Rubert Hermanos, Inc. v. People of Puerto Rico, 3631.

• Citation: 118 F.2d 752
• Decision Date: 31 March 1941
• Docket Number: No. 3631.,3631.
• Parties: RUBERT HERMANOS, Inc., et al. v. PEOPLE OF PUERTO RICO.
• Court: U.S. Court of Appeals — First Circuit

118 F.2d 752 (1941)

RUBERT HERMANOS, Inc., et al. v. PEOPLE OF PUERTO RICO.

No. 3631.

Circuit Court of Appeals, First Circuit.

March 31, 1941.

COPYRIGHT MATERIAL OMITTED

Henri Brown, of San Juan, P. R. (Jaime Sifre, Jr., San Juan, P. R., on the brief; Arthur J. O'Leary, of New York City, of counsel), for appellant.

William Cattron Rigby, of Washington, D. C. (George A. Malcolm, of San Juan, P. R., and Nathan R. Margold, of Washington, D. C., on the brief), for appellee.

David A. Buckley, Jr., of New York City, amicus curiae.

Before MAGRUDER and MAHONEY, Circuit Judges, and HARTIGAN, District Judge.

MAGRUDER, Circuit Judge.

Complaining now of an order by the Supreme Court of Puerto Rico appointing a receiver, Rubert Hermanos, Inc., brings this case here a second time. Joined as appellants are five individuals as trustees in liquidation of the corporation. A brief résumé of the earlier phase of the litigation will help toward an understanding of the issues raised in the present appeal:

By joint Resolution of May 1, 1900, 31 Stat. 715, Congress enacted that every agricultural corporation thereafter organized in Puerto Rico "shall by its charter be restricted to the ownership and control of not to exceed five hundred acres of land." This provision was continued in effect by the revised Organic Act, 39 Stat. 951, 965, 48 U.S.C.A. § 752.

Rubert Hermanos, Inc., was organized under the laws of Puerto Rico in 1927, with articles of incorporation expressly containing the aforesaid restriction as to acreage. Notwithstanding the restriction, the corporation proceeded to acquire upwards of 12,000 acres of farming land in Puerto Rico.

In 1935 the Legislature of Puerto Rico passed Acts No. 33 and No. 47¹ to implement and add sanctions to the Congressional prohibition. The Supreme Court of Puerto Rico was by these acts vested with original jurisdiction of all quo warranto proceedings which might thereafter be instituted by the Government of Puerto Rico for violation of the 500-acre restriction.

Several months after the passage of the latter of these two acts, and pursuant thereto, the People of Puerto Rico commenced quo warranto proceedings in the Supreme Court of Puerto Rico against Rubert Hermanos, Inc., praying the court to adjudge the corporate franchise to have been forfeited, to decree immediate dissolution of the corporation, to impose a proper fine, and for other relief.

On July 30, 1938, the court gave judgment pronouncing that the defendant corporation was guilty of a violation of the aforesaid provision of the Joint Resolution and of its own articles of incorporation, and imposing a fine of $3,000. In addition, the judgment read: "The forfeiture and cancellation of the license of the defendant corporation and of its articles of incorporation is hereby ordered and decreed, as well as the immediate dissolution and winding up of the affairs of said corporation."

This judgment was reversed by us in Rubert Hermanos, Inc., v. People of Puerto Rico, 1 Cir., 106 F.2d 754. In turn, we were reversed on certiorari, Puerto Rico v. Rubert Hermanos, Inc., 309 U.S. 543, 60 S.Ct. 699, 84 L.Ed. 916, and the case was remanded to the Supreme Court of Puerto Rico for further proceedings not inconsistent with the opinion of the federal Supreme Court.

Mr. Justice Frankfurter, speaking for the court, said that "On the only questions now before us, we think the Supreme Court of Puerto Rico acted within the scope of power validly conferred upon it by the Legislative Assembly." 309 U.S. at page 550, 60 S.Ct. at page 703, 84 L.Ed. 916. But as the case was presented on that earlier appeal it is clear that the court did not have before it and did not intend to pass on the validity of so much of Act No. 47 as authorizes the People of Puerto Rico at its option, in the same quo warranto proceedings, to move for the confiscation² of unlawfully held farming land, or in the alternative, to move for the sale of such land at public auction. Nor was any question presented as to the procedure by which the People of Puerto Rico might exercise this option, assuming its validity. These questions would only arise if the People should elect to proceed with a confiscation or a public sale; but no such election had been made when the case came up before. In all three courts, Rubert Hermanos, Inc., sought to challenge the provision in Act No. 47 for confiscation or public sale as being an ex post facto penalty invalid under the Organic Act, 48 U.S.C.A. § 737. Counsel for the insular government persuaded the courts not to pass on this issue by pointing out, correctly enough, that the People had not asked for confiscation or public sale. Obviously this did not estop the People from subsequently moving for a confiscation or public sale, in accordance with the procedure prescribed in Act No. 47. Appellee has not taken inconsistent positions. The contention of appellants to the contrary is without foundation.

