Burdon Central Sugar Refining Company v. Payne
[Syllabus from pages 127-128 intentionally omitted]

The circuit court of appeals for the Fifth circuit, desiring the instruction of this court for the proper decision of certain questions arising in the above-entitled cause, certified the statement of facts set out in full in the margin,  and thereon propounded the following questions: 'First. It being shown that the cane sold by appellees, J. U. Payne & Co. et al., to the Ferris Sugar-Manufacturing Company, Limited, pursuant to the contract between the parties, was grown on lands not embraced within the limits of the premises leased to the Ferris Sugar-Manufacturing Company, Limited, are appellees, under the laws of Louisiana, considered in connection with the provisions of the contract, entitled to the lessor's privilege to secure the payment of the purchase price of such cane? 'Second. Under the terms of the thirteenth article of the contract between the Paynes and the Ferrises, and to secure the payment of the price of the sugar cane sold and delivered under said contract, have the appellees, H. M. Payne, J. U. Payne, and the members of the firm of J. U. Payne & Co., an equitable lien upon the bounty money collected from the United States by the receiver in this suit?

'Third. If the second question shall be answered in the affirmative, can such equitable lien, under the laws of Louisiana, be so enforced in the present suit as to appropriate the bounty money to the payment of the claim of the Paynes, to the exclusion of the general creditors of the Ferris Sugar-Manufacturing Company?' J. D. Rouse, Wm. Grant, and W. H. Saun ders, for appellant.

Charles E. Fenner and James David Coleman, for appellees.

Mr. Chief Justice FULLER, after stating the facts in the foregoing language, delivered the opinion of the court. 

Notes

(2) On June 16, 1892, they entered into the following contract with L. Murray Ferris and Wm. L. Ferris, of Poughkeepsie, New York, which was duly recorded:

'This indenture made by H. M. Payne, J. U. Payne, and the firm of J. U. Payne & Co,. all residents of the city of New Orleans, state of Louisiana, as the parties of the first part, and L. Murray Ferris and William L. Ferris, both residents of the city of Poughkeepsie, state of New York, as the parties of the second part, witnesseth: That whereas the said H. M. Payne, J. U. Payne, and the firm of J. U. Payne & Co., parties of the first part, as aforesaid, are the owners and proprietors of three certain plantations, to wit, the Barbreck, St. Peter's, and Anchorage places, their respective interest in the said three plantations being of record in the said parish; and

'Whereas, the said L. Murray Ferris and William L. Ferris, parties of the second part, as aforesaid, have proposed to contract, upon the terms and conditions hereinafter provided, for a lease of the Barbreck sugar house, and the purchase of the crops of the three aforesaid plantations:

'Now, therefore, the said parties of the first part, each for and as regards his respective interest in the said plantations, and the said parties of the second part, jointly and severally, hereby contract, obligate, and bind themselves as follows, to wit:

'Article First. The parties of the first part grant to the parties of the second part, upon the terms and conditions hereafter provided, a lease, for a period of ten years, of the sugar house situated on the Barbreck plantation, together with all the machinery and appurtenances thereto belonging, it being understood and agreed that this lease shall cover and include all the present inclosure around the Barbreck sugar house, and so much in addition towards the Anchorage plantation as may be necessary to provide space for handling cars, and, further, the land between the cane yard and the bayou, except the public highway, which shall be used in common by the parties hereto: provided, that the lease shall not include any cabins or dwelling houses which may be situated on the aforesaid premises, the parties of the first part reserving to themselves the right to remove any and all such cabins or dwelling houses off the said premises which the parties of the second part shall have the right, at their option, to require.

'And it is agreed and understood that the lease shall further cover and include the right to make such additions, alterations, or modifications to or in said sugar house as the parties of the second part may desire to make, using, at their option, all the brick and other material now on the aforesaid premises; the right being further reserved to the said parties of the second part to drain the aforesaid leased premises into the regular plantation ditches and drains.

'But the parties of the second part hereby covenant and bind themselves to make at least, and in any event, such additions and alterations to and in said sugar house as will enable it conveniently, and in suitable time, to take off the crops of the Barbreck, St. Peter's, and Anchorage plantations.

'Article Second. The consideration of the aforesaid lease shall be the sum of twenty thousand dollars ($20,000), or two thousand dollars ($2,000) per annum, which the parties of the second part bind and obligate themselves to pay in semiannual installments of one thousand dollars ($1,000) each; the first installment to be due and payable on the first day of January, 1893, and the others every six months thereafter.

