Opinion ID: 506586
Heading Depth: 1
Heading Rank: 2

Heading: the bond order

Text: 11 As we have mentioned, the district court ordered Parque, pendente lite, either to (i) bring the payment of property taxes current, or (ii) post bond sufficient to cover the accrued tax liability, plus the anticipated taxes for the next six months. The court felt the order was necessary in order to allow HMG to avoid the danger of losing the guaranty [for its loan] entirely but with the assurance that should it prevail it may recover said payment from the bonds deposited with the Clerk and not overburden the property with this additional ongoing debt. Parque I, supra, at 52. Parque contends that the order was procedurally flawed and represented an abuse of the district court's discretion. We scrutinize its chief contentions.
12 The district court apparently acted under the aegis of Fed.R.Civ.P. 64, which provides in pertinent part: 13 At the commencement of and during the course of an action, all remedies providing for seizure of person or property for the purpose of securing satisfaction of the judgment ultimately to be entered in the action are available under the circumstances and in the manner provided by the law of the state in which the district court is held.... The remedies thus available include arrest, attachment, garnishment, replevin, sequestration, and other corresponding or equivalent remedies.... 14 Fed.R.Civ.P. 64. The parties have not suggested that Puerto Rico is to be regarded as other than a state for purposes of the Civil Rules. 5 15 Rule 64, by its terms, sets out a quadrat of requirements: the provisional remedy must (1) involve a seizure, (2) be entered for the purpose of securing satisfaction of the judgment ultimately to be rendered in the action, (3) be permitted under the law of the forum state, and (4) be issued in a manner compatible with state law. Appellant does not raise any question as to the first pair of elements, 6 so we pass directly to the final two. These are so closely allied that we can and do treat them in a unitary fashion. 16 In the absence of an applicable federal statute or rule, Fed.R.Civ.P. 64 indicates that we look to the law of Puerto Rico to find an appropriate analog for the bonding order. Appellee nominates two candidates: P.R.Laws Ann. tit. 31, Sec. 3049 7 and Rule 56.1 of the Puerto Rico Rules of Civil Procedure, P.R.Laws Ann. tit. 32, App. III. 8 Because we believe that Rule 56.1 empowered the district court to act, we focus principally on that state-law source, and do not examine into the applicability of section 3049. 17 In our view, the order to post the bond fell squarely within the ambit of Rule 56.1 and was both reasonable and adequate for the purpose of securing the judgment which HMG sought in this action. In this regard, it is important to note that the Supreme Court of Puerto Rico has construed its procedural rule expansively:Rule 56 of the Rules of Civil Procedure confers upon the court sufficient flexibility to issue the measures which it deems necessary or convenient, according to the circumstances of the case, to secure the effectiveness of the judgments. Its only limitation is that the measure be reasonable and adequate to the essential purpose of the same, which is to guarantee the effectiveness of the judgment which in due time may be rendered. This flexibility, so necessary for the administration of justice, is the greatest virtue of Rule 56, virtue which we should promote and preserve instead of mystifying it with technical concepts and requirements.... 18 F.D. Rich Co. v. Superior Court, 99 P.R.R. 155, 173 (1970). This emphasis on flexibility, on the fashioning of a pragmatic prophylaxis, nicely characterizes the district court's actions. As the court explained, although HMG could halt [the tax] collection proceeding by paying the delinquent taxes directly as mortgage creditor ... this did not respond to the reality that as the tax liability increases the guaranty offered by the property decreases to a point that may eventually prove insufficient to cover the debt. Parque I, supra, at 51. Since, under the loan documents, the ultimate liability for paying the property taxes rested with Parque, and since Parque was resisting foreclosure, it seems to have been altogether reasonable for the district court to have placed the burden of covering the tax delinquency on appellant. This sort of practical, evenhanded disposition, we think, is what P.R.R.Civ.P. 56 envisions. On this record, the rule would, without serious question, allow entry of such an order. And, there was no abuse of discretion in entering this order in these circumstances. 9 19 Appellant tries to take yet another bite at the bond ruling. It asserts that, whether or not supportable on the record, the record was incomplete and the order procedurally infirm. Parque's contention in this respect reduces to the idea that the order was not made in the manner provided by the Puerto Rico Rules because the district court failed to abide by a related provision, P.R.R.Civ.P. 56.2, which stipulates that [no] provisional remedy shall be granted, ... nor shall any action be taken thereon without notice upon the adverse party and a hearing.... Cf. P.R.R.Civ.P. 56.5 (reaffirming notice requirement and giving aggrieved party preferential right to modification hearing if Rule 56 order granted ex parte). In short, appellant insists that Rule 56.2 required the federal district court to hold an evidentiary hearing before it ordered the posting of a bond. We disagree. 20 Appellant cites no authority which interprets Puerto Rico's rule as mandating a full-blown evidentiary hearing, and elementary logic suggests the opposite. See Cia. