Manrique de Lara de Garrosi v. Garrosi

9 P.R. Fed. 71

Opinion

HamiltoN, Judge,

delivered the following opinion:

This is a bill filed on the equity side of this court in aid of the marital 'property rights of a wife in the local district court at Ponce. That there is such a jurisdiction in this court was declared, 8 Porto Rico Red. Rep. 214, and this decision has been .affirmed by the circuit court of appeals. A number of questions arise which will be considered seriatim.

1. The defendant in his brief requests that a special finding of fact be made. This is probably intended to be under Revised Statutes, § 649, Comp. Stat. 1913, § 1587, as to special verdicts. It may be remarked that this request of the defendant is made only in his brief. There is no paper on file to this effect. A brief is a place only for the argument of matters of law or fact, and not for any pleading, motion, or any step in litigation. A oase is complete when submission is made, whether briefs are •ever filed or not. But, even apart from this, an equity case is not one coming under the above section of the Revised Statutes. The court is not required by law to make any special finding of facts, except in the nature of a special verdict.

It is to be added, however, that the court, as a matter of necessity in writing an opinion, states many, if not all, of the facts which are necessary to reach the conclusion arrived at. This will be found true in the present opinion; and the facts so stated are to be considered as found by the court, and, so far as this court is concerned, may be acted upon accordingly.

2. Among the preliminary questions raised by the defense is that the amount in dispute in this case is not of the statutory amount of $1,000. Whether what is intended is to be regarded as the matter in dispute, the subject in dispute, or the amount in dispute, is probably not material. As at present presented, these expressions would probably cover the same thing. Blackburn v. Portland Gold Min. Co. 175 U. S. 571, 44 L. ed. 276, 20 Sup. Ct. Rep. 222, 20 Mor. Min. Rep. 358; Hawkins v. Cleveland, C. C. & St. L. R. Co. 39 C. C. A. 538, 99 Fed. 322. In the case at bar the allegations of the bill séem to be that the property of the defendant husband is between $100,000 and $200,000, and the interest of the wife in this, if she has any at all, under the Porto Rican statutes exceeds $1,000. How far the proof goes need not be considered at present. This objection is not well taken.

3. It is also contended by the defendant that the plaintiff has an adequate remedy at law, and under the Judicial Code, § 267, a court of equity in such cases has no jurisdiction. It is true that this is not now raised by any distinct pleading. Incidentally it has already been passed upon, but the contention of the defendant is that this is jurisdictional allegation, which can be raised at any time. Kane v. Luckman, 131 Fed. 609; Marthinson v. King, 82 C. C. A. 360, 150 Fed. 49. The point should receive full treatment.

Thus it is contended that this case is analogous to one for a discovery, and it is alleged that the local law makes ample provision for discovery. Ex parte Boyd, 105 U. S. 647, 26 L. ed. 1200. The Code of Civil Procedure, §§ 269-276, supplies what is often called supplemental proceedings, designed to obtain from the defendant and others a discovery of his assets. It is not clear, however, that this takes away the jurisdiction of a court of equity. Tbe fact tbat a local law provides for discovery is not conclusive. In tbe first place, equity bas always bad sueb a proceeding as discovery, and its being allowed at law does not take away-tbe equitable jurisdiction.

Wbetber tbis was provided for by tbe local law before there was any equity law on tbe Island, it is unnecessary to determine. Tbe Organic Act of 1900 gave tbe Federal court tbe usual jurisdiction of courts of equity, while tbe Code of Civil Procedure, which contains the supplemental procedure in question, was not adopted until 1902. What was in tbe Spanish Code of Civil Procedure, adopted in 1881 and extended to Porto Pico in 1885, is not shown, and it was repealed by tbe new Code of Civil Procedure in 1902. There would seem to be applicable, therefore, tbe ordinary rule tbat where equity already covers a subject, legislation extending tbe same right to law courts after-wards does not affect tbe jurisdiction of a court of equity. In such case tbe provision of tbe Judicial Code above quoted does not apply.

