Benitez v. Bank of Nova Scotia

125 F.2d 519, 1942 U.S. App. LEXIS 4407
CourtCourt of Appeals for the First Circuit
DecidedJanuary 30, 1942
DocketNo. 3503
StatusPublished
Cited by7 cases

This text of 125 F.2d 519 (Benitez v. Bank of Nova Scotia) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Benitez v. Bank of Nova Scotia, 125 F.2d 519, 1942 U.S. App. LEXIS 4407 (1st Cir. 1942).

Opinion

MAGRUDER, Circuit Judge.

This is an appeal from a deficiency judgment rendered May 9, 1939, by the United States District Court for Puerto Rico in a foreclosure suit brought by the Bank of Nova Scotia, appellee herein, a Canadian corporation having its principal office and domicile in Halifax, against Benitez Sugar Company, a Puerto Rican corporation, and various persons, including the present appellant, individually and as members of the Comunidad Jose J. Benitez e Hijos.

A final decree in this equity suit, dated August 22, 1938, adjudged that the Comunidad and the Sugar Company were jointly and severally indebted to the Bank in the principal sum of $673,569.82 with interest; that the members of the Comunidad were individually liable in proportion to their respective participations therein, that of the present appellant being a one-twelfth interest; that defendant members of the Comunidad, in proportion to their respective liabilities, and the defendant Benitez Sugar Company, must on or before September 1, 1938, pay to the Bank the said sum with interest, in default of which a special master was directed to sell at public auction certain specified securities consisting of mortgage notes, shares of stock and [521]*521assignments by way of guaranty. The decree also provided that in case the sale did not realize enough to pay the amounts due in full, “complainant shall be entitled to a deficiency judgment against the defendant Benitez Sugar Company and against the defendant members of the ‘Comunidad’ Jose J. Benitez e Hijos in proportion to their liability and responsibility, as specified herein, for any amounts remaining unsatisfied and shall be entitled to execution therefor.”

A receiver having been appointed to take possession of all the property of the Benitez Sugar Company and the Comunidad, the district court on January 14, 1938, had entered an order granting leave to all other creditors of the corporation and the Comunidad to file bills of intervention in this proceeding or at their option to file proofs of claims with the receiver. Pursuant thereto, a number of creditors had intervened. The claims of these creditors were not disposed of by the foreclosure decree. There were pending also, and not disposed of by the foreclosure decree, two bills filed by the Bank of Nova Scotia in the nature of ancillary suits against the Benitez Sugar Company and the Comunidad for the foreclosure of certain mortgages on their respective real properties. These ancillary suits and the original equity suit with respect to the issues remaining undisposed of therein were consolidated by an order entered August 22, 1938, and the receivership was extended to the ancillary suits. On September 6, 1938, a so-called reorganization committee of creditors intervened in the consolidated cause and filed a plan of reorganization which was approved by the court for submission to creditors.

The amount found to be due the Bank by the foreclosure decree not having been paid, the foreclosure sale of the securities was duly held by the master on October 13, 1938. The securities were sold to the Bank, the only bidder at the sale, for $466,-250. On October 24, 1938, a hearing was held on motion to confirm the master’s sale. No opposition or objection was made at the hearing and the sale was duly confirmed by the court. On April 22, 1939, the Bank moved for a deficiency judgment in the sum of $272,-470.53. At the hearing on this motion, on April 28, 1939, no objection was made thereto by the appellant and on May 9, 1939, the deficiency judgment now appealed from was entered against the Benitez Sugar Company and the members1 2of the Comunidad, appellant’s liability being fixed at $22,705.87 plus interest thereon. Subsequently appellant filed a petition to vacate the deficiency judgment, which petition was denied by order of the district court on June 30, 1939.

Appellant attempted to appeal from the foreclosure decree of August 22, 1938, but in Benitez v. Bank of Nova Scotia, 1 Cir., 1940, 109 F.2d 743, we held that the appeal failed because not brought within the statutory period. Consequently the matters adjudged by that decree have become res judicata as against the present appellant.

Since the sole party complainant in the original equity suit was a Canadian corporation not domiciled in Puerto Rico, the United States District Court for Puerto Rico had jurisdiction on the basis of the kind of diversity of citizenship described in § 41 of the Organic Act, 48 U.S.C. § 863, 48 U.S.C.A. § 863.2 Sanfeliz v. Bank of Nova Scotia, 1 Cir., 1934, 74 F.2d 338. The foreclosure decree of August 22, 1938, being now binding on appellant,- it is too late for her to urge that the original bill did not properly invoke the equity jurisdiction of the district court because there was an adequate remedy at law. The point, furthermore, is without merit. Sucesores de Jose Maria Ortiz v. Royal Bank of Canada, 1 Cir., 1934, 68 F.2d 933. See, also, Woods-Faulkner & Co. v. Michelson, 8 Cir., 1933, 63 F.2d 569; Fay v. Hill, 8 Cir., 1918, 249 F. 415, 418.

The deficiency judgment follows the terms of the foreclosure decree, which decree cannot now be reexamined. Appeal from the deficiency judgment does not bring up for review the propriety of various orders in the consolidated cause with reference to the ancillary suits against the [522]*522Benitez Sugar Company and the Comunidad for foreclosure of certain real estate mortgages. Even though some of such orders were intermediate in point of time, they were not related to and did not lead up to the entry of the deficiency judgment now appealed from. Hawke v. Servicised Products Corp., 6 Cir., 1938, 95 F.2d 710, 711.

About one half the numerous assignments of error relate to orders by the district court rendered in the consolidated cause subsequent to the deficiency judgment, and hence not relevant to this appeal. Running through the other assignments is the assertion that all proceedings in the district court subsequent to the foreclosure decree of August 22, 1938, are invalid because the district court lost jurisdiction by the pendency of a perfected appeal from said decree. As we have previously stated, no timely appeal was taken and the foreclosure decree became res judicata. Even if the appeal had been perfected the effect would not have been as appellant supposes, no supersedeas having been granted.

It is contended further that Section 1771 of the Civil Code of Puerto Rico (1930 Ed.)3 “expressly provides that if upon alienation of the pledge through public sale or auction, the creditor becomes the owner thereof, he shall be obligated to give a discharge for the full amount of his credit, so that even though the legal impediments hereinbefore set forth should not actually exist, the district court could not legally enter the deficiency judgment complained of.” But this section of the Code refers only to extrajudicial sales before a notary, not to judicial sales. See Banco de Puerto Rico v. Arguinzoni, 1938, 53 D.P.R. 167. In Sucesores de Jose Maria Ortiz v.

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Cite This Page — Counsel Stack

Bluebook (online)
125 F.2d 519, 1942 U.S. App. LEXIS 4407, Counsel Stack Legal Research, https://law.counselstack.com/opinion/benitez-v-bank-of-nova-scotia-ca1-1942.