Case Name: Graham v. Banco Territorial y Agrícola et al.
Court: Supreme Court of Puerto Rico
Jurisdiction: Puerto Rico
Decision Date: 1904-02-23
Citations: 5 P.R. 345
Docket Number: No. 65
Parties: Graham v. Banco Territorial y Agrícola et al.
Judges: Chief Justice Quiñones and Justices Hernández and Mac-Leary concurred.
Reporter: Puerto Rico Reports
Volume: 5
Pages: 345–363

Head Matter:
Graham v. Banco Territorial y Agrícola et al.
Appeal from the- District Court of San Juan.
No. 65.
Decided February 23, 1904
Mortgage — Personal Property Situated Upon the Mortgaged Estate. — When it bas been declared by final judgment that certain personal property situated upon the mortgaged estate is subject to the mortgage, and that the attachment of the saíne should proceed until payment is made by the creditor, such a declaration involves an absolute denial of the right of the owner of said personal property to claim the same from the execution creditor.
Obligation — Fraud—Negligence or Delay.' — In order that articles* 1101 and 1108 of the old Civil Code may be applicable, a pre-existing obligation between the parties is necessary, which has been agreed upon by any of said parties, or that any of the same may have been guilty of fraud, negligence, or delay in the fulfillment thereof.
Id. — Act or Omission — Indemnity.—The person who by an act or omission causes an injury to another, when there is fault or negligence, is,obliged to repair the damage so caused.
Damage — Costs.—A person who demands a more or less clear right before the courts does not, properly speaking, commit any damage, and the imposition of costs is the only corrective which is proper when the unwarranted, claims are wholly rejected.
Creditor — Interest—Real and Personal Action. — Such part of the interest which the creditor is unable to recover from the person obligated in a real mortgage action, may be claimed in a personal action, being considered with respect thereto, in general assignment proceedings, as a mortgage creditor protected by a public document.
Counter-claim. — The' fact that the owner of personal property situated upon a mortgaged estate, and subject to the same mortgage, attempts to assert his rights to such property in executory proceedings, although unsuccessfully, thereby preventing the execution creditor from disposing of the proceeds of a sale of the property, does not constitute a proper subject of counterclaim.
STATEMENT OF THE CASE.
This is a complaint in intervention of better right instituted in the court of this district by Bobert Graham y Fraser, a resident of Ponce, engineer, represented in this Supreme Court by Jacinto Texidor, attorney, against the ‘ ‘ Banco Territorial y Agrícola, ’ ’ established in this city, represented by Juan Guzmán Benitez, attorney, and José Ricardo Carazo, a resident of Bayamón and an agriculturalist, in default, which case is pending before ns on appeal in cassation, now ordinary appeal, taken by Robert Graham y Fraser from the judgment delivered. Said judgment reads as follows :
“Judgment. — In the city of San Juan, Porto Rico, December ninth, one thousand nine hundred and two. In the matter of a declaratory action between Robert Graham y Fraser, a resident of Ponce, engineer, represented by Herminio Diaz Navarro, attorney, and afterwards by Jacinto Texidor y Alcalá del Olmo, attorney,as complainant, and the ‘Banco Territorial y Agrícola’ established in this city, represented by Juan de Guzmán Benitez, attorney, and José Ricardo Carazo, a resident of Bayamón, agriculturalist, who was in default, as defendants, upon an intervention of better right to the collection of the value of the property attached in executory proceedings had between the last-mentioned parties.
“Robert Graham y Fraser brought an action in intervention of better right against the ‘Banco Territorial y Agrícola’ and Jose "Ricardo Carazo, praying that it be declared by the court that only the machinery belonging to Graham, included in the mortgage of the estate ‘Carmen’ and machinery thereof, made in favor of the ‘Banco Territorial y Agrícola,’ be declared liable for a sum proportionate to the value of the bank’s claim and costs, and that said Graham had a better right over the resulting balance, as to said machinery, with costs against any one opposing his claim thereto.
