217 U.S. 2 | SCOTUS | 1910
delivered the opinion of the court.
This appeal is taken to secure the reversal of a decree of the court below dismissing the bill of complaint. The court sustained its action by an elaborate opinion, and subsequently stated, in a formal way, its findings of fact and conclusions of law.
The evidence is not in the record, although a portion of the testimony is contained in the formal findings of fact, upon the theory that this was-necessary to preserve the right to review the action .of the court concerning objection urged by the defendants to the admission of certain testimony tendered on behalf of the complainants. The record, we are constrained to say, is unsatisfactory and confused, a condition which we assume has resulted from circumstances referred to by the court below in the opening passage of its opinion, as follows (3 Porto Rico, 3 25, 128):
“This is a creditors'' bill filed June 23, 1902, and permitted to remain on the docket of this court during the five years that have since intervened, without any apparent proper or sufficient cause for the unwarranted delay and with infinite inconvenience to many parties connected with the subject-
In order to in some measure dispel the obscurity which must arise from the circumstances just referred to we briefly state, in 'their chronological order, certain unquestioned facts which gave rise to the controversy, and also outline the pleadings and proceedings, the whole for the purpose of enabling us to adequately test the sufficiency of thfe errors assigned.
For many years the firm of J. Tornabells & Co., composed of Joaquin Tornabells and Carlos Doitteau, was established in Porto Rico and there carried on a mercantile business, The firm was the owner-of various trading establishments and warehouses, and was, besides, the owner of considerable real estate, embraced in which were extensive coffee plantations which the firm carried on, including the buildings, machinery and appurtenances incident thereto. It is not disputed that, presumably as the result of losses occasioned-'by a disastrous hurricane which devastated thfe island of Porto Rico the firm, prior to 1900, had become temporarily embarrassed, and,under .provisions of the local law, had obtained i'n a local court
On Mav 9, 1900, Tornabells & Co., by deed before a notary public, conveyed to Luis Aran y Lanci the following property, as stated by the court below: “Its place of business and other town property, its stock - of merchandise and twenty-six several pieces of real estate, most of them being coffee plantations and their appurtenances.” The stated price was 197,700 pesos, provincial money,-30,000 declared to have been paid in cash, and the remainder to be paid in ten installments of 16,700 pesos, bearing no. interest, maturing respectively from one to ten years. A few days thereafter, on May 11, 1900, Aran y Lanci mortgaged for 150,000 pesos nineteen of the twenty-six pieces of real estate thus conveyed to him. This mortgage was in favor of one Baudelio Duran y Cat and a firm styled Duran & Coll. The mortgage in favor of the first was for' 130,000 pesos, divided into' ten annual installments of 13,000 pesos each, evidenced by' notes to the order of the mortgagee, maturing in each of the ten years, the whole being secured on fourteen of the twenty-six pieces of real estate. The mortgage in favor of Duran & Coll, was on five of the pieces of real estate acquired as aforesaid, and secured twenty thousand pesos, divided into five installments of four thousand pesos each, maturing in each of five years. These mortgages were not indivisible, as the amount of each was apportioned among the various pieces of real eátate, so that each piece was liable only for thé sum secured on it. .The sale to Aran y Lanci was recorded on May 21,. and the ibortgages just stated
The bill — which was not sworn to — was originally filed oh behalf of three commercial firms, Will & Co. of Cuba, David Midgley & Sons of Manchester, England, and Ramon Cortado & Co. of Ponce, Porto Rico, and the members of-said firms, in their own behalf and in behalf of. all others similarly situated who might intervene in the cause.' It was alleged that the complainants were creditors of the firm of Tornabells & Co. at the time of the conveyance to Aran y Lanci and. the execution of the mortgages by Aran y Lanci above recited, and that subsequent to said transactions the claims of the. complainants had been merged into judgments against the firm, obtaine'd in the court where the bill was filed, and that on such judgments executions had issued and been, returned unsatisfied. It iyas’ further alleged that the conveyance made by Tornabells & Co. to Aran y Lanci, and the mortgages put by the latter upon the property ip favor of Duran y Cat, and the firm of Duran & Coll, were fraudulent simulations, and that the property covered by the. conveyance and the mortgages continued to belong to the firm; and was held by Aran .y Lanci under a Secret trust in favot. of Tornabells & Co., the con
Separate sworn answers-wére filed on behalf of the members of the firm of Tornabells & Go., traversing the allegations of insolvency and of simulation and fraud, both as respected the conveyance to Aran y Lanci and the mortgages executed by the latter. The answers couvNiC aSim ative allegations as to the good faith of the ce'^veyanoe to Aran y Lanci, the adequacy of the consideration c rd lull payment thereof prior to the commencement '•* anit., The taping possession by and the exclusive control i: ¡ \ pimir.gement of the property conveyed, and receipt-of .a l~d£s u),em:£ by /..ran y Lanci for his exclusive use ai.ó was ala./ averred. An answer
On October 31, 1904, the firm of L. W. & P. Armstrong of New York City, unsecured creditors of Tornabells & Co., were made parties complainant to the bill. Thereafter, Ruffer & Sons, a firm doing business in London, England, and the Caja de Ahorros de Mayaguez, a Porto Rican corporation, as creditors of Tornabells & Co., were also allowed to intervene and become parties complainant.