On May 13, 1940, the day on which the mandate of the United States Supreme Court was received by the clerk of the Supreme Court of Puerto Rico, appellee renewed a motion for the appointment of a receiver. This motion had originally been made on July 30, 1938, just after the judgment of dissolution was entered, but the Supreme Court of Puerto Rico held it in abeyance pending the outcome of an appeal from such judgment. The only ground for appointment of a receiver avowed in the motion was that "Such dissolution and disposition of the property of the respondent shall be entrusted to a receiver."

The motion was opposed by the corporation on various grounds, the first being that "The judgment of the court has been complied with. The corporation has been dissolved, its obligations have been extinguished and it has disposed of its properties by unanimous agreement of its stockholders and of the liquidators appearing herein." It seems that this had been accomplished two or three days after the decision in Puerto Rico v. Rubert Hermanos, Inc., 309 U.S. 543, 60 S.Ct. 699, 84 L.Ed. 916, was announced, March 25, 1940, by the simple expedient of transferring the properties of the corporation to a partnership composed of those who were its only stockholders.

By the order now appealed from, issued July 26, 1940, the court appointed a receiver. Authority for such appointment was found by the court to be impliedly conferred by Act No. 47 on two grounds: First, it is said, authority to decree the dissolution and winding up of the corporation necessarily presupposes power in the court to enforce compliance with its commands; appointment of a receiver is an appropriate way for the court to supervise the liquidation. Second, it is said, a receivership is necessary to preserve the status quo, pending decision by the People of Puerto Rico whether to exercise their option to confiscate the excess lands or have them sold at public auction. The court also found authority to appoint a receiver in § 182, paragraph 4, of the Code of Civil Procedure.

Though the insular government asked for a receivership to liquidate the dissolved corporation, the order does not direct the receiver to proceed with the liquidation but on the contrary contemplates the full operation of the business for an indefinite period. The receiver is directed to take possession not only of the land illegally held but also of all the other property of the corporation, movable and immovable, of every kind and description. He is to continue managing said properties and cultivating the lands, until further order of court, doing all that may be necessary to maintain and preserve the business established by the defendant corporation. Specifically, he is authorized to employ, compensate and dismiss workmen, servants, agents and attorneys; to purchase and pay for materials and accessories needed; to settle with creditors all claims in the ordinary course of business; to pay taxes; to initiate and defend all actions in behalf of or against the corporation; to institute all legal proceedings necessary for the purpose of obtaining possession and control of any property of the corporation; to "give all security which might be necessary to secure loans of funds in interest of the trust confided to said receiver by these presents." All moneys coming into the hands of said receiver as such are to be deposited in his name in one or more banks with the approval of the court, against which deposits the receiver shall have the right to draw by his personal order or by order of his agents. It is further provided that should the People of Puerto Rico request, in accordance with Act No. 47, the sale at public auction of the said properties, the receiver is authorized to proceed "in accordance with the plan which shall be submitted to the previous approval of this court or of the judge acting in the name of this court during its vacation, to sell said properties at public auction." In addition, it is ordered that the defendant, its directors, officers and agents, and all those persons, partnerships or corporations claiming any right by reason of the assignment or transfer made by the defendant corporation subsequent to the date on which the judgment of dissolution was entered, shall "refrain from disposing of conveying or selling in any manner movable or immovable property of which they might be in possession or which they may have under their control, and from interfering with or obstructing the receiver or impeding him in any form from taking possession of the said properties of said corporation."

Appellee moves to dismiss this appeal on the ground that the order appointing the receiver is interlocutory merely. Interlocutory orders appointing receivers have been appealable from the United States District Courts to the Circuit Courts of Appeals for many years. 31 Stat. 660, 28 U.S.C.A. § 227. But under 28 U.S.C.A. § 225, only "final decisions" of the Supreme Court of Puerto Rico are appealable to this court.

The...