Sancho v. Texas Company/Opinion of the Court

Respondent brought this action in a Puerto Rico court to enjoin the Treasurer of Puerto Rico from enforcing by distraint, orders of the Puerto Rico Workmen's Relief Commission awarding compensation for the death of each of three laborers while in the employ of respondent. The Supreme Court of Puerto Rico interpreted the Workmen's Accident Compensation Act of Puerto Rico as not permitting such collateral attack on orders of the Commission and affirmed a judgment dismissing the bill. 52 D.P.R. 658, 53 D.P.R. 475. On appeal (43 Stat. 936, 28 U.S.C.A. § 225) the Circuit Court of Appeals vacated that judgment and remanded the cause with directions to issue the injunction. 1 Cir., 102 F.2d 710. We granted certiorari, 308 U.S. 538, 60 S.Ct. 85, 84 L.Ed. --, because of the asserted violation by the Circuit Court of Appeals of the well established rule that Puerto Rican tribunals must not be overruled on their construction of local statutes in absence of 'clear or manifest error.' Sancho v. Yabucoa Sugar Co., 306 U.S. 505, 307 U.S. 613, 59 S.Ct. 626, 629, 83 L.Ed. 946.

The theory underlying respondent's bill was that it was an insured employer and therefore the awards should have been said out of the state fund, and that its remedy at law was not adequate. The bill so alleged, and attacked the orders of the Commission adjudging that it was not an insured employer. The cause was submitted, without an answer, on a stipulation which included, inter alia, an admission by petitioner of 'the ultimate facts of the bill, except the conclusions of fact or of law that it might contain.' The Supreme Court of Puerto Rico in effect treated this stipulation as a demurrer and concluded that petitioner had not thereby admitted that respondent was an insured employer. This seems to have been a reasonable construction certainly not manifest error.

Treating the bill then as one brought by an uninsured employer, the Supreme Court of Puerto Rico construed the Act on two points: (1) the right of respondent to appeal; (2) the power of petitioner to distrain.

Right to Appeal. It held that respondent had an adequate remedy at law under § 9 of the Act which provided that 'the employer may appeal from any decision of the commission when such decision is to the effect that the accident is one for which compensation is granted under this Act.' And it indicated that on such appeal the question of whether or not respondent was uninsured was among the issues which could have been reviewed. The Commission, however, had directed the awards to the Attorney General on April 24, 1928, for collection under § 7 of the Act, a section providing for collection of awards against uninsured employers. But eight years passed and the Attorney General made no attempt to collect. Respondent contended that it did not appeal under § 9 since it was waiting to defend, on the ground that it was insured, an action by the Attorney General under § 7. And though a new method of collection of such awards was created within a few months after these awards were made, respondent contended that the new law, in providing that pending litigation was not to be affected, preserved its former opportunity to defend under § 7. To this the Supreme Court of Puerto Rico replied that the purpose of the saving clause in the new act was merely to preserve the rights of workmen to compensation, not to make the new procedure inapplicable to pending cases in contradiction to the well settled rule that procedural statutes are immediately applicable. It also added that in any event the procedure of § 7 had not survived the issuance of the order by the Commission since by the 1935 amendment that procedure was to be 'followed in such litigations or claims, until their termination' -the issuance of the orders of the Commission having terminated the case within the meaning of the amendment.

The Circuit Court of Appeals disagreed with this construction of the Act. It held that § 9 gave an appeal only to insured employers and that only § 7 provided for review of orders issued against those who were uninsured. It said that when § 9 stated that 'the employer may appeal from any decision of the commission when such decision is to the effect that the accident is one for which compensation is granted under this Act', it meant that only insured employers could appeal since the compensation granted by the Act was payment out of the state fund. Hence, in its view, the orders of the Commission here in question were 'to the effect' that the accident was not one for which compensation was granted under the Act, since the Commission had adjudged respondent to be uninsured. Consistently with that construction it held that the remedy of an aggrieved uninsured employer was to defend any suit brought under § 7. For in its view, the procedure under § 7 was not abolished by the amendments, the issuance of the orders of the Commission not having terminated the case within the meaning of the saving clause quoted above. Accordingly, it held that unless petitioner were restrained from collecting the awards, respondent would be deprived of its day in court.

