Wallingford & Arango v. McCarty

• Decision Date: 17 October 1940
• Docket Number: Civ. No. 916.
• Parties: WALLINGFORD & ARANGO v. McCARTY.
• Court: U.S. District Court — Panama Canal Zone

69 F. Supp. 1000

WALLINGFORD & ARANGO v. McCARTY.

Civ. No. 916.

District Court, D. Canal Zone, Cristobal Division.

October 17, 1940.

COPYRIGHT MATERIAL OMITTED

Charles E. Ramirez, of Ancon, C. Z., for plaintiff.

W. C. Todd, of Christobal, C. Z., for defendant.

GARDNER, District Judge.

Plaintiff instituted this action seeking recovery against the defendant on two promissory notes.

In the complaint it is alleged that the plaintiff is a corporation of the Republic of Panama and that the defendant is employed by The Panama Canal at Cristobal in the Canal Zone.

The defendant undertakes to challenge the jurisdiction of this court and the sufficiency of the complaint by a pleading captioned "Special appearance on motion to dismiss for lack of jurisdiction."

The court recognizes that this motion is not the proper procedure to challenge the jurisdiction of the court nor to even test the sufficiency of the complaint. However, notwithstanding the caption of the motion, the motion states: "That the complaint filed in said action shows on its face, First, that the parties thereto, both plaintiff and defendant, have no official or business residence within the territorial limits of the Canal Zone Government, or reside therein for the purpose of any occupation or employment. Second, that the cause of action therein stated did not arise within said territorial limits. Third, that the party proceeded against has no property within said limits subject to the jurisdiction of the Canal Zone courts."

This motion is really a demurrer and the court has decided to treat it as such.

The cause of action alleged in the complaint is transitory, and a decision on the demurrer involves a construction of Section 121, Title 4, Canal Zone Code, which reads as follows:

"Civil actions or special proceedings between nonresidents.—No civil action or special proceedings shall be brought or proceeded with in the courts of the Canal Zone, in any case in which both of the parties, plaintiff and defendant, are alien nonresidents of the Canal Zone, and the cause of action is one which arose without the territorial limits of the Canal Zone, and the party proceeded against has no property within said territorial limits, subject to the jurisdiction of the Canal Zone courts.

"Neither shall any civil action or special proceeding be brought or proceeded with in the courts of the Canal Zone when both parties, plaintiff and defendant, though citizens of the United States, are found transiently within the limits of the Canal Zone, unless the cause of action is one arising within the said territorial limits, or the party proceeded against has property within the said limits, subject to the jurisdiction of the Canal Zone courts.

"This section shall not be construed to exclude from the jurisdiction of the Canal Zone courts cases between parties who have an official or business residence within the territorial limits of the Canal Zone Government, or who reside therein for the purpose of any occupation or employment, notwithstanding that they may not have acquired a permanent residence within said territorial limits."

This section of the Code was derived from an Executive Order issued by President Taft in 1910.

When this question arose the court was interested in knowing whether or not the section of the Code referred to above had ever been construed by this court or by the Circuit Court of Appeals. After investigation the court discovered that there had never been any construction of the entire statute by this court or by the Circuit Court of Appeals. The court did discover, however, that this section of the Code had quite an interesting legislative history. Taking this into consideration, the court called the attention of the Bar Association, the District Attorney's office and the office of the General Counsel of The Panama Canal to the matter pending herein and requested that if interested they file briefs herein or submit arguments to the court upon the hearing. The Bar Association and the District Attorney have filed briefs, amicus curiae, and in same they have clearly and accurately set forth the legislative history of this section of the Code. These briefs have been very helpful to the court.

The court will not unduly prolong this opinion by reciting in detail the legislative history because it is accurately set forth in the briefs referred to, which are on file herein.

However, the history in connection with the statute does show that from the time of the creation of the Canal Zone that there had been some controversy between the United States and the Republic of Panama as to the jurisdiction of this court, and that the Republic of Panama had from time to time expressed misgivings and fear that the courts of the Canal Zone would encroach upon the jurisdiction of the courts of the Republic of Panama.