“He bases his right of action on the fact that by public document of June 28, 1896, Carazo acknowledged that he owed the ‘Banco Territorial y Agrícola-’ sixteen thousand pesos and interest accrued, aggregating twenty-four thousand two hundred and eleven pesos and twenty centavos, which he engaged to pay in semi-annual installments, it being stipulated that in case of default in the payment of two successive installments, the whole debt would be considered as due; that to insure the fulfillment of said obligation he mortgaged the estate ‘ Carmen, ’ of Bayamón, with all its appurtenances and such others as might subsequently be incorporated therein; and the bank instituted foreclosure proceedings for sixteen thousand four hundred and ten pesos, which were afterwards substituted by execution proceedings provided by the Law of Procedure; that, the writ of execution having issued, an attachment was levied on the mortgaged estate and machinery installed thereon before and after the mortgage; that on January 2, 1900, Graham had instituted an action in intervention of ownership of the machinery, based on the public document of May 31/ 1897, which was filed, judgment being rendered in cassation declaring that the machinery in controversy belonged to Graham but was subject to the liability of the mortgage credit held by the bank, without specifying the amount for which it was liable, and pursuant to this decision the bank, to which the estate ‘Carmen’ had been awarded for the sum of eight thousand eighty-one pesos and eighty centavos, had instituted execution proceedings against the machinery for the balance due, thus making it liable for the whole debt in the same manner as the estate ‘Carmen.’
“The legal grounds of the complaint are: That aforesaid judgment in cassation dealt with two distinct properties belonging to different owners, namely, the estate ‘Carmen,’ belonging to Carazo, and the machinery owned by Graham, and it was necessary to determine the limit of the encumbrance resting upon them; that between the bank and Carazo there was a third party, Graham, and the scope given to the encumbrance on the machinery was opposed alike by articles 119 and 121 of the Mortgage Law, by the judgment of the Supreme Court of November 9, 1881, and by the decision of the Direction of Registries of April 18, 1876, and September 22, 1882; that the Supreme Court, in deciding that the machinery belonging to Graham was subject to the mortgage, did not state in what amount, and therefore the distribution should be made as called for by paragraph 2 of article 164 of the Regulations for the execution of the Mortgage Law, and the value of the estate and of the machinery as specified in the mortgage deed and that of Graham’s credit being given, the proper thing to do is to apportion these amounts, Graham being entitled to the balance; articles 1530 and 1540 of the Law of Civil Procedure being applicable to the ease.
“The ‘Banco Territorial y Agrícola’ asked that the complaint be dismissed with costs, alleging the following facts: That it accepts the facts as stated, adding thereto that the compulsory proceedings for the recovery of the outstanding amount due the bank, and inter est thereon and costs, were directed against the machinery. The grounds of law were: That if the Supreme Court had declared that Graham’s machinery was subject to the same mortgage which encumbered Carazo’s estate in favor of the bank, and ordered that the execution proceedings against it be prosecuted, it was because the estate and machinery, including that of Graham, formed a single body irrespective of the fact that Graham and Carazo were two distinct persons; that Graham is not a third party, but an execution debtor, and he cannot be a party in the execution proceedings and a third party in the incidental issue, for an execution debtor cannot interpose an intervention of better right without changing his character and becoming a creditor, when he had before claimed ownership; that the intervention of better right presupposes a credit which does not exist, since Graham is owner of the machinery, and not Oarazo’s creditor; that even were it true that the estate and Graham’s machinery formed two distinct bodies, this would result after constituting the mortgage, and there is no ground for invoking articles 119 to 121 of the Mortgage Law, which prescribe the division of the encumbrance when several estates are mortgaged together to satisfy one debt only, because if the mortgaged estate is divided into two or more parts, the mortgage debt shall not be distributed among them, unless the credit- or and debtor voluntarily agree to do so, according to article 123; and the plaintiff should be condemned to pay the costs.
“In additional matter set up in its answer to the complaint the bank brought forward a counter-claim against the plaintiff for losses and damages, based upon the fact that it had appeared both at the execution proceedings and at the intervention of ownership by Graham, and the latter’s machinery being appraised and a day set for the public sale, the same was held on the 10th of February, 1902, when it was awarded to a bidder who offered four thousand five hundred and eighty dollars — two-thirds of the appraised value of said machinery — the bidder being ordered to be put in possession thereof upon payment of the price; that the intervention of better right having been presented by Graham, the money was deposited in the ‘Banco Territorial y Agrícola,’ as shown by the vouchers on file with the record, and thus the bank was deprived of disposing of its money by reason of the intervention, which it was beyond, its power to prevent; that the bank had presented the liquidation of the outstanding portion of its credit -without calculating costs and interest, and credited the portion of the four thousand five hundred and eighty dollars it was entitled to receive as mortgage creditor, exclusive of costs, and what remained outstanding formed part of the credit giving rise to these proceedings, on which an interest of nine per cent, per annum had been stipulated. As grounds of law articles 1101 and 1108 of the Civil Code were cited, and costs asked to be imposed upon plaintiff for his persistency in the prosecution of his claim. Defendant prayed that judgment be rendered condemning Graham to pay the bank as damages and losses, nine per cent, interest on the sum the latter was entitled to recover out of the four thousand five hundred and eighty dollars, proceeds of the sale of the machinery, to be reckoned from the' date on which said sum had been duly established in the proceedings.
