe controversy is directly connected with tbe main issue. That is not tbe case here. Bankruptcy •administration may go on quite apart from tbe foreclosure of tbe mortgage in question. Foster, Fed. Pr. 5th ed. §§ 51 and 55. The jurisdiction of a court of bankruptcy is exclusive of all other courts so far as questions as to tbe possession or administration of tbe property in custodia legis are concerned. Loveland, Bankr. § 31.

3. The ease at bar is very unusual in that receivership and now even foreclosure come up between the petition in bankruptcy and tbe adjudication. It is quite possible that tbe defendant may not be declared bankrupt. Indeed the defendant has taken steps to raise tbe issue of insolvency vel non. Tbe defendant has bad tbis issue postponed from month to month and does not seem disposed to press it during tbe grinding of tbe present crop of sugar. The fact seems to be that tbe receivers of tbis court are managing tbe crop and manufacture of tbe sugar better than tbe defendant itself bad been doing. And the defendant is therefore quite willing to have this state of affairs continued.

However, this situation may or may not be satisfactory to the bondholders. It may well be that the trustee does not care to have the situation thus prolonged. Certainly upon default the trustee has the right to proceed immediately without waiting for any proceeding in bankruptcy or otherwise, provided, of course, he obtains permission from the proper court. There is mo doubt, therefore, of the trustee’s right to file this bill for foreclosure. What would be the outcome if the issue of insolvency were decided in favor of the defendant, it would be premature to discuss. Attention may be called, however,-to the fact that as a general rule jurisdiction and other rights of 'suitors depend upon the facts existing at the time of filing of suit. All subsequent proceedings relate back to the con-' dition of .affairs at that time.

4. The bill properly contains a prayer for the appointment of receivers.. It may be well to say in passing that this would be granted, if at all, only at the final hearing, unless special. application and proceedings were had during the progress of the case. In other words, this court is not going to appoint one set of receivers in the main case and another set of receivers in an ancillary proceeding, unless there is some overwhelming reason, which does not now appear. If there were need for a second appointment it' would probably be of those who are already in charge. There is so far no such application.

It follows.that the motion to dismiss must be denied.

It is so ordered.