It also appears that on December 22, 1909,¹ a corporation of the State of Louisiana instituted suit in this court against a partnership doing business exclusively in Panama under the firm name of Ehrman and Company; that summons was served on one of the defendants while she was ill and a patient in a hospital in the Canal Zone; and that service was also made on another defendant while visiting his sister in the hospital. Both were residents of the Republic of Panama and were merely in the Canal Zone for the purposes mentioned above. The action was transitory. The cause was heard by the First Judicial Circuit Court of the Canal Zone upon the defendant's plea to the jurisdiction of the court, and the case was dismissed for want of jurisdiction. The plaintiff thereupon appealed to the then Supreme Court of the Canal Zone. The Supreme Court reversed the case and held that the Circuit Court should have taken jurisdiction, citing Section 393 of the Code of Civil Procedure of the Canal Zone of 1907, which provided that transitory actions "may be brought in any circuit where the defendant or necessary party defendant may reside or be found, * * *." It appears that this decision precipitated a great deal of publicity in the newspapers and also very strong complaint on the part of the Republic of Panama. The then Governor of The Panama Canal recognizing the situation, and calling attention to the relationship between the Republic of Panama and the United States, suggested and recommended that the law be changed. Pursuant thereto, the Executive Order referred to, which is now incorporated in the Canal Zone Code, was prepared by the Legal Department of The Panama Canal and submitted to the President through the proper channels with memoranda and letters stating the situation, the reasons for the change, and also explaining the terms of the Order submitted. This legislative history and these documents clearly show the intent and purposes of the lawmakers.

While this entire statute has never been construed by this court or by the Circuit Court of Appeals, the court does find that in the case of Sigmund Bettelhiem v. E. G. Cornelius,¹ this court, in an opinion handed down by Judge Martin on the 21st day of January, 1927, undertook to construe this statute, and while the opinion quotes the entire section, it states that the decision in the case was controlled by the last paragraph of the statute, and nowhere in the opinion was there any attempt to construe the entire statute.

In that case the complaint alleged that the defendant was a resident of the Republic of Panama but was employed by The Panama Canal in the Canal Zone. There was a special appearance of the defendant and a motion to quash service of process, which was really a plea to the jurisdiction of the court. Judge Martin, in his opinion, stated that the cause of action arose, in the Republic of Panama and was there to be performed; that the plaintiff was an alien nonresident of the Canal Zone and resided in the Republic of Panama; that the defendant was an American citizen residing in the Republic of Panama, but that he was employed by The Panama Canal and during working hours was present and working in the Canal Zone.

Judge Martin, after quoting the second and third paragraphs of the statute, stated that the decision in the case was controlled by the clause of the third paragraph, viz., "or who reside therein for the purpose of any occupation or employment." The court then stated that the defendant was not a business man or officer, but an employee, and that both plaintiff and defendant resided in the Republic of Panama, and as the cause of action arose there and was to be performed there, that the court had no jurisdiction, and the action was dismissed.

In the opinion of this court the court erred in concluding that the case was controlled by the third paragraph of the statute. Instead, it was controlled by the second paragraph which prohibits suits by and between transients, and it is clear that the court's opinion absolutely ignored this paragraph of the statute. Obviously, if the defendant was regularly and permanently employed by The Panama Canal in the Canal Zone, he was not a transient.

The court also discovered that in the case of McFarlane v. McFarlane¹ the statute here in controversy was involved, and the defendant challenged the jurisdiction of the court by a plea. The court, in an opinion by Judge Martin, stated that the plaintiff and the defendant were alien nonresidents. However, it was also stated that the plaintiff lived in Colon, but that while working on the land in Gatun, Canal Zone (involved in the suit), he ate and slept there during the working days of the week. Judge Martin held that the action was transitory, and it does not anywhere appear that the plaintiff alleged or asserted that the cause of action was one arising within the Canal Zone. This clearly appears to have been the case, and should have determined the jurisdiction. The cause of action arose out of an agreement between the parties with reference to the cultivation of certain land in the Canal Zone on...