“Notice of the counter-claim having been duly served upon plaintiff, the default was entered and a day set for the presentation of evidence, which, at the request of the plaintiff, was postponed to another day, when the parties appeared and offered such evidence as was deemed most pertinent to their respective claims.
“The proofs submitted by the plaintiff were: The executory proceedings instituted by the bank against Carazo, and the intervention of ownership interposed by Graham against said proceedings; the deed executed May 31, 1897, by José R. Carazo and Robert Graham before Mauricio Guerra, wherein it is stated that the former had purchased from the latter and set up on the estate ‘Carmen,’ in Bayamón, the machinery therein specified, for the sum of two thous- and three hundred and seventy-five pounds sterling, part of which had been paid by Carazo, leaving a balance of one thousand three hundred and twenty-five pounds at the date of the deed, which the ven-dee agreed to pay to the vendor with interest at twelve per cent, on May 31, 1898, Graham to retain the ownership of said machinery until the debt had been paid in full; the judgment rendered by the Supreme Court of the Island in the matter of the intervention of ownership instituted in aforesaid complaint, on appeal in cassation taken by the bank, annulling the judgment appealed from, and ordering the attachment of the machinery to be dissolved, and said property left at the disposal of the third party; and the one rendered thereafter, which, while affirming the ownership .of the machinery in favor of Graham, declared that said machinery was subject' to the same mortgage encumbering the estate ‘Carmen,’ on which the machinery is installed, in favor of the ‘Banco Territorial y Agrícola,’ and instead of dissolving the attachment on said machinery, ordered the execution against tbe same to proceed until the termination of the compulsory proceedings and payment of the sum due to the execution creditor, without prejudice to the rights of Graham against Carazo.
“The proofs of the defendant consisted of the proceedings in intervention, including the judgment of the Supreme Court, mentioned in the foregoing finding, and a certificate of the court clerk to the effect that in the executory proceedings instituted by the bank against José Ricardo Carazo, now against Robert Graham, after awarding to the bank Carazo’s estate, without including Graham’s machinery, there remained an unpaid balance, as per liquidation made March 10, 1902, amounting to four thousand one hundred and fifty-eight pesos and seven centavos, being capital and interest besides costs, for which reason a request was made for a continuation of the compulsory proceedings against Graham’s machinery, the same being sold at public sale and the proceeds deposited in aforesaid bank at the disposal of the court, by reason of the intervention of better right interposed by Graham.
■ “A day being set for the hearing, both parties pleaded their respective claims, after which Presiding Judge Juan Morera Martínez rendered judgment as follows:
“By executory judgment, Graham’s dominion over the machinery placed on estate ‘ Carmen, ’ which is subject to the same mortgage encumbering the estate in favor of the ‘Banco Territorial y Agrícola,’ is declared; and instead of dissolving the attachment levied on aforesaid machinery, the execution against it is ordered to go on until the termination of the compulsory proceedings and payment of the claim of the execution creditor, as Graham is thereby barred from any claim against the bank in the attached property, the action instituted by him shows bis persistency in litigation.
“If any doubt could have been entertained by Graham, the reservation of rights made in his favor against Carazo should have dispelled it.
“The obstacles experienced by the bank through Graham’s action, which prevented the former from receiving in time the money deposited, justifies the counter-claim.
“We adjudge that we should declare and do declare that the counter-claim presented by the bank will lie, and that the intervention <of better right instituted by Graham is not tenable. We therefore condemn the plaintiff to pay the ‘Banco Territorial y Agrícola’ nine per cent, interest on the portion recoverable by it out of the sum of four thousand five hundred and eighty pesos proceeding from the sale of the machinery, to be reckoned from the date on which said sum may be established in the proceedings, with costs.