It might be added tbat even if tbe remedies relating to rescission and-annulment provided by tbe Civil Code of Porto Pico in §§ 1262 and 1266 and tbe Mortgage Law in articles 36 and 37, were to be deemed adequate for tbe facts of such a case as tbe one at bar, tbis would not change tbe further rule tbat proceedings in a Federal court, even where they enforce tbe local law, are to be reformed and rewritten so as to preserve tbe distine-ton prevailing in tbe Federal courts between law and equity. In other words, if tbe plaintiff and defendants in tbe suit at bar can come into tbe Federal court on account of their diverse citizenship, it would make no difference wbetber there was an adequate remedy under the local law or not. If there was such an adequate remedy, it would not prevent enforcement of this remedy in the Federal court by the proper procedure at law or in equity, as the nature of the case would require.

4. The defendants set up in their pleading and evidence that the local district court of Ponce on May 1'7, 1915, affirmed by the local supreme court January 26, 1916, has determined in a suit between this plaintiff and the main defendant that this defendant Garrosi owns no property, and that this determination is res judicata and cannot be re-examined in the Federal court. There is no doubt that an issue determined by a local court between the same parties binds them in proceedings in every other forum. It does not follow, however, that a finding one year that a man has no property is necessarily true the next year. The only issue that is found, the only res which can be said to be judicata, is that at a particular date he did not have property for the purposes of that proceeding. In the finding now relied upon the local court held that Garrosi was without property for the purposes of alimony. It would be going too far to say that this was a finding that he had no property in which his wife would have marital rights at the dissolution of the marriage, whether by divorce or death. There would not be, in other words, the same issue before the two courts, and the finding of the one would not necessarily be res judicata in the other, particularly where the latter calls for discovery and the former did not.

5. A somewhat similar point is raised as to lands now attacked in the hands of Juana Maria Gonzalez. In the case of Garrozi v. Dastas, 204 U. S. 64, 51 L. ed. 369, 21 Sup. Ct. Rep. 224, these same defendants were involved, although the assault upon the defendant Garrosi was made by a former wife, and not by the present plaintiff. It seems that this former wife sought a divorce and a dissolution of the marriage property partnership, and that the matter went from this court sitting at Ponce to the Supreme Court of the United States. Garrozi v. Dastas, supra, page 64. The point at present under discussion, however, is not the Supreme Court decree, but the one rendered in this court February 4, 1907, carrying out the principles enunciated by the Supreme Court. The decree in question decides that some of the lands now attacked as belonging to defendant Garrosi were really property of Juana Maria Gonzalez, and as such immune from the attack of Garrosi’s former wife. Garrosi is unfortunate in having the same kind of an assault made upon him by two successive wives, but the action of wife No. 1 is not res judicata, as to wife No-. 2. The legal principle is that every one is entitled to his or her day in court, whether he or she happens to be a first or second consort, or otherwise connected with the other party to the suit. It is true that the evidence in the one case if repeated in the other wo-uld be very persuasive, but this is a matter of weight of evidence, and not of conclusiveness of former decree.

6. In the ease at bar, certain evidence was taken by the plaintiff before defendant Juana Maria Gonzalez had been made a party defendant, and it is now contended that there is not enough evidence in the case to bind her after she was made a defendant. It is doubtless true that evidence taken before the cause was at issue as to her is not binding upon her. The court so ruled when the evidence was offered. But the question arises, whether the evidence of Juana Maria Gonzalez given in the case of Garrozi v. Dastas, supra, may be used against her in the case at bar. TMs evidence was admitted-; but it is contended that tbe ruling should be changed and the evidence excluded, because there is nothing in the case to show that the witness was out of the jurisdiction, and therefore subject to have her former statements used against her under the Porto Rican Law of Evidence, § 35, subd. 6.

There is no question that the general principles of evidence are the same at law and in equity. And it may be conceded that the Porto Rican Law of Evidence, adopted in 1905, is but a digest of the general common-law rules on that subject. This -court has frequently followed the rules so enunciated, but not because they were law so much as because they were right. It is to be presumed that the Porto Rican Law of Evidence was adopted to meet conditions of the Porto Rican courts, that is to say courts without a jury and courts without equity jurisdiction, just as was the case in California and other Western states, from which the code was adopted. The Porto Rican Law of Evidence, § 35, declares that “ . . . evidence of the following facts may be given upon the trial: . . . (6) The testimony of a witness deceased, or out of the jurisdiction, or unable to testify, given in a former action between the same parties, relating to the same matter.” This does not apply to the case a bar, for the previous action was not between these same parties. No implication can be derived from this section one way or the other. The evidence of Juana Maria Gonzalez was introduced not so much as that of a witness, as the previous admissions of a party to the suit at bar. It is always admissible to introduce the statements of a party at least so far as to bind the party himself. This rests upon the general rule that it is unnecessary to prove what a party admits. It is not perceived that any error was committed in admitting the previous testimony of Juana Maria Gonzalez.

