Guaranty Trust Co. v. Porto Rico Gas Co.

11 P.R. Fed. 427

Opinion

Hamilton, Judge,

delivered the following opinion::'

The bill in this case seeks the foreclosure of a mortgage made by the defendant to the plaintiff as trustee, alleging default for about two years in the payment of interest. The plaintiff is a nonresident, as is also the defendant, and no official of the defendant company resides or is at present in Porto Eico. The management of the business is in the hands of Mr. George IT. Joy.

1. The new equity rules do not cover 'fully the procedure as to receivership, but it is a special remedy, not only auxiliary to the main relief, but, much like an injunction, to be had pendente lite in order to- be efficacious at all. It would seem, therefore, that, except so far as required by the nature of the case, the procedure should be analogous to that as to injunctions, under new equity rule 73.

2. The bill in this case is sworn to, and makes the mortgage sued on an exhibit. The bill alleges that the mortgage was duly registered in Porto Eico, but there is no certificate of the registrar that this was done. Although equity originated in canon law and the oath played a great part in its development, it by no means follows, under' the modern practice, that all bills must be under oath. A bill in equity can be a mere pleading, as at law, and need not be under oath. But under new equity rule 2o bills asking special relief, which includes relief pendente lite, should be under oath. This is no doubt due to the fact that, where preliminary relief is sought, evidence must be adduced, and if the bill is to be used as basis for this relief it must be sworn to, so as to be tbe equivalent of an affidavit, wMch is -ordinarily the kind of evidence introduced on motions in equity. A similar procedure applies in preliminary injunctions. 3STew Equity Rule 13.

3. A receiver can be appointed without notice, and there are eases where it would defeat'the whole object of the suit to-give a notice of application for a receiver. It would seem better, however, in analogy to injunctions where no harm would be done by the short delay, to hear the defendant before the receiver is appointed, and the case at bar seemed to call for this procedure. 'While the defendant did not formally appear, the local manager came into court and suggestions were made on his behalf. Thus, it was suggested that the bill, while sworn to on. its face, was sworn to- before a notary whose position was not in turn .certified by the secretary of state or any other official of Eew York. This, however, is not required. The exact point was passed upon adversely by this court in Bigelow v. Porto Rico Planters Co. 7 Porto Rico Fed. Rep. 386. The bill in this case is to be considered sufficiently verified so far as relates to the notary.

4. The case is by no means so clear as to the lack of certificate of registration of the mortgage. The sworn bill alleges registration, ffiit that is not the best proof of registration. It is required by the local Mortgage Law that a mortgage, to be effective, at least as against third parties, must be registered. It is true that the suit in question is in effect between the mortgagor and the mortgagee, and this court must not be considered as holding that the instrument is not good as between the parties, regardless of registration. Eor would it necessarily be field that, even as against third parties, the court would not pro ceed without such a certificate if there were any reason why the certificate conld not he readily obtained. The remedy of receivership to be effective must be quick. But in the case at bar the registrar is in San Juan and the plaintiff has agreed in open court to supply the certificate. Supposing this amendment to have been made, the court will- proceed with the other matters involved. .

5. In bankruptcy proceedings the law requires that a bond be given by the applicant for a receiver to protect the defendant against the results of receivership if improperly granted in bankruptcy. Bankruptcy Act of 1898, § 3 (e). This does not seem to be the case with receivership outside of bankruptcy. •As the appointment of a receiver is in the court’s discretion, terms may be imposed varying with the particular cases, and there might be instances in which a preliminary bond should be required. It would be going very far to require it of a mere trustee under a mortgage. In this case, therefore, it is unnecessary.

6. The receivership prayed for will be granted upon the filing of the certificate of registration above mentioned. The bondholders have suggested Mr. R.. M. Bedding as receiver, and there appears to be no objection to him personally. He is not at present' a resident of Porto Bico, and seems to be on the Island for the purposes of this case. His impartiality and ability are not questioned. It seems best to the court, however, not to have the receivership entirely in the hands of a nonresident. Making and distribution of gas is a public utility, not only dependent upon the earnings coming from the public, but, under modern conditions, almost a vital necessity for the public in such cities as San Juan. The interests of the bondholders are not the only ones to be consulted, especially in the matter of appointing a receiver. It would seem that there should he a local receiver also, and when the case is ripe for appointment the court will appoint two receivers, — one being the one suggested and the other a local man, Herbert W. Brown, — who will jointly perform the duties of the office. The application in this case is only for a preliminary receiver, and for that purpose the bond need not be as large as in the case of a permanent receiver, if appointed. Therefore, a bond for $10,000 for each preliminary receiver will be sufficient.