LAW OFFICES OF DAVID EFRON, P.C. Appellant,
MADELEINE CANDELARIO, Appellee.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
PUERTO RICO [Hon. Jose A. Fuste, U.S. District Judge]
Charles A. Cuprill-Hernández on brief for appellant.
Michelle Pirallo-Di Cristina on brief for appellee.
Howard, Torruella, and Dyk, [*] Circuit Judges.
Offices of David Efron, P.C. ("Efron Firm") appeals
from an order of the United States District Court for the
District of Puerto Rico directing that "the moneys for
legal fees to Mr. Efron, which we ordered retained by our
Clerk, be disbursed to the Court of First Instance, Superior
Part of San Juan." ECF No. 55. We conclude that Puerto
Rico courts cannot garnish funds deposited in a federal
district court's registry, and that the district court
cannot transfer registry funds without transferring the
concomitant case. Because the appellee, Madeleine Candelario,
has no right to intervene in the federal action, we reverse
and direct that the funds be paid pursuant to the provisions
originally governing the funds' disposition.
Efron ("Efron") and Madeleine Candelario were
involved in two proceedings before the Superior Court of
Puerto Rico: a divorce proceeding that concluded in 2000, and
a pending marital property division proceeding. David Efron
is the sole owner of the Efron Firm. In the divorce
proceeding, the Superior Court of Puerto Rico ordered payment
of $5, 473, 627.98 plus interest from Efron to Candelario.
Candelario alleges that Efron has refused to pay as ordered
by the Superior Court, which has forced her to resort to
garnishing funds owned by Efron.
present controversy concerns funds allegedly owned by
Efron and deposited in the federal district
court registry. In the case of Juan Carlos Torres Rivera
v. Hospital Menonita Caguas, Inc., No. 15-1231 (D.P.R.
Aug. 31, 2015), in the district court, the Efron Firm
represented the plaintiffs and secured a settlement for its
clients. In accordance with the settlement agreement, the
defendants deposited the Efron Firm's attorney's fees
with the district court clerk. Meanwhile, in the divorce
proceeding in Puerto Rico Superior Court, the court issued an
order garnishing amounts owed to Efron (not specific to these
funds) to satisfy the Superior Court judgment.
September 14, 2015, Candelario served the district court
clerk with a certified translation of the Superior
Court's garnishment order and requested that the district
court transfer the amounts deposited in the district court
registry pursuant to the Rivera settlement. On
December 8, 2015, the district court ordered that "the
moneys for legal fees to Mr. Efron, which we ordered retained
by our Clerk, be disbursed to the Court of First Instance,
Superior Part of San Juan, . . . for that court to decide to
who, when, and how to disburse those moneys [because the]
Superior Court is in the best position to consider all the
equities, rights, and obligations arising from its judgment
and orders for execution of judgment." ECF No. 55. Efron
appealed. The district court order is a final order, see
Alstom Caribe, Inc. v. Geo. P. Reintjes Co., 484 F.3d
106, 113 (1st Cir. 2007), over which we have jurisdiction
under 28 U.S.C. § 1291. We stayed the district court
transfer order pending appeal.
first issue is whether the Superior Court of Puerto Rico
could garnish funds deposited in the registry of the federal
district court. Supreme Court authority establishes that it
cannot: funds in federal court registries are protected under
the doctrine of custodia legis from garnishment or attachment
by a state court.
The Lottawanna, 87 U.S. (20 Wall.) 201 (1873),
owners of a steamship were sued in a federal district court
sitting in admiralty for failure to pay wages. The owners
sold the steamship in order to pay the claims, and deposited
the sale proceeds in the federal court registry for
disbursement to the wage claimants. Id. at 211.
After the deposit occurred, additional parties attempted to
garnish the funds based on state court judgments relating to
expenses incurred by the ship owners. Id. at 214.
The district court ordered the funds in the registry to be
paid over to these state court judgment claimants.
Id. at 215-16. On appeal, the Supreme Court held
that the federal court registry "fund, from its very
nature, is not subject to attachment either by the process of
foreign attachment or of garnishment, as it is held in trust
by the court to be delivered to whom it may belong."
Id. at 224. The Court thus ordered the return of the
incorrectly disbursed funds from the state court judgment
claimants. Id. at 225-26. This doctrine of custodia
legis is "based on the desirability of avoiding a clash
between judicial jurisdictions which would result from any
attempt to use the process of one to seize assets in the
control of another judicial authority . . . [especially]
where the judicial departments belong to different
sovereignties." In re Quakertown Shopping Ctr.,
Inc., 366 F.2d 95, 97 (3d Cir. 1966).
custodia legis principle has been reaffirmed in subsequent
cases. In Osborn v. United States, 91 U.S. 474
(1875), the Supreme Court held that the "power of the
[district] court over moneys belonging to its registry
continues until they are distributed pursuant to final
decrees in the cases in which the moneys are
paid." Id. at 479 (emphasis added). And
Motlow v. Missouri ex rel. Koeln, 295 U.S. 97
(1935), noted that a state would be "without
jurisdiction to enforce [its] liens . . . [if] the ...