Benitez v. United States, 3768.

• Citation: 141 F.2d 943
• Decision Date: 29 March 1944
• Docket Number: No. 3768.,3768.
• Parties: BENITEZ et al. v. UNITED STATES et al.
• Court: U.S. Court of Appeals — First Circuit

141 F.2d 943 (1944)

BENITEZ et al. v. UNITED STATES et al.

No. 3768.

Circuit Court of Appeals, First Circuit.

March 29, 1944.

Carlota Benitez Sampayo, pro se.

J. Octavio Seix, pro se.

Norman M. Littell, Asst. Atty. Gen., and Wilma C. Martin and Vernon L. Wilkinson, Attys., Department of Justice, both of Washington, D. C., for the United States.

Henri Brown, of San Juan, P. R., for Bank of Nova Scotia.

Before MAGRUDER, MAHONEY, and WOODBURY, Circuit Judges.

MAGRUDER, Circuit Judge.

This is a consolidated appeal from three judgments entered by the court below in the course of a condemnation proceeding.

On November 12, 1941, the United States, pursuant to the request of the Acting Secretary of the Navy, filed a petition for condemnation of land on the Island of Vieques, Puerto Rico, for immediate public use for security of fleet anchorage. The petition named as defendants numerous persons having or claiming interests in the six parcels to be taken. Among those so joined as defendants were Carlota Benitez Sampayo, and her husband J. Octavio Seix, on account of her claim to an undivided interest in parcels 1, 4, and 5, Juan Angel Tio and his wife, who were described as purported owners of these three parcels, and the Bank of Nova Scotia which was described as the holder of a purchase money mortgage thereon.

The District Court, on the same day that the petition was filed, entered an ex parte judgment on the declaration of taking which accompanied the petition, as provided by the Act of February 26, 1931, 46 Stat. 1421, 40 U.S.C.A. § 258a et seq. Later, on March 23, 1942, the court made findings of fact and conclusions of law, holding that Carlota Benitez Sampayo and her husband had no interest in the property, and entered judgment dismissing their claims. Thereafter, on September 8, 1942, the court entered its final judgment condemning the described properties to the public use of the United States, fixing the reasonable market value of the condemned properties, and allotting compensation among those found entitled thereto. These three judgments, entered on November 12, 1941, March 23, 1942, and September 8, 1942, respectively, are the ones now under review.

The only appellants are Carlota Benitez Sampayo and her husband. The former is the real party in interest, the latter being conceded to be merely a nominal party. Hereafter, when speaking of appellant, we mean to refer to Carlota Benitez Sampayo.

Parcels 1, 4 and 5 had formed part of the holdings of the Comunidad Jose J. Benitez e Hijos, in which appellant had a small fractional interest. The complicated affairs of this Comunidad have been before this court in many cases over the past five years. One not familiar with the background of litigation would perhaps find it difficult to unravel the tangled skein of argument and assertion contained in appellant's amended answer, covering 40 pages of the present record, and in her 225 pages of brief and reply brief.

The Comunidad had large holdings of land on the Island of Vieques, Puerto Rico, used for growing sugar cane and for pasturage. It also owned cattle, buildings, agricultural equipment, and held the capital stock of the Benitez Sugar Company, a corporation. The latter corporation owned a sugar factory, agricultural land, a large number of livestock, trucks, equipment, buildings, a railroad with locomotives and rolling stock, all on the Island of Vieques and devoted to the growing of sugar cane and the manufacture of raw sugar and molasses, and the transportation, marketing and sale of such manufactured products. The corporation also extensively financed the growing of sugar cane by independent "colonos", or farmers, under grinding contracts calling for the processing of such sugar cane at the corporation's sugar factory. Since 1917 the operations of the Comunidad and the Benitez Sugar Company had been conducted as a single and integrated enterprise devoted to the growing of sugar cane and the manufacture of that sugar cane and cane grown by independent farmers into raw cane sugar and molasses, and to the sale and transportation of the sugar and molasses.

The Comunidad had been constituted by contract between the widower and the heirs of Carlota Sampayo Guzman in 1917 and by successive renewals extended to July 30, 1935. In the course of business the Comunidad and the Benitez Sugar Company executed certain bearer notes secured by mortgages of real estate. These notes were pledged to the Bank of Nova Scotia as security for loans. On July 1, 1933, the Bank of Nova Scotia under the terms of a crop loan agreement with the Comunidad took possession of the properties and operated them for the account of the Comunidad and the Sugar Company, applying the net proceeds to the repayment of the crop loans. When the contract regulating the Comunidad expired on July 30, 1935, no partition or liquidation of the business was had, but the Bank continued the operation of the business as theretofore, until a receiver took over.

