Case Name: THE SPOOL COTTON CO. v. GANDIA ET AL.
Court: United States District Court for the District of Puerto Rico
Jurisdiction: United States
Decision Date: 1920-07-06
Citations: 12 P.R. Fed. 5
Docket Number: No. 1052
Parties: THE SPOOL COTTON CO. v. GANDIA ET AL.
Judges: 
Reporter: Porto Rico Federal Reports
Volume: 12
Pages: 5–9

Head Matter:
THE SPOOL COTTON CO. v. GANDIA ET AL.
San Juan,
Equity,
No. 1052.
Opinion filed July 6, 1920.
Mr. II. G. Molina for plaintiff.
Mr. J osé A. Povenivd for defendant.

Opinion:
Hamilton, J udge,
delivered the following opinion:
1. The motion socks to dismiss because under the Porto Pican law a partnership is considered a legal entity, and therefore the partners should not be joined. Code of Commerce, 116. This, however, is a suit in equity and there may he proper parties as well as necessary parties. There seems to he no impropriety in joining the partners with the firm. It has been hold in this court, moreover, time where certain persons are named as doing business under a certain name the suit is rcalb? against the individuals. Saxe v. Dooley, 7 Porto Rico Fed. Rep. 624, 625. Equity Pule 37 requires that every action shall he prosecuted in the name of the real party in interest. The Code of Commerce makes partners individually liable for fii'm debts, although the firm debt may have in he paid primarily out of the partnership assets.
2. The motion to dismiss first alleges that no ground is shown for an accounting inasmuch as a specific sum is mentioned as duo. It would appear, however, that the sum is mentioned only provisionally, possibly in order to show the jurisdictional amount. The law is that a general allegation of fraud is in sufficient. Coll y Cuchi v. Arzuaga, 9 Porto Rico Fed. Rep. 201, 205. Tlie relation of principal and agent alone is not sufficient to require resort to equity. There may he a remedy at law for fraud, but not if the discovery sought is solely within the knowledge of the defendant. Russell v. Clark, 7 Cranch, 69, 3 L. ed. 271. Under the old ride the bill for discovery must show its necessity and oath must not be waived to the discovery prayed for. Beggs v. Edison Electric Illuminating Co. 96 Ala. 298, 38 Am. St. Rep. 94, 11 So. 381. The case at bar, however, goes beyond these principles. Discovery is asked not by itself, but as a means of disclosing fraud which is alleged in such detail as lies within the knowledge of the plaintiff. It would seem that there is jurisdiction on this point.
3. The plaintiff is a foreign corporation and the motion to dismiss avers that plaintiff is not shown to have complied with the Porto Pican law as to registry, agency, and the like. The laws of Porto Pico require a license from the treasurer. P. R. Pol. Code, § 353, ¶ 2; Private Corporation Act of March 9, 1911, § 37, 38, 40. Section 38 denies remedy in Porto Pico for a contract, unless such qualification has been effected. Section 40 makes it a misdemeanor to do business without such qualification. Section 41 requires certain reports. Hone of these things arc alleged in the bill to have been done, and a motion is now made to dismiss the bill on that account. Where license is required for carrying on a particular business an agreement made without such license is void. Miller v. Ammon, 145 U. S. 421, 36 L. ed. 759, 12 Sup. Ct. Rep. 884. If the local law provided that the contract should bo void, it would raise a question which is not in the present case. The local laws seem only to enforce a fine and to deny recourse to the local courts. This is within the right of local legislation. But, un less the contract is declared void, there is no ground under this legislation for denying recourse to the Federal courts. Harris v. Runnels, 12 How. 79, 13 L. ed. 901.
4. And it is to be remembered that local legislation cannot deny the existence of a foreign corporation, whatever may be the right of controlling the business of the corporation within the local limits. A foreign corporation has a right to carry on business authorized by its charter, subject to any proper restriction, but there can be no local restriction as to interstate commerce. All the business alleged by the plaintiff, so far as concerns the defendant, is by correspondence through the United States mails, or at most shipping goods from Porto Rico to the United States, which must from the necessity of the c'ase be interstate commerce. The bill in question is not one brought to enforce any contracts declared illegal by the Porto Rican statute, but for matters concerning only the principal and agent, whose relations are interstate. Allen v. Alleghany Co. 196 U. S. 458, 49 L. ed. 551, 25 Sup. Ct. Rep. 311; Butler Bros. Shoe Co. v. United States Rubber Co. 84 C. C. A. 167, 156 Fed. 1.
5. Furthermore, no matter how technically illegal contracts made by the plaintiff might be with people in Porto Rico, there is no illegality in trying to collect what is due from its agent. The Porto Rican statutes cannot be construed so as to enable an agent to get hold of money that belongs to somebody else and reply to a suit to force payment that this is doing business and that the principal is not entitled to do business in Porto Rico.. It is true that a single act of loaning by a mortgage loan company amounts to doing business; but seeking an account from an agent is not doing business prohibited by any statute. Chattanooga Nat. Bldg. & L. Asso. v. Denson, 189 U. S. 408, 47 L. ed. 870, 23 Sup. Ct. Rep. 630.
Upon the whole, it would seem that the motion to dismiss is not well taken, and therefore it is overruled.
It is so ordered.