7. The Porto Bican Law of Evidence is further referred to on the subject of presumptions. Thus presumptions, unless controverted, are to control. § 100. Civil Code, § 1218. Among such disputable presumptions are that (19) private transactions have been fair and regular, (2) the ordinary course of business has been followed, and (38) that there was good and sufficient consideration for a written contract. Porto Bican Law of Evidence, § 102. It is also in this law, §§ 11 and 16, that entries in the public records made in pursuance of official duty are prima facie evidence of the facts recited. Even less doubtful are the provisions of the Civil Code, such as §§ 1186, 1241, and 1244, which are as follows:

“Sec. 1186. Public instruments are evidence, even against a third person, of the fact which gave rise to their execution and of the date of the latter.

“They shall also be evidence against the contracting parties and their legal representatives with regard to the declarations the former may have made therein.”

“Sec. 1241. In contracts involving a valuable consideration, the prestation or promise of a thing or services by the other party is understood as a consideration for each contracting party; in remuneratory contracts, the service or benefits remunerated, and in those of pure beneficence, the mere liberality of the benefactor.”

“Sec. 1244. Even though the consideration should not be expressed in the contract, it is presumed that it exists and that it is licit, unless the debtor proves the contrary.”

Such presumption, however, is disputable, especially in equity, which' looks not to tbe forms and tbe presumptions from the forms, but to the actual facts and intent of the parties concerned. It is doubtless true, also, that there is no presumption of fraud arising from the relationship of the parties. This fact merely calls for closer scrutiny.. Relationship' is not a crime, but from its very nature it denotes interest of one person in another, and the possibility, if not disposition, to help each other. Vansickle v. Wells F. & Co. 105 Ned. 16; Shealy v. Edwards, 75 Ala. 411; Smith v. Collins, 94 Ala. 394, 10 So. 334; Gottlieb v. Thatcher, 151 U. S. 271, 38 L. ed. 157, 14 Sup. Ct. Rep. 319. The retention of land by a grantor is not evidence of fraud (Miller v. Rowan, 108 Ala. 98, 19 So. 9), although there is to be remembered that a presumption, also appearing in the Porto Rican law, is that a person owns that of which he is in possession and over which he is exercising acts of ownership. Law of Evidence, § 102 (11 and 12).

8. The plaintiff was married to defendant Garrosi July 3, 1908, and the defendants set up that she cannot complain and seek to set aside conveyances made before that time, on the same principle that creditors cannot complain of antecedent conveyances, that is to say, conveyances made before they became creditors. This is true even if such antecedent conveyances were voluntary, whether without any adequate consideration, or even gifts. Horbach v. Hill, 112 U. S. 144, 149, 28 L. ed. 670, 672, 5 Sup. Ct. Rep. 81; Schreyer v. Scott, 134 U. S. 405, 33 L. ed. 955, 10 Sup. Ct. Rep. 579; Adams v. Collier, 122 U. S. 382, 30 L. ed. 1207, 7 Sup. Ct. Rep. 1208; Wallace v. Penfield, 106 U. S. 260, 27 L. ed. 147, 1 Sup. Ct. Rep. 216. There is the important qualification that a subsequent creditor can set aside a conveyance made with the express intent to defraud him, as where a party in expectation of contracting debts conveys away bis property. This is an instance of where actual fraud avoids the transaction even in favor of a person not at the time a creditor. Wilson v. Stevens, 129 Ala. 630, 87 Am. St. Rep. 87, 29 So. 678.