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 411 (1st Cir.1985) (under Fed.R.Civ.P. 56, rule's reference to a 'hearing' does not necessarily imply oral argument; a matter can be 'heard' on the papers); Spark v. Catholic University of America, 510 F.2d 1277, 1280 (D.C.Cir.1975) (per curiam) (due process does not encompass a right to oral argument on motion). It is clear to us that the notice and hearing requirements contained in Rule 56.2 can be met short of taking evidence in open court. The standards exist to ensure that, before a provisional remedy issues, the parties will have an opportunity to present relevant facts and arguments so the judge can consider the interests of all the parties and ... adjudicate as substantial justice may require. P.R.R.Civ.P. 56.1. To be meaningful, such an opportunity requires notice and a fair chance to marshal supporting facts and theories--nothing more. 21 Here, the requisite opportunity was afforded in full measure: the case had been pending for years, the district judge was extremely familiar with it, and appellant had made voluminous filings on almost every conceivable point--including a plenitude of filings directed to the property tax situation. Judicial consideration of the tax issue and what it portended took no one by surprise. The record makes manifest that, before entering the bond order, the court was thoroughly informed about all of Parque's arguments. Although Parque disputed the need for the imposition of a provisional remedy at all--arguing, for example, that the property was not in any imminent danger of tax foreclosure--the litigants had fully presented all of their views. The court had before it both parties' motions, briefs, affidavits, exhibits, and a plethora of other materials when it acted. Even at this late date, Parque has pointed to no single, definable aspect of its position which could not have been adequately presented by a written submission. 10 22 Further discussion would be supererogatory. Insofar as appears from the record, an evidentiary hearing would have changed nothing. In the circumstances of this case, P.R.R.Civ.P. 56.2 did not necessitate that one be held. Cf. United States v. DeCologero, 821 F.2d 39, 44 (1st Cir.1987) (where movant unable to identif[y] any data needed ... which could not have been furnished by affidavit or in like fashion, refusal to convene evidentiary hearing on Fed.R.Crim.P. 35(b) motion not erroneous); Socialist Workers Party v. Illinois State Board of Elections, 566 F.2d 586, 587 (7th Cir.1977) (per curiam) (denial of evidentiary hearing before issuance of permanent injunction harmless where appellants have not demonstrated that anything that could have arisen in a factual hearing would have altered the result), aff'd, 440 U.S. 173, 99 S.Ct. 983, 59 L.Ed.2d 230 (1979); Securities and Exchange Comm'n v. Frank, 388 F.2d 486, 490 (2d Cir.1968) (evidentiary hearing not compulsory for issuance of preliminary injunction in instances where [t]he taking of evidence would serve little purpose).
23 Appellee has argued, alternatively, that whether or not Fed.R.Civ.P. 64 authorized the district court to employ bonding as a provisional remedy in a case such as this, the bond order was nevertheless a legitimate exercise of the district court's inherent powers. Because the issue is an important one, and because resolution of it furnishes an independently sufficient ground for our holding, we address it. 24 We start with the proposition that the rules of civil procedure do not completely describe and limit the power of district courts.... Brockton Savings Bank v. Peat, Marwick, Mitchell & Co., 771 F.2d 5, 11 (1st Cir.1985), cert. denied, 475 U.S. 1018, 106 S.Ct. 1204, 89 L.Ed.2d 317 (1986). Such courts have inherent powers, rooted in the chancellor's equity powers, to process litigation to a just and equitable conclusion. ITT Community Development Corp. v. Barton, 569 F.2d 1351, 1359 (5th Cir.1978). In general, except where a statute or rule holds to the contrary, federal courts enjoy the inherent power to provide themselves with appropriate instruments required for the performance of their duties. Ex Parte Peterson, 253 U.S. 300, 312, 40 S.Ct. 543, 547, 64 L.Ed. 919 (1920). More to the point, that federal courts have the authority to preserve a fund or property which may be the subject of a final decree is well established. Usaco Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94, 97-98 (6th Cir.1982), citing De Beers Consolidated Mines, Ltd. v. United States, 325 U.S. 212, 220, 65 S.Ct. 1130, 1134, 89 L.Ed. 1566 (1945). And the judiciary must be free, within reason, to exercise this inherent judicial power in flexible and pragmatic ways. As Justice Cardozo warned, [w]e must be on our guard against depriving the processes of justice of their suppleness of adaptation to varying conditions. Landis v. North American Co., 299 U.S. 248, 256, 57 S.Ct. 163, 166, 81 L.Ed. 153 (1936). 25 In this case, the bond order was plainly desirable in order to ensure a just conclusion and to preserve the res. HMG began the action by seeking the assistance of the court with respect to real estate which would likely become the subject of a final decree should foreclosure be allowed, and its counterclaim reemphasized and expanded this quest. Had the court left the path clear for a tax sale, it would have jeopardized its ability to grant meaningful relief. If the tax sale occurred, the property might well have been lost; on the other hand, if HMG was forced to pay the tax liabilities as they accrued, its security would have been diminished, perhaps to the point of no return. Either way--and especially given the district court's view that HMG had shown a considerable likelihood of success-- 11 ordering the bond to be posted was, we think, a measured and appropriate exercise of the court's inherent powers. See, e.g., Bronson v. La Crosse & Milwaukee R. Co., 1 Wall. (68 U.S.) 405, 410, 17 L.Ed. 616 (1863) (in mortgage foreclosure action, district court had inherent power, pending appeal, to adopt all proper and judicious measures to protect and preserve [the property] from waste or loss); Hawes v. Club Ecuestre El Comandante, 535 F.2d 140, 143 (1st Cir.1976) (federal district courts have inherent power to require security for costs when warranted by the circumstances of the case); cf. De Beers, 325 U.S. at 220, 65 S.Ct. at 1134 (where court commanded prejudgment sequestration of property unrelated to cause of action, order was not an appropriate exercise of inherent power).