
    BERWIND WHITE COAL MINING COMPANY, Complainant, v. BORINQUEN SUGAR COMPANY, Dft.
    San Juan,
    Equity,
    No. 897.
    As to Rents or Property in Receiver’s Hands.
    Corporations — Limitation on Control of Land.
    1. An individual cannot complain of a corporation because it controls more than 500 acres of land contrary to the provisions of the Joint Resolution of May 1, 1900, of the Congress of the United States, because this is a question to be determined solely upon complaint of the government, if at all.
    Receivership — Reorganization—Opposing Creditors.
    2. Because certain creditors of a corporation in the hands of a receiver opposed the plans of the reorganization committee, and also the sale of the property under the reorganization, they are not not therefore' deprived of their status as creditors and of their right to oppose any irregularities which they deem to have been committed or to be imminent in carrying out the reorganization plan.
    
      Note. — As to right of private person to contest power of corporation to take or hold property, see notes in 32 L.R.A. 293; 9 L.R.A.(N.S.) 689; 33 L.R.A.(N.S.) 355; 46 L.R.A.(N.S.) 72.
    
      Receivership — Rents from Leased Property — Date of Accrual of Rents.
    3. The property of a corporation in the hands of a receiver was leased and the property afterwards sold at public sale by order of the court, which sale was later confirmed. Held, that the rents in the hands of the receiver proceeding from the lease of the property relate back to the date of the purchase and belong to the purchaser of the property.
    Opinion filed June 16, 1915.
    Statement of Facts.
    In tbe course of tbe proceedings on tbe creditors’ bill in this cause, tbe main property of tbe defendant was sold on October 6, 1914, to satisfy the second mortgage and other preferred claims, and bought in by a committee of bondholders and others, known as tbe [Reorganization Committee. Different questions connected with tbe master’s report of sale have been passed upon, but its full confirmation has béen awaiting the proposed reorganization of tbe property and its creditors, for which due provision was made by tbe decree of this court. Thereafter, on December 29, 1914, a further decree was entered for a deficiency judgment and sale of tbe remaining property of tbe company, containing provisions similar to tbe first decree. A sale was bad under this decree on February 8, 1915, and in this, as in tbe previous instance, tbe property was bid in by tbe representatives of tbe reorganization plan. Tbe second sale was for tbe sum of $75,000 in bonds and common credits plus claims allowed priority by tbe court. Different proceedings have been bad upon tbis sale also, and its confirmation has awaited tbe proposed reorganization. On March 15, 1915, without any special notice to other parties except tbe receiver, tbe Reorganization Oommittee, representing tbe great bulb of tbe creditors, petitioned tbe court, stating that a reorganization corporation, called tbe Central Pasto Viejo, Incorporada, bad been organized in conformity with law, and tbe matter was set down for bearing. Thereupon, on tbe 26th and 27th of March, tbe said sales were confirmed to tbe Central Pasto Viejo, In-corporada, as tbe successor of tbe Reorganization Committee, and tbe purchaser was allowed until October 15, 1915, to complete tbe details of reorganization. On April 10, 1915, tbe petitioners or movants herein, Chase Ulman et al., filed an application seeking that tbe orders of confirmation be set aside because tbe terms set forth in tbe petition upon which the sale was confirmed, vary from the bids heretofore made. Tbe grounds for tbis application are (1) that tbe term of payment has been so extended (2) that tbe reorganization plan contemplates tbe use of tbe fund in tbe bands of tbe receiver for the payment of tbe preferred claims, whereas by tbe terms of tbe bids tbe purchasers were to pay tbis money themselves, and (3) that tbe, new corporation would thereby come into tbe ownership or control of more than 500 acres of land, contrary to tbe joint resolution of May 1, 1900.
    
      Messrs. Savage & Francis for Ulman et al.
    
      Mr. Jorge Dominguez for Central Pasto Viejo, Incorporada.
    
      
      Mr. Ghas. Hartzell for receiver.
   HamiltoN, Judge,

delivered tbe following opinion:

Tbe motion is overruled as to tbe last ground. Tbe matter of acreage controlled by corporations bas more tban once been determined by this court to be one for tbe government, and not for individuals to complain of, if at all. Tbe other points require fuller consideration.

1. Tbe Reorganization Committee contends that tbe applicants have no standing iu court, inasmuch as they have opposed reorganization iu all its phases, and cannot now be permitted to claim under tbe reorganization. ■ This does not seem to be well taken. Tbe applicants have been merely exercising their legal rights. They bad tbe right to oppose tbe sales when made. It is true that at that time they could not have set up any claim under tbe sales, but that time is past. Tbe sales have been confirmed aud tbe applicants as nonassenting creditors must, under tbe terms of tbe decree, receive their share of tbe proceeds in cash. They have now become creditors under tbe reorganization instead of opponents of tbe reorganization, and have tbe right to oppose any irregularities which they deem to have been committed or to be imminent in carrying out this plan. Tbe court would have no right to punish them for not assenting to tbe scheme, nor would it have tbe wish to do so if it bad tbe right.