Early in 1905 Tornabells died and the cause was revived as to .him against his widow and children as his heirs. In November of the same year Aran y Lanci died, and the cause-was revived against his widow, as administratrix of his estate. Doitteau, the surviving partner of Tornabells &. Co., died on January 22, 1907, and the cause was revived against his widow and children.
Duran y Cat, an original defendant to the bill — in whose favor, as we have stated, Aran y Lanci had mortgaged fourteen pf the pieces of real estate for 130,000 pesos — was. hot served with process and did not enter his appearance. He also died during the pendency of the cause. On February 12, 1907, upon motion of the complainants, an order was entered dismissing the cause as to the heirs of said Duran y Cat, “■on the ground that said heirs, being out of the jurisdiction and having entirely disposed of their interest in 'the cause, are not indispensable parties thereto.”
Journal entries are contained in the record, showing that moré than a dozen firms or individuals became additional defendants in the cause. The time when they came in and the nature of the pleadings by them filed or the proceedings had concerning their rights do not distinctly appear. It is, however, fairly inferable that these new defendants came in long after the commencement of the suit, either during or
Answers'or amended answers were filed on behalf of the. widow and administratrix of Tornabells, and by the guardian ad litem, who .was appointed for his minor'children. An answer was also filed on behalf of the widow and administratrix and minor children of Doitteau. This also was the case as to the widow and administratrix of Aran y Lanci. These various. apswers were substantially in accord with those which had been previously filed on behalf of the original defendants, except that in one of them the prescription of one year was pleaded. It is. inferable from the record that at this stage of the proceedings, or at all events at a time not earlier than four years after the commencement of the suit, certain persons • who had acquired rights in or to the property, either directly from Aran y Lanci or through the mortgage executed in favor of'Duran y Cat and Duran & Coll, sought to enforce their claims afid were enjoined from so doing. At about the same time a receiver was appointed. The record is silent, however, as to whether the receivership was intended to apply to' all the property in controversy or whether the receiver attempted to take possession under his appointment, although it. would seem that to some extent he did so, since by the
It came at last to pass in the spring of 1907 that the cause was heard and taken under advisement. It was disposed of in the summer of that year by the entry of a final decree dismissing the bill, and was followed nearly six months thereafter, on December 19, 1907, by the making of formal findings of. fact and conclusions of law applicable thereto.
The facts found are embraced in fourteen numbered paragraphs. The first merely states in general terms the filing of the bill, makes allusion to the complicated' proceedings which followed, the dismissal as to some of the defendants (presumably the heirs of Duran y Cat), the coming in of other parties, the ultimate joinder of issue and the submission of the cause. In the second is stated the fact that evidence was heard on behalf of the complainants and the submission of a motion for a decree dismissing the bill on two grounds, viz., the failure to prove the allegations of the bilí and the prescription of one year. The third finding is as follows:
“3. The documentary evidence introduced on behalf of complainants and the testimony of all the witnesses do not prove the allegations of the bill so as to entitle the complainants to a decree in their favor declaring the conveyance from defendants Tornabells & Co; to defendant Aran, and the mortgage from defendant Aran to defendants Duran y Coll and Duran personally to be voluntary or made to hinder and delay the complainants in the collection of their debts.”