Power of Petitioner to Distrain. The Supreme Court of Puerto Rico concluded that petitioner had the power to distrain by virtue of the amendments to the Act made subsequent to the issuance of the orders of award. By the 1928 amendments summary procedure was authorized for collection of a claim 'as if it were a tax levied on such property'. § 25. Although that phrase was eliminated by the 1935 amendments, § 15 of the latter made such claims 'liens preferred over any other charge or lien for taxes or any other cause' with specified exceptions. The court held that since under both the 1928 and 1935 amendments petitioner had the duty to collect the claims and since under both the claim had the status or legal effect of a tax, the power to distrain survived.

But the Circuit Court of Appeals disagreed with that conclusion. It reasoned that petitioner had no power to collect in that manner since by § 15 of the 1935 amendments the person who was to 'determine' the amount of the claim and 'certify its decision' to petitioner was the Manager of the State Fund created under that law. That person not being the same as the Workmen's Relief Commission which had issued the orders in question, § 15 was not operative as respects respondent. This reasoning was interwoven with the conclusion of that court that the new procedure provided by the 1928 and 1935 amendments did not reach back to touch pending cases, a result contrary to the opinion of the Supreme Court of Puerto Rico, as we have noted.

The Supreme Court of Puerto Rico, on the other hand, did not reach the precise point determinative of the power of the Manager of the State Fund to certify an award of the former Workmen's Relief Commission apparently because it was tacitly admitted that that power existed, if the remedy provided by former section 7 had been abolished. But however that may be, it did conclude that the Act as amended, though not clear, was designed to give the petitioner power to distrain and that the procedure followed was authorized by law.

For over sixty years this Court has consistently recognized the deference due interpretations of local law by such local courts unless they appeared to be clearly wrong. From Sweeney v. Lomme, 22 Wall. 208, 22 L.Ed. 727, decided in 1874, to Sancho Bonet v. Yabucoa Sugar Co., supra, decided in 1939, repeated admonitions to that effect have been given. That rule is founded on sound policy. As this court recently stated, 'Orderly development of the government of Porto Rico as an integral part of our governmental system is well served by a careful and consistent adherence to the legislative and judicial policy of deferring to the local procedure and tribunals of the Island.' Sancho Bonet v. Yabucoa Sugar Co., supra, 306 U.S. page 510, 59 S.Ct. page 629, 83 L.Ed. 946.

We now repeat once more that admonition. And we add that mere lip service to that rule is not enough. To reverse a judgment of a Puerto Rican tribunal on such a local matter as the interpretation of an act of the local legislature, it would not be sufficient if we or the Circuit Court of Appeals merely disagreed with that interpretation. Nor would it be enough that the Puerto Rican tribunal chose what might seem, on appeal, to be the less reasonable of two possible interpretations. And such judgment of reversal would not be sustained here even though we felt that of several possible interpretations that of the Circuit Court of Appeals was the most reasonable one. For to justify reversal in such cases, the error must be clear or manifest; the interpretation must be inescapably wrong; the decision must be patently erroneous.

Measured by such a test the judgment of the Supreme Court of Puerto Rico should not have been reversed. In concluding that under § 9 an uninsured employer could have an award of the Commission reviewed, including the issue of whether or not he was insured, the Supreme Court of Puerto Rico did not take a patently absurd position. The most that can be said is that the contrary position is a tenable one. In holding that the amendments substituted collection by the petitioner for collection by the Attorney General even in case of pending claims, that tribunal did not commit manifest error. The conclusion that the latter procedure survived the amendments is merely another possible view. And the decision of that tribunal that the petitioner had the power to distrain cannot be said to be inescapably wrong in view of the legislative design to leave no hiatus in the statutory scheme as a result of cumulative amendments. The contrary conclusion, though it might seem wholly reasonable, would not warrant a reversal.

Intimations that respondent was not accorded due process of law and that the question of whether or not it was insured was a jurisdictional fact open to collateral attack are untenable. According to the Supreme Court of Puerto Rico, respondent had not only an opportunity to be heard before the Commission but also a right of appeal. The fact that the period for review by appeal was very limited and that on respondent's interpretation of the law its right to appeal was uncertain are immaterial. Here, as on other aspects of this case, we cannot say that the conclusion of the Supreme Court of Puerto Rico that under this statute the remedy of respondent at law was adequate is obviously erroneous.

The judgment of the Circuit Court of Appeals is reversed and the judgment of the Supreme Court of Puerto Rico is affirmed. It is so ordered.

Reversed.

Mr. Justice STONE did not participate in the consideration or disposition of this case.