2. These creditors, however, have no more vested right to tbe details of tbe reorganization scheme tban other creditors. It bas seemed expedient to tbe court, in view of all tbe circumstances of tbe case, to allow about six months more to work out all tbe details of tbe reorganization. Where there are a number of conflicting interests to be consulted, some at a distance, relating in part to a not only manufacturing, but an agricultural and transportation, business, tbe court is not willing to force tbe large majority in interest to proceed faster than they find practicable. Control of details of tbe reorganization was necessarily retained by tbe court, and tbe court has, in its discretion, extended tbe time. If there was any error in not notifying tbe dissentient minority of tbe application for extension, that has been cured by this minority coming in voluntarily and making opposition. Having beard them, however, tbe court sees no reason to change tbe decree so far as relates to the extension of time.

3. Tbe remaining ground of tbe motion raises tbe question, to whom belong tbe rents which have accumulated in the bands of tbe receiver under orders previously made by tbe court approving tbe lease of tbe property for tbe past season to what is .known as tbe Federal Syndicate? Tbe argument of tbe applicant herein is that tbe [Reorganization Committee needs and seeks this fund, amounting to some $60,000, in order to carry out tbe scheme of reorganization, while tbe applicants contend this fund was not applied for or granted to tbe re-organizers in any of tbe decrees of tbe reorganization plan. It would therefore, on this view, be an unexpected asset, belonging to tbe defendant company, and should be distributed among its creditors. Tbe [Reorganization Committee having agreed to take care of all preferred creditors, tbe applicants seek to have tbe rent fund distributed to tbe common creditors, that is to say, to themselves amongst others, on tbe theory that they will get only a percentage on bonds from tbe reorganization, and will remain common creditors for tbe unpaid large percentage of sucb bonds.

On tbe other band, tbe Reorganization Committee contend that, having bought all other assets of tbe defendant, tbe rent as an incident of tbe real property also goes to them. Tbe two contentions therefore raise tbe question, To whom shall go tbe rent of real property held in receivership %

A receivership is a temporary status, whereby tbe property is kept in statu quo for tbe benefit of the person to whom it may ultimately be decreed in tbe suit. If tbe receiver bad operated the property and made $60,000 profit, tbe result would have been the same as in tbe case at bar. On account of tbe uncertainty of tbe sugar conditions it was thought better for tbe receiver to lease tbe property on shares, and fortunately this has turned out to tbe advantage of tbe receivership. Tbe present rents, however, are not something different from tbe hypothetical profits mentioned. What would be true of one would be true of the other.

4. Decisions' in the 'different states of tbe Union throw some light upon tbe solution of tbe question, but there is no doubt that tbe decision of matters relating to land must primarily be. in accordance with tbe law of the place where tbe land lies, tbe lex rei sitce. Tbe fact that this was a sale in equity does not change tbe rule. Tbe forms in equity are peculiar io this jurisdiction, but rights to land enforced will conform as far as possible to those fixed by local law. United States v. Fox, 94 U. S. 315, 24 L. ed. 192; United States v. Crosby, 7 Cranch, 115, 3 L. ed. 287; Suydam v. Williamson, 24 How. 427, 16 L. ed. 742; Hutchinson Invest. Co. v. Caldwell, 152 U. S. 65, 38 L. ed. 356, 14 Sup. Ct. Rep. 504. It is therefore important to determine wbat is tbe local law upon tbe subject of rents.

5. Land in Porto Rico comes under tbe class known as im-movables, wbicb are defined in tbe Civil Code of Porto Rico, §§ 333 and 335, wbicb read as follows:

“Sec. 333. Immovables are, in general, those wbicb cannot move themselves or be removed from one place to another.

“This definition, strictly speaking, is applicable only to such things as are immovable by their own nature, and not to such as are so only by tbe disposition of the law.

“Sec. 335. Tbe following are immovables:

“1. Lands, buildings, roads, and structures of every kind adherent to tbe soil.

“2. Trees, plants, and ungatbered fruits, while they are not separated from the land or form an integral part of an immovable.

“3. Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated from it without breaking tbe matter or causing injury to tbe object.

“4. Statutes, reliefs, paintings or other objects of use or ornament, placed in buildings or on lands or tenements by tbe owner thereof in such a manner that they become attached permanently to tbe property.

“5. Machinery, vessels, instruments, or implements intended by tbe owner of tbe tenement for tbe industry or works that be may carry on in any building or upon any land, and wbicb tend directly to meet tbe needs of tbe said industry or works.

“6. Animal bouses, pigeon bouses, beehives, fishponds or breeding places of a similar nature, when tbe owner has placed or preserves them with the intention of keeping them attacked, to the tenement and forming a permanent part thereof.

“7. Manures or fertilizers intended for the cultivation of the land, when upon the place where they are to be employed.

“8. Mines, quarries, and slag lands, while the matter thereof forms part of the beds, and waters, either running or stagnant.

“9. Docks and structures which, though floating, are intended by their nature and the object for which they are designed, to remain at a fixed place in any river or lake, or on any shore.

“10. Administrative concessions for public works, and servi-tudes and other real rights, attached to immovables.”