The fourth, fifth, sixth, seventh, eighth and ninth paragraphs, in a summary way, find substantially, as we have stated them, the facts concerning the conveyance by Torn-abells & Co. to Aran y Lanci, the execution of the mortgages in favor of Duran y Cat and Duran & Coll, and. the divisibility of. those mortgages, as well as the fact that'the claims upon which the complainants sued, although in existence, were not reduced to. judgment until some time after, the execution of the conveyance and mortgages in question. In
Prom the facts tlu^s found the court drew the following conclusions of law:
“1. That the proof on behalf of complainants is not sufficient to entitle them to any relief under their bill of complaint.
n2. That there is not now, and never was, any such statute in Porto Rico as the statute of 13th Elizabeth in England, referring to fraudulent conveyances, because we have the civil law rule here instead of the common law. Every State in the Union has a reenactment of the statute of Elizabeth in some form or other among its laws. In the absence of it there is no rule of' law preventing a debtor, even when insolvent, for even that does not take from him the power of disposition of his property, and paying his debts with it, or a portion of his debts, and preferring one or more of his creditors with absolute intent to hinder, delay or even to defeat other creditors. If the favored creditor receives no more than is due him, and permits the debtor to secure no advantage to himself, the transaction will be upheld.
“3. That the statute of limitations of one year, as fixed by article 37 of the mortgage lav/, is applicable to suits like the one at bar.
“4. That complainants, under the pleadings and proofs' herein, are not entitled to subject the properties described in the bill of complaint herein to any lien, interest or decree, by. which the complainants would be entitled to’have the conveyance and mortgages described .in said bill of complaint can-celled and annulled for the benefit of the said complainants.
“5. That the bill of complaint should be dismissed.”
•These conclusions were followed by the reproduction of portions of the testimony to-presgrve the right to review cer
The assignments of error are seven in number. The seventh we at once put out of view, as it only charges generally that the court erred in dismissing the bill of complaint.
The sixth, fifth and fourth assignments concern rulings as to the admissibility of testimony, and the third complains of the action of the court maintaining the plea of prescription of one year. As these assignments cannot be disposed of without in some respect appreciating the merits, we temporarily forego considering them.
The remaining assignments, that is, the first and second, are as follows:
/'First, the court erred in finding as matter of law that in Porto Rico there was no rule of law preventing a debtor, even though insolvent, from preferring one creditor over others with absolute intent to hinder, delay-or even defeat the just claims of said others.
“Second, the court erred in finding as matter of law, from the facts found, that the above rule of law was applicable and in not finding as .matter of law that the applicable rule was that a debtor could not transfer his property without any consideration for-the purpose of delaying or defeating the just claims of his creditors.”
It is apparent that these propositions assert that a twofold error was committed, first, in not applying to the facts as found the legal principle rightfully applicable; and, second, by erroneously stating the law in the irrelevant proposition which was mistakenly applied in deciding the cause. The first contention rests' upon the theory that the facts found established that the conveyance and mortgages which the bill assailed were mere fraudulent simulations, and upon'this ‘ assumption insists that the case should have been controlled by the law applicable to that state of fact instead of being governed, as it was, by considering how far, as a matter of law, a debtor, being insolvent, had,a right, through a real and
We think it is also clear that the second proposition, of law which the court announced, that is, the right of a debtor under the Porto Rican law;, although insolvent,. to give a
Indeed, unless the appreciation which we have just made of «the findings and the conclusions of law deduced therefrom be correct, it would cause the findings of fact to be absolutely silent on the issue of simulation, although that issue was the controlling one in the cause, an issue indeed so essential that it is impossible to conceive that the causé could have- been disposed of on its merits without a finding on the subject. But if the findings could be thus envisaged the inquiry would be at once suggested whether they were not so manifestly irresponsive to the case as made by the pleadings and to the facts necessarily involved in the decision rendered as to cause them to-be no findings at all, and therefore to require at our hands an affirmance of the judgment because of the substantial absence of any finding to enable us to review. Gray v. Smith, 108 U. S. 12. ' Concerning this suggestion, however, we express no opinion, since we do not consider that the findings are of the unsubstantial and irrelevant character which would result from attributing to them the construction contended for by the appellants.