“Thus by this our decision, finally adjudging, do we find, order and sign. Juan Morera Martínez, Juan Hernández López, Angel García. ’ ’
From the foregoing decision Robert Graham y Fraser took an appeal in cassation for error of law, and the record having been forwarded to the Supreme Court, said appeal was heard in conformity with the proceedings prescribed by the act of the Legislative Assembly of March 12, 1903.
The papers having been submitted to the parties, a day was set for the hearing at which counsel for appellant declared that his client accepted the judgment appealed from, so far as the dismissal of the intervention of better right was concerned, but opposed it as to the declaration upholding the counter-claim presented by the “Banco Territorial y Agrí-cola.”
The latter, in its oral argument, sustained the grounds of aforesaid judgment, while José Ricardo Carazo was considered in default throughout the whole proceeding.
Mr. Texidor, for appellant.
Mr. Guzmán Benitez {Juan), for respondent.

Opinion:
Mr. Justice Figueras,
after making the above statement of facts, delivered the opinion of the court.
The findings of fact and only the first and second conclusions of law are accepted.
The only question to be decided by this court is whether the counter-claim presented by the "Banco Territorial y Agrícola" should be admitted or not; and in case it should be declared to lie, condemn Robert Graham y Fraser to pay, by way of indemnity for losses and damages, nine per cent, interest, on the sum the bank is entitled to recover ont of the fonr thousand five hundred find eighty dollars from the sale of the machinery, to be reckoned from the date when said sum, namely, the balance in the bank's mortgage credit with interest agreed upon, may be determined in due form.
The claim to said indemnity is derived from the fact that Robert Graham y Fraser, by interposing first an intervention of ownership which was dismissed, and then one of better right in the execution proceedings instituted against the machinery, had prevented the bank from disposing of the money it had on deposit, which circumstance it could not avoid, being a lawful consequence of the last mentioned intervention.
In support of aforesaid claim articles 1101 and 1108 of the old Civil Code are cited, but these provisions imply a prior obligation, and in the present case it does not appear that between Robert Graham y Fraser and the "Banco Territorial y Agrícola" there existed any which had been violated by the former or in the fulfillment whereof he had been guilty of fraud, negligence or delay, for which reason the cause giving rise to the losses and damages claimed is lacking.
The application of article 1902 of aforesaid Code would be more to the purpose in the present case, inasmuch as it provides that a person who, by an act or omission, causes damage to another when there is fault or negligence shall be obliged to repair the damage done; but then it would be necessary to analyze the acts executed by Graham and determine whether they involve the negligence or guilt mentioned in said legal provision, and we would arrive at the conclusion laid down in the decisions of the Supreme Court of Spain, especially in its decision of June 27, 1896, to the effect that "he does not properly consummate a damage who confines himself to demanding a right, more or less clear, before the courts of justice, the imposition of costs being the only corrective applicable in each particular case, when claims not established are dismissed."
Nor has the existence of damages been established, because there can be no doubt that the sum deposited by reason of the intervention of better right interposed by Graham secures the mortgage credit and interest agreed upon, and, moreover, article 148 of the Mortgage Law prescribed that such part of the interest, which the creditor cannot demand in a foreclosure suit, he may claim in a personal action, being considered with regard thereto, if there be general assignment proceedings, as a creditor protected by a public document; and this being so, the bank has also a clear right of action to recover at the proper time the interest that may be due it from José Ricardo Carazo, and if it recovers said interest, it will hot then have sustained any loss by reason of the mortgage loan entered into with the latter.
On the strength of the foregoing reasons, the counter-claim for the losses and damages referred to is improperly interposed.
Under rule 63 of General Orders No. 118, costs shall always be paid by the litigant who loses his case on all points, and if in other cases the court must give an equitable decision, according to the same rule, it is logically to be inferred that when the claims of both parties absolutely fail to succeed, as happens in the present ease, each of them should pay the costs incurred by himself.
In view of the legal provisions cited in this judgment, articles 358, 360 and 371 of the Law of Civil Procedure, and the act of the Legislative Assembly of March 12, 1903, we adjudge that we should declare and do declare that the inter vention of better right interposed by Robert Graham y Fraser to recover Ms credit in preference to others will not lie. It is also declared that the counter-claim set up against the latter by the "Banco Territorial y Agrícola" for losses and damages does not lie; without special imposition of costs in either proceeding, the judgment appealed 'from being affirmed where in conformity herewith, and reversed where not.
Chief Justice Quiñones and Justices Hernández and Mac-Leary concurred.
Mr. Justice Sulzbacher did not sit at the hearing of this case.