On October 20, 1936, the Bank of Nova Scotia filed in the District Court of the United States for Puerto Rico a bill in equity against the Benitez Sugar Company, and various persons, including the present appellant, individually and as members of the aforesaid Comunidad, seeking foreclosure of the aforesaid pledged notes and of a crop lien in satisfaction of various joint and several obligations of the corporation and the Comunidad.

Upon the filing of the bill for foreclosure a receiver was appointed. The receiver took possession of the properties of the integrated enterprise and operated the same under orders of the court. A final decree was entered on August 22, 1938, in favor of the Bank. The decree adjudged that the Comunidad and the Sugar Company were jointly and severally indebted to the Bank for $673,569.82 with interest; that the members of the Comunidad were individually liable in proportion to their respective participation therein, that of the appellant being a one-twelfth interest; that the members of the Comunidad in proportion to their respective liabilities, and the 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 the pledged notes and other securities. Provision was made for an eventual deficiency judgment.

Appellant's untimely appeal from this decree was dismissed by us in Benitez v. Bank of Nova Scotia, 1940, 109 F.2d 743. This decree was affirmed by us in an appeal by another member of the Comunidad in Benitez v. Bank of Nova Scotia, 1940, 116 F.2d 359. It was also upheld by us, as against attempted collateral attack, in an appeal by a third member of the Comunidad in Ferrer v. Bank of Nova Scotia, 1943, 135 F.2d 41.

After the entry of the equity decree of August 22, 1938, appellant on October 13, 1938, one hour before the foreclosure sale pursuant to said decree, filed in the District Court her petition as a farmer-debtor for composition or extension under § 75 of the National Bankruptcy Act, 11 U.S.C.A. § 203. In addition to her relationship to the farming operations of the Comunidad appellant based her claim to be a "farmer" on the fact that at her home in the city of Ponce, Puerto Rico, she had for several years engaged in raising and selling poultry and eggs. This farmer-debtor petition has had a checkered history, as to which much will need to be said throughout the course of this opinion.

The debtor's schedule of debts filed with her farmer-debtor petition listed her pro rata liability for all the debts of the integrated enterprise, the Comunidad and the Benitez Sugar Company, also a debt of $500 to her personal attorneys, and a trivial debt on account of the poultry business. The schedule of the debtor's properties listed all the specific real and personal property of the Comunidad and the Sugar Company, in which she claimed a one-twelfth interest. There was also listed an unspecified sum alleged to be owing the debtor by the integrated enterprise, the amount of which could only be determined on an accounting. In addition petitioner listed certain personal property wholly owned by her — household effects, $1,850, chickens and pigeons, together with lofts, poultry houses, supplies, etc., $1,199.

The petition was presented ex parte, and on the same day the acting judge of the bankruptcy court issued an order approving it as properly filed under § 75, and referred the same to a conciliation commissioner. In due course the debtor filed her inventory and proposal for extension. Having failed to obtain from creditors the requisite assents to her proposal for extension, the debtor on November 30, 1938, amended her petition and asked to be adjudged a bankrupt under § 75, subsection s. The debtor further asked that her property be appraised, her exemptions set aside, and "that she be allowed to retain possession or be placed in possession of all of the remainder of her property" under the conditions provided in said subsection s.

On December 1, 1938, the Bank of Nova Scotia as a creditor filed a motion to dismiss the petition under § 75 on the ground, among others, that the petitioner was not a "farmer". This motion raised a jurisdictional issue, and was set down for hearing, after due notice to the debtor. On January 3, 1939, the court rendered an opinion, filed findings of fact and conclusions of law, and decreed that the petition of the debtor be dismissed with costs.

Appeal was duly taken fom this decree of January 3, 1939, dismissing the farmer-debtor petition, but appellant obtained no supersedeas. We affirmed the decree on January 10, 1940. Benitez v. Bank of Nova Scotia, 109 F.2d 743, 747. We then held that the applicable definition of "farmer" was that contained in § 1(17) of the Bankruptcy Act, as amended by the Chandler Act, 52 Stat. 841, 11 U.S.C.A. § 1(17); and we were clear that under that definition the debtor, on...