The substantial foundation upon which the cause was.based, that is, the issue as to the simulation of the conveyance to Aran y Lanci and the mortgage to Duran y Cat and the firm of Duran & Coll being disposed of, the remaining contentions are free from difficulty. We say this because, although it is elaborately insisted that putting the question of simulation out of view, the court was wrong in its second legal conclusion, to the effect that the law of Porto Rico did not avoid a real and otherwise valid contract merely because its result was to prefer one or more creditors of .the. debtor making the contract, we think such contention is shown by the record to be an afterthought, or if not is unsupported by the provisions of law which are cited to maintain it. An afterthought because the entire theory of the bill was' opposed to the conception that the assailed transactions merely embodied preferences giving rise to a revocatory action that is merely to have an otherwise valid contract revoked. Indeed, it is difficult to imagine-that the action in any aspect was considered as but revocatory in character when it is borne in mind that although the mortgage in favor of Duran y Cat' covered fifteen pieces of real estate securing 130,000 pesos, he was not served with process, and after his death, on motion of the complainants, the cause was dismissed as to his heirs, upon the theory that they had no interest in the result. We say that the contention as to preference, if not an afterthought, is unsupported by the provisions of law relied upon,
The foregoing considerations cause it to be unnecessary to pass on the error which it is alleged was committed in maintaining the plea of prescription of one year. It remains therefore only to dispose of the errdrs based upon the action of the court in disposing of objections to testimony. They relate to two subjects, the first to objections made to the admissibility of the testimony of Mr. Cornwell, one of the attorneys of record, of. the.-complainants, concerning statements made to him by members of the firm of Tornabells & Co. in reference to their intention to dispose of or mortgage their property, and the other to the testimony of the same witness concerning statements made to him by the widow of Tornabells after the death of her husband, and during the pendency of the. cause, as to alleged conversations had by her with her husband tending to show the simulation of the contracts which were assailed.To pass upon the contentions on these subjects a statement of what transpired at the time the- evidence in question was proffered and of the action -of the court thereon is essential. While testimony was being taken in open court Mr. Cornwell, one- of the attorneys for the complainants, was offered as a witness on their behalf. It developing at once from the-questions put to him that the purpose was to draw from the witness statements made to him by the members of the firm of Tornabells & Co. shortly before the assailed conveyance and mortgage were executed, objection was made that such statements, were incompetent, because at the time they were made Cornwell was the attorney for the firm and its members, and therefore the statements, were not admissible because privileged communications. Thereüpon the examining counsel, while not denying that at the. time the statements were made the relation of attorney and client existed, insisted that the
“Mr. Dexter: I desire to except against that ruling.
“The Court: Give an exception to, all counsel that wish it.
“Mr. Dexter: I want my objection to clearly appear: (1) It is incompetent because of the relation of attorney and client;
(2) It is incompetent under the United States statute; and
(3) Because of the party being dead.
“Mr. Boerman: I want an exception to every question given.”
The witness Cornwell was then recalled and was fully examined and cross-examined, not only in regard to / the-alleged statements, but as to his professional relations with the firm of Tornabells & Co. when the statements as to which he testified were made, and thereafter up to or nearly about the time of the bringing of this suit.
Beyond question, the testimony established that: the witness had been- the confidential legal adviser of the firm of Tornabells & Co. up to and at the time when the statements as to which' he testified were made. Without reproducing the testimony as to the statements, we think it suffices to say that on the examination-in-chief of the witness he repeated a conversation had with both members of Torna-. bells & Co. a short while before the making of the convéyance to Aran y Lanci and tlie mortgage by the latter of the property, which conversation was occasioned by the fact that the members of the firm called upon the witness as their legal adviser, either to consult him or to. state to him the purpose of the firm to convey or mortgage its property, and that the witness, on his examination, stated that he construed the statements made to him by his clients as unfolding a purpose on their part to make a simulated transfer of their property to defraud their creditors,,and that he, the witness, declared he could not represent them in the. matter or have anything to do with it. The second statement testified to a conversation had with Doitteau, one of the members of the firm, after
“As appears from the above the coürt tentatively allowed the foregoing evidence of said witness Cornwell to be admitted, but subsequently, upon the consideration of the testimony as á whole and upon making its findings of fact and law and rendering its decision herein, the court did determine and rule that defendants’ objections to the testimony of said witness, Cornwell, in so far as- same related to conversations ■between said witness and Joaquin Tornabells, Carlos Doitteau and Luis Aran, should be sustained and said testimony excluded, because the plan outlined by - said Tornabells during said conversation did not constitute a fraud upon creditors under the laws of Porto Rico at that time in force, hence'the privilege existing as to confidential communications between attorney and client was applicable thereto, and further, because such testimony- involved admissions, of a dead man against the interests of his own heirs, who are parties to the suit.”
