Higinio Romeu v. Roert Todd

• Decision Date: 27 May 1907
• Docket Number: No. 269,269
• Citation: 206 U.S. 358,51 L.Ed. 1093,27 S.Ct. 724
• Parties: HIGINIO ROMEU, Appt., v. ROERT H. TODD
• Court: U.S. Supreme Court

206 U.S. 358

27 S.Ct. 724

51 L.Ed. 1093

HIGINIO ROMEU, Appt.,

v ROERT H. TODD.

No. 269.

Submitted April 19, 1907.

Decided May 27, 1907.

Mr. Frederick L. Cornwell for appellant.

Mr. N. B. K. Pettingill for appellee.

[Argument of Counsel from pages 358-361 intentionally omitted] Mr. Justice White delivered the opinion of the court:

Robert H. Todd obtained a judgment in the United States provisional court of Porto Rico, in the year 1900, for the sum of $2,946.05, against Pedro and Juan Agostini, and execution to enforce the same was rereturned nulla bona. Thereupon Todd, in 1901, filed a bill in equity in the United States court for the district of Porto Rico against the judgment debtors (the two Agostinis) and one Ana Merle for the purpose of enforcing the judgment upon certain real property of which Ana Merle stood upon the public records as the owner. The ground was that the property had been paid for with the money of the Agostinis and was hence liable to be applied to their debts. Without further detail it is only necessary to say that the court decreed that a certain parcel of land described in the bill had been purchased by Ana Merle with funds belonging to Pedro Agostini, and said Agostini 'was the owner of the equitable and beneficial title of the same.' And it was ordered that, to pay the indebtedness to Todd, the property, with the improvements thereon, be sold at public sale by a commissioner appointed for that purpose. Whilst this suit was pending, before decree, the piece of real estate embraced by the decree was sold by Merle to Higinio Romeu, the plaintiff in error. The present bill was filed on behalf of Romeu against Todd to enjoin the sale of this piece of property. The bill alleged the bringing of the Todd suit, the purchase by Romeu pending such suit, the decree rendered therein as above stated, and the fact that the decree was about to be executed. It was averred that the purchase by Romeu had been made for an adequate consideration, with the utmost good faith and without knowledge of the pendency of the Todd suit; that the property, since it was bought by Romeu, had been largely improved by him, and tha, as no cautionary notice concerning the Todd suit, as authorized and required by the law of Porto Rico, had been put upon the records, the property acquired by Romeu under the circumstances alleged was not subject, in Romeu's hands, to the Todd decree. A temporary restraining order was allowed. The bill was demurred to on two grounds,—first, that it stated no cause of action, and second, that, admitting all its averments to be true, as the property was bought whilst the equity cause was pending, the purchaser took subject to the lis pendens. The demurrer was sustained, and, Romeu electing not to plead further, a final decree was made dismissing the bill.

The court below, in its opinion, assumed that, under the local law, a third party in good faith purchasing from or dealing with the registered owner of real estate, without notice in fact of the existence of a pending suit concerning the title to property, was not to be treated by operation of law as constructively notified of the pendency of the suit unless the cautionary notice which the law of Porto Rico required to be put upon the record was given. But, whilst so declaring, it was nevertheless decided that the local rule of real property referred to was not controlling in this case. This ruling was based upon the conception that the constructive notice resulting from a suit in equity in the United States court for Porto Rico was to be imputed, irrespective of the positive requirements of the local law. The court said:

'As this is a proceeding on the equity side of the court it is governed by the principles of equity followed by the Federal courts, as distinguished from suits at law, where local statutes are adopted. As local laws have no binding force upon the United States courts in matters of procedure in equity and maritime law, the laws of Porto Rico relating to filing of notice of lis pendens have therefore no application in this case, and the sufficiency of this bill must be determined by the rules and principles followed in like proceedings in the courts of the United States. Stewart v. Wheeling & L. E. R. Co. 52 Ohio St. 151, 29 L.R.A. 438, 41 N. E. 247.'

Proceeding then to apply what is deemed to be the conclusive force of decisions of this court, it was held that the pendency of an equity cause in a court of the United States affecting real property constituted constructive notice as to third parties, and was therefore operative against those dealing with the owner as to such property, in good faith, any rule of state law to the contrary.

In the argument at bar on behalf of the appellee the correctness of the ground upon which the court based its decision is insisted on as follows:

'The main contention of appellant, however, seems to be that even courts of equity of the United States in a state are bound by the statutory provisions for recording a lis pendens when such provision has been enacted in such state. But in this contention counsel fail to distinguish between cases of law and cases in equity . . .'

Nevertheless, in substance, it is contended that, even if the court below was wrong in its reasoning, it was right in its conclusion. This rests on the proposition that the court mistakenly assumed that the local law provided for a notice of the pendency of suit of the character of the Todd case, and protected an innocent purchaser where a notice was not given.

That issue arises, therefore, and as it underlies the question whether the court should have applied the local law, we come first to ascertain the local law concerning notice and its effect.

It appears certain that by the ancient Spanish law the sale or the dismemberment by mortgage of the ownership of real property which was involved in a pending litigation was forbidden. Law 13, title 7, Part. 3; see also Resolution of November 29, 1770, referred to in commentaries upon the Spanish mortgage legislation by D. Leon Galindo y De Vera, 1903 ed., vol. 2, p. 594. The result was that acts done invi olation of the prohibitory law were void, even as to innocent third parties. But, as pointed out by the author just referred to, the prohibition in question was omitted from the Spanish Civil Code, and therefore the right to deal with real property involved in a pending litigation was no longer prohibited. And when the comprehensive system known as the mortgage law came to be adopted, the power of the record owner of real property involved in litigation, to mortgage or contract concerning the same, was not left to the implication resulting from the disappearance of the ancient prohibitions, but was expressly recognized by articles 71 and 107 of the mortgage laws. D. Leon Galindo y De Vera, in his commentaries, considering the provisions of the mortgage law concerning the power of the owner of real property to deal with it pendente lite, and of the right of the plaintiff in a suit affecting such property to obtain a cautionary notice, and his duty to record the same in order to affect third parties, points out that these provisions were the natural result of three considerations: respect for the rights of property, regard for the rights of one seeking redress in the courts against such owner, and solicitude for the public interest. Because of the first the owner was not deprived of his right to dispose of his real property merely because a suit relating to the same had been brought against him, but was left free to make contracts concerning the property, if anyone could be found willing to do so, and thus assume the risk of the pending litigation. On account of the second consideration a means was provided for giving a notice by which one who brought suit would be able to secure the results of an ultimate decision in his favor. Because of the third, those dealing in good faith, in reliance on public records, were protected from the risks of pending suits unless the cautionary notice was made and recorded according to the statute.

That the essence of the statute was the protection of innocent third parties dealing with the recorded owner when no cautionary notice had been given is obvious. Answering the contrary contention, D. Leon Galindo y De Vera says (p. 192):

'That is not so; if the mortgagor has on the record the ownership of the properties in litigation and those who claim the properties have not made the cautionary notice on the register, and the writing establishing the mortgage does not show that the properties are in litigation, the debtor can freely mortgage them, and the mortgage will have effect, even when the decision of the case is in favor of the plaintiffs, declaring that the ownership of the properties mortgaged belengs to them.'

See articles 71 and 107 of the 'Mortgage Law for Cuba, Porto Rico, and the Philippine Islands,' War...