Section 336 goes further, and prescribes that immovables embrace certain incidents inherent in what is immovable itself. It reads as follows:

“Section 336. The following incorporeal things are considered as immovable from the object to which they apply:

“1. The usufruct and use of immovable things.

“2. Any right or obligation established on any immovable.

“3. Every action to recover an immovable or the whole of an inheritance.”

Ownership of property, including immovables, is defined in §§ 354 and 356 of the Porto Pican Civil Code as follows:

“Section 354. Ownership is the right by which a thing belongs to some one in particular, to the exclusion of all other persons.

“Ownership confers the right to enjoy and dispose of things without further limitations than those established by law.

“The owner holds a right of action against the holder and the possessor of the thing in order to recover it.

“Section 356. The ownership of a thing is vested in him who has the immediate dominion thereof, and not in any other person, notwithstanding the fact that he uses or enjoys in some manner the thing belonging to another.”

Such ownership, whether of movables or immovables, carries with it all rights of accession. This is expressed in §§ 360 and 361 as follows:

“Section 360. The ownership of property, whether movable or immovable, carries with it the right, by accession, to everything which is produced thereby, or which is united thereto or incorporated therewith, either naturally or artificially.

“Section 361. To the owner belong:

“1. The natural fruits.

“2. The cultivated fruits.

“3. The civil fruits.”

Civil fruits include interest, as is declared in § 362, as follows:

“Section 362. Natural fruits are the spontaneous productions of the soil, and the broods and other products of animals.

“Cultivated fruits are those produced by lands of any kind, through cultivation or labor.

“Civil fruits are the rents of buildings, the price paid for the lease of lands, and the amount of perpetual life or other similar incomes.”

In connection with this should also be taken into account the provisions of § 453, which is as follows:

“A possessor in good faith becomes the owner of the fruits collected, so long as the possession is not legally interrupted.

“Natural and cultivated fruits are considered as collected from tbe time they are gathered or separated.

“Civil fruits are considered as daily proceeds, and belong, in that proportion, to the possessor in good faith.”

The law therefore declares that the rents shall go with the land, that is to say, that the owner is usually entitled to the rents.

6. In the case at bar the lease contract, under which the rents were to accrue, was made before the second sale, under which the reorganizing corporation claims. The earlier period of this lease called for expenditures by the lessee, and the income in the nature of the sugar business could not come, and did not come, in any marked degree until after the second sale of the land in question. The lease did not provide for any partial payments of rent, nor does it furnish any basis for apportionment of the rent. This was to be paid, and in fact has been substantially paid, in one lump sum after the submission on the application in question.

It is under these circumstances that the question of ownership of the rents must be determined.

The Code of Civil Procedure, § 259 as amended May 28, 1904, provided: “Upon sale of real property, the purchaser is substituted to and acquires all the rights, title, interest, and claim of the judgment debtor thereto, and all his right, title, interest, and claim thereto at any time during any subsisting lien thereon by attachment in the action, or by the docketing of the judgment. When the estate is less than a leasehold of two years’ unexpired term, the sale is absolute. In ail other cases the property is subject to redemption, as provided in this chapter. . . .”

This section was repealed March 9, 1905 (Acts, p. 136), so far as it related to the redemption of property sold at public sale. In the case at bar, however, there is no question as to redemption, and the section by the terms of this act would seem to be still in force unless complete omission from R. S. of 1911 repealed it. On the same day an act as to judgments (Acts, p. 115) provided in § I that “a purchaser at a sale under execution or order of sale shall be deemed to be an innocent purchaser without notice, in all cases where he would be deemed to be such had the sale been made voluntarily by the defendant in person.”

The law specially controlling this issue, however, is found in the Civil Code, §§ 1371 and 1404, which read as follows:

“Section 1371. The vendor must deliver the thing sold in its condition at the time of the completion of the contract.

“All the fruits shall belong to the vendee from the day on which the contract was perfected.”

“Section 1404. In the three following cases the vendee shall owe interest from the time the thing is delivered until the payment of the price:

“1. Should it have been so stipulated.

“2. Should the thing sold or delivered produce fruits or income.

“3. Should he be in default in accordance with section 1067.”

These contemplate the possible passing of title at a later date than the contract of sale and specifically provide that in such a case as tbe one at bar tbe purchaser is entitled to tbe rents and tbe seller to interest upon tbe purchase price, whether provided in tbe contract or not. It is not necessary to determine whether these sections apply ipso facto to proceedings in equity in the Federal court. The motion in question brings the whole matter up for review, and the analogy of the above sections will be followed in this case. The result would be, therefore, that the contract of purchase by the reorganizing corporation or its predecessor must be held to date from the sale at which the committee was the successful bidder, and that the bidder must pay interest from that date, and on the other hand is entitled to rents from that date. This, of course, is dependent upon the confirmation of the sale, but this confirmation, when made, relates back to the sale itself. There is nothing else to confirm except that sale, and the sale must, therefore, be confirmed in its entirety and as of the date it was made. The confirmation decree now being passed upon will be amended so as to meet the above views.

It follows, therefore, that, upon the application now before the court, the decree of confirmation will be modified as above. Except to this extent, the motion is denied.

It is so ordered.  