9. There is no doubt about these principles throughout the United States and wherever the common law prevails, but it is doubtless true that the law known as the 13th of Elizabeth, reinforced by the 27th and 29th of Elizabeth, designed to avoid conveyances and acts to hinder, delay, or defraud creditors, necessarily did not apply to Porto Rico, and cannot now be extended to Porto Rico by the courts. The Organic Act, § 37, expressly maintains the Porto Rican law existing at the time of acquisition of sovereignty by the United States and other laws passed amending these laws. The statute of Elizabeth may, therefore, be said not to apply in express terms to Porto Rico, although it may be in the “equity” of the Constitution, which is applied to Porto Rico by the Organic Act. It remains true, however, that under the Spanish law, as under all civilized law, fraud vitiates contracts. The principle that no one can take advantage of his own wrong is as old as law itself, and if there was no express statute on the subject the principle of the Civil Code, declared in § 7, would prevail, that “when there is no statute applicable to the ease at issue, the court shall decide in accordance with equity, which means that natural justice, as embodied in the general principles of jurisprudence and in accepted and established usages and customs, shall be taken into consideration.”

Eraud has been condemned in all law. The oldest extant Code is perhaps that of Hammurabi, antedating the Mosaic legislation, and in tbis Code many instances are mentioned of fraud wbicb vitiates transactions. It is of course, however, characteristic of early law, such as this, and even the Soman Twelve Tables, that specific instances are denounced and general principles are not announced. Under the classical Roman law fraud was known as dolus, sometimes dolus malus, and by the praetor’s edict invalidated contracts (Sohm Inst. 85). The presumption of good faith is declared in the Code of Justinian, 2, 21, 6. By this time the principle is 'announced, but fraud is described rather than defined. Labeo, whose words are adopted in the Digest, describes dolum malum as “omnen calliditatem, fallaciam machinalionem ad circumveniendum, fallendum, de-cipiendum alberum adhibitcm.” Digest 4, 3, 1, § 2. Fraud is one of the fundamental grounds of equitable jurisdiction, and has been such from the beginning of the English chancery system, As Lord Hardwicke expressed it, “the court very wisely hath never laid down any general rule beyond which it will not go, lest other means of avoiding the equity of the court should be found out.” Lawley v. Hooper, 3 Atk. 278, 26 Eng. Reprint, 262. The Code Napoleon declares, art. 1116, that fraud makes voidable an agreement “when the stratagems [man-oeuvres] practiced by one of the parties are such that it is evident that without such stratagems the other party would not have contracted. It is not to be presumed, but must be proved.” Code Napoleon, art. 1116. The same principle can be traced through the Spanish legislation from the Roman times to the present.

“Fraud of creditors” (enageñacion en fraude de acree-dores) is as well known a title in the civil law reports as at common law. The basic law on the subject was Law 7 of title 15 in tbe 5th Partida. That, omitting the prescription period of one year as inapplicable here, reads as follows: “Cases in which the sale of properties to the detriment of creditors may be revoked. A personal debtor is one whose liability rests upon his debt and not upon his property. It happens sometimes that a debtor of this character, after being directed by a judgment of a court to pay what he owes, or having been ordered to turn over all his properties, such debtor sells all his properties so that nothing is left for delivery to the persons entitled thereto. Wherefore, we say that such a sale can be set aside by the persons entitled to receive the properties. . . . Por it is to be presumed that he who sells his properties in that manner does it maliciously or deceitfully. The same we say will be the case if such debtor during his lifetime should give away or bequeath to another person any one of his properties. If from what he retains his creditors could not be paid, then such gift or legacy should be set aside in the manner above set forth. And if it should happen that he had not disposed of the thing either by gift or bequest, but by making sale thereof, or exchanging it, or giving it in dowry or in pledge, then we say that if it can be proved the person who received said thing in any one of the manners described had knowledge that the debtor was making said alienation with malice or deceit, the same may be set aside. . . .”