It is upon this statement that the contention is based that the court illegally ■ rejected the testimony of the witness Cornwell. But, when the statement is accurately considered, it -appears that instead of rejecting the testimony the court weighed and considered it, and but declared that on its face it did not tend to establish a fraud within the meaning of the Porto Rico law, and hence that the statements were privileged. As the fraud on the part of the firm of Tornabells & Co. which was charged in the bill, and the fraud which it was insisted was demonstrated by the statements made to the witness were in substance one and the same, it necessarily follows that the finding of the court, that the statements .testified to did not tend to show the fraud which it was asserted they did show,, was but an expression of the conclusion of the court upon the facts involved in the merits of- the controversy, oand therefore is embraced in its finding of fact which we may not review. If, -however, we could otherwise consider the action of the court, we aré -constrained to say, upon an examination of the
The error which it is insisted the court committed as to the statements of the widow of Tornabells need only be briefly noticed. In the course of. his examination the witness Corn-well was asked concerning statements made to him by Mrs. Tornabells of conversations which she stated she had with her husband, tending to show that the assailed contracts were simulated, the statements to the witness having been made after the death of Mr. Tornabells. In reference to the motives which induced Mrs. Tornabells to make to him the statements about which the witness was asked, he said that she represented herself to be ih great pecuniary distress and was desirous of ascertaining whether she and her children could not in some way be benefited if the pending suit assailing the conveyance and mortgage of the property was successful. Indeed, on cross-examination, the witness said:
“Q.' Is it a fact, Mr. Cornwell, that a contract was made between your firm and this woman to give her either money or property?
“A. If it was, it was made afterwards by Judge Pettingill and Mr. Horton.
“ Q. I am asking you if it was.
“A. I don’t know. I am out at the mill the most of the time.”
On objection being made to the witness testifying to the statements of Mrs. Tornabells as to the conversations with her deceased husband, the court declared that the objection would be overruled -pro forma, with a right to sustain it later, and gave counsel for the defendants an exception. Thereupon the counsel for the complainants declared as follows:
“I want to get on the record that it is not claimed by the complainants that this statement, whatever it may be, made
After this declaration the witness testified as to' the statements made to him by Mrs. Tornabells concerning conversations with her húsband, the substance of which tended to show that the assailed contracts were fraudulent simulations. Although the testimony was thus in the case when it was submitted to the court for decision, in its certificate appended to the statement of facts to which we have already referred •the court said that in disposing of the case it, in effect, concluded that the statement by Mrs. Tornabells as to the conversations with her husband were inadmissible, because they were hearsay, Mrs. Tornabells not having been called as a witness, and because, in any event, it was incompetent to establish the want of good faith in written contracts -made by a deceased person by repeating conversations had with him during his lifetime. Conceding that the action of the court can be. construed- as indicating that it rejected .the testimony instead of simply weighing it, and found it insufficient to prove the alleged fraud, we think it suffices to say, • without further elaboration, that the reasons stated by the court are, on their face, adequate to sustain its conclusion. Besides, ás the testimony of the witness Cornwell concerning the statements made by the widow Tornabells was offered only as against her-and her children and not against the other defendants, it clearly results that no prejudicial error could in any event have resulted from the ruling, even on the hypothesis that the administratrix was competent by a mere admission to injuriously affect the .estate of her minor children, which the court made, in view of its finding as to the rights of the other defendants.
Affirmed.