Among decisions upon this may be cited No. 53, Peb. 9, 1881, 45 Tur. Civ. pp. 238, 242; and No. 168, April 18, 1881, 46 Jur. Civ. pp. 23, 28, where, however, the court held that tiie facts did not come within the law. The Civil Code, adopted 1889, preserved the same principles. The Porto Pican Civil Code, § 1258, taken from the Spanish Civil Code, art, 1291, declares that' contracts may be rescinded which are executed in fraud of creditors when the latter cannot recover in any other manner what is due them, and a court of equity is not limited to the remedies given by law. As construed in Dastas v. Gar-rozi, supra, this means that Porto Bican creditors may avoid fraudulent contracts. This is quite analogous to the Statute of Elizabeth. Civil Code, § 1068 (Span. 1101), subjects those guilty of fulfilling their obligations fraudulently to the payment of damages, and § 1069 declares that “liability arising from fraud is demandable in all obligations.” TTnder § 1074 (Span. 1107) “in case of fraud a debtor shall be liable for all losses and damages which may clearly originate from nonful-fillment of the obligation.” Even the Mortgage Law protecting registered conveyances makes an exception in the case of fraud. Arts. 37 and 41.

There is no doubt that in England, even if there had been no Statute of Elizabeth, courts of equity would have found a way to avoid all transactions tainted with fraud, and the same principle obtains and is enforceable under the provisions of the Spanish civil law above noted. The Federal court, therefore, is not hampered by the fact that the Statute of Elizabeth possibly does not apply to Porto BicO1. Any person defrauded will receive the aid of this court.

10. Several of the conveyances complained of do. not come under the head of fraud in the ordinary sense of the word. Defendants rely upon the regularity of conveyances, but a court of equity looks beneath the surface. The bill alleges that 'they are fictitious and simulated, and this seems to be proved. It is not necessary to detail the transactions, but those set out in the bill seem to be substantially proved; that is to say, the defend- ■ ant Garrosi bought certain properties, either directly, or by lending money and afterwards buying them in one foreclosure, and then made them over, directly or indirectly, to the defendant Juana Maria Gonzalez for a recited valuable consideration. It does not appear that any money was paid to him by the said defendant Gonzalez, and the fact that he. took a power of attorney from her to manage her property, and also a will by which the property is to come back to him, is very persuasive that the transactions were not real ones. The court accordingly finds in such cases that the title is in defendant Gonzalez as a mere depositary, or, to express it differently, that she holds the title for defendant Garrosi. It is more than a resulting trust for the purchase money, because no purchase money was intended. If a person puts the title of his property in the name of another, it is liable for his debts, and for all interests that others would have upon it if it were in his own name. In point of fact, the title is held by his codefendant in the eye of'the law as his agent, no more and no less.

It is true that it is alleged the defendant Gonzalez nursed her codefendant through a serious illness, and this might, under some circumstances, constitute a valuable consideration. But the transactions in this case do not seem to be conveyances in grateful payment of such services; they leave an entirely different impression upon the mind. The proof of the value of. these services is not set out, and the property must be held to be that of'defendant Garrosi, and not defendant Gonzalez. The case is one, therefore, not so much of a fraudulent conveyance, or even a voluntary conveyance which may be attacked by subsequent creditors, as of property still belonging to the defend-aut Garrosi and subject to all bis obligations, contractual and legal.

So mucb as to tbe real property, Juanita, Luisa, Concepción, & Leonor, as to wbicb tbe proof substantially supports tbe bill. Tbe proof as to tbe money, however, is otherwise. Tbe fact that tbe defendant, bad money, such as gold, at one time by no means proves that be has it now, and no proof is introduced to overcome bis sworn evidence that be has no such money.

11. Defendant Garrosi contends that whether these conveyances were valid or simulated makes no difference so far as regards this plaintiff, that she is not a creditor in tbe ordinary sense of tbe word, but can claim, if at all, only tbe rights wbicb a wife is allowed under tbe civil law. This is true. Whether Garrosi kept tbe title of these plantations in himself directly, or in an agent for him, would be immaterial, unless some marital right of tbe plaintiff is affected. Under tbe Civil Code of Porto Eico, § 1314, property owned before marriage by either spouse remains bis or her separate property.

“Sec. 1314. Tbe following is tbe separate property of tbe spouses: 1. That brought to tbe marriage as bis or her own. 2. That acquired by either of them during tbe marriage by titulo lucrativo, that is to say, by gift, devise or descent. 3. That acquired by right of redemption or by exchange for other property belonging to one of tbe spouses only. 4. That bought with •money belonging exclusively to tbe wife or to tbe husband.”

What Garrosi, therefore, owned before bis marriage would be, under tbe law, bis separate property. Tbe wife is concerned only in tbe property of tbe conjugal partnership, wbicb is defined in § 1316, P. E. Civ. Code, as follows: “To tbe conjugal partnership belong: 1. Property acquired for a valuable consideration during the marriage at the expense of the- partnership property, whether the acquisition is made for the partnership or for one of the spouses only. 2. That obtained by the industry, salaries, or work of the spouses or of either of them. 3. The fruits, income, or interest collected or accrued during the marriage, coming from the partnership property, or from that which belongs to either one of the spouses.”

There are some other minor provisions on the subject, which are not important in this case. It is true that by § 1322 “all the property of the marriage shall be considered as partnership property until it is proven that it belongs exclusively to the husband or to the wifebut the bill in this case and the evidence leave no doubt that the particular property attacked belonged to Garrosi before his marriage, and in such case it did not constitute property of the conjugal partnership, and therefore it is not liable to any claim on plaintiffs part for division. The husband is given the power of administration of conjugal property by § 1327, although he cannot sell the real estate without the express consent of the wife. Any act in violation of these provisions, or in fraud of the wife, is null. Civ. Code, § 1328.

The effect of the civil law, therefore, is that whatever either spouse owned before marriage remains his separate property, but whatever is the increase of that property above necessary expenses of maintenance and support of the family is to be considered as conjugal property and to be accounted for as such. It is probable that the plantations described in the bill have produced returns, it may be valuable returns. The parties hereto seem to have lived as if they had considerable means. It is therefore a proper conclusion that there is conjugal property of considerable amount; and the property should be either held intact to await future investigation by the local court, or a reference should be ordered by this court to determine the amount of the partnership property liable to the claim of the plaintiff, and in what form it exists.

12. A serious question arises out of the fact that the defendant Garrosi seeks to show that the case in the local court, to which this case in the Federal court is ancillary, has been decided adversely to the plaintiff. Of course, if the main case falls, an ancillary proceeding must fall with it. There is the difficulty involved, that this alleged decision was made May 16, 1916, and thus after the submission of the case at bar. No evidence can be introduced in a case after its submission. So far as the parties are concerned, the submission ends the case, and the decree of the court will for most purposes relate back at least to the submission. The evidence in question is different from ordinary evidence in that it does not so much supply a link in the chain as, if valid, it strikes out the chain altogether. Nevertheless, it must now be held, as it was when it was offered, that the decree of the local Ponce court cannot be considered. It is not relevant under the issue in the case, and is not set up by any pleading. It could become competent, if at all, only by setting aside the submission and by such supplemental pleading as would afford the court a ground upon which to proceed. Offered as it was by a mere motion to add a certain paper to the evidence, it could not be entertained.

It may be added that it is questionable whether the local judgment could be considered at all until the time for appeal to the local supreme court had expired. The obj'ect of the case in the Federal court is to discover and preserve the property of the defendant Garrosi until the claim of the plaintiff can be finally determined. It would be doing less than full justice to dismiss tbis case until a decree of tbe Porto 'Rican court of last resort bad been obtained, or tbe time bad expired witbin wbicb sucb appeal could be applied for. On this ground also it seems that tbe evidence offered cannot at present be received.

13. Tbe question of prescription can bardly be said to arise at tbis time. Tbis is not so much a case of setting aside a conveyance to one creditor in fraud of others, as of establishing a trust in property conveyed to another for tbe grantor’s secret use. It is obvious that tbe Statute of Limitations does not apply to something wbicb is continuous. If defendant Gonzalez bolds tbe property in question for tbe benefit of defendant Garrosi, and defendant Garrosi is receiving tbe proceeds, be is tbe owner now just as much as be was before tbe conveyance complained of. Tbe conveyance may be disregarded and tbe property in question treated as tbe property of Garrosi. Tbe Statute of Limitations in sucb case has not begun to run.

Tbis defense is in its nature preliminary, but until tbe facts have been examined it could not be determined what statute applied, or when it began to run. Hence it is considered last of all.

A decree will therefore be entered in favor of tbe plaintiff in accordance with tbe foregoing opinion.

It is so ordered.