'And it is understood and agreed that, while all the terms and stipulations of this contract shall be absolutely and irrevocably binding from the date of its execution, the rent, as above stipulated, shall not begin to run until the first day of October, 1892.

'Article Third. It is further understood and agreed that there shall be built immediately, or as soon as practicable after the execution hereof, a tramway and bridge from the Barbreck sugar house through the St. Peter's plantation, on the Barbreck side of the bayou, to the boundary line of the Prosser plantation, for the purpose of conveying the crops of the said plantation to the sugar house.

'The parties of the first part contract and agree, on their part, to grade the beds of the said tramways, and to haul all the necessary materials for their construction; the parties of the second part covenanting and agreeing, on their part, to furnish all the material, and to complete the tramways and build the bridges, after the grading and hauling aforesaid shall have been done.

'And, after the first crop season after the execution hereof, the parties of the second part bind and obligate themselves to build, on the same terms and conditions as are provided above, a branch tramway from the main tramway on the Barbreck plantation, hereinabove provided for, across the St. Peter's bridge and through the St. Peter's field on that side of the bayou up to the line of the Morgan Railroad. And the parties of the second part shall have the privilege of carrying the tramways entirely through all or either of the said three plantations, so as to be able to extend them beyond.

'Article Fourth. The parties of the second part shall further have the right of way for a railroad to connect the Barbreck sugar house with the Morgan Railroad, including the consent of the parties of the first part to their building a railroad bridge across the bayou at the grade level of the Barbreck cane yard, and the further right to construct and operate telegraph and telephone lines along all the aforesaid tramways and railroad.

'The parties of the second part shall further have, during the lease, a full and complete right of way over the road connecting the Barbreck sugar house and the railroad depot, and the further right to establish and operate during the lease, at some suitable place on one of the three aforesaid plantations, a kiln for burning brick.

'Article Fifth. But it is distinctly understood and agreed that the aforesaid tramways and railroad must be so constructed as not to interfere with the drainage facilities of the aforesaid three plantations, or either of them.

'And, as the courses of the aforesaid tramways and railroad are not definitely fixed herein, it is further understood and agreed that as soon as the said courses shall have been mutually agreed upon, and the tramways and railroad built, they shall ipso facto become the courses contemplated herein, and neither of the parties hereto shall have the right to change the same, or either of them, without the other's consent.

'Article Sixth. The parties of the first and second part hereto further covenant and agree mutually to sell and purchase, respectively, upon the following terms and conditions, all the cane which may be grown on the three aforesaid plantations, viz. the Barbreck, St. Peter's, and Anchorage plantations, except such as may be needed each season as seed for the following year.

'Article Seventh. The parties of the first part shall cultivate the plantations in cane, or so much thereof as would be justified by usual and improved agricultural methods.

'Article Eighth. The cane shall be delivered at the sugar house or at the tramways, at the option of the parties of the first part, to cars furnished by the parties of the second part; the said cars to be loaded to their full capacity by the parties of the first part.

'Article Ninth. The parties of the first part shall have the absolute right to deliver on and after the fifteenth day of October of each season, and the parties of the second part shall be bound and obligated to accept, unless hereinafter provided to the contrary, so much cane each working day as shall represent the average amount necessary to be delivered per day, to complete the delivery by the twenty-fifth day of December following; the said average to be based upon the number of working days between the

fifteenth of October and the twenty-fifth of December, and the total estimated tonnage of the three plantations.

'The said estimate shall be made on the first day of each October by the parties of the first part, and shall be submitted in writing to the parties of the second part, who shall have the right to make a personal inspection of the crop; and, in case of a disagreement between the parties hereto as to the tonnage, they shall agree upon an umpire, whose decision and estimate shall be final and binding on all parties hereto.

'Article Tenth. The parties of the second part shall not be bound to accept cane frozen standing more than eight days after a freeze, but windrowed cane uninjured by freeze shall be paid for on the same basis as uninjured standing cane.

'And all cane must be cut as close to the ground as practicable, and not above the first red joint; and it must be delivered promptly after cutting, freed from trash, as is customary in Louisiana. Nor shall the parties of the second part be bound to accept any cane the juice of which shall test less than 9 per cent. sucrose.

'Article Eleventh. The price to be paid by the parties of the second part shall be graduated according to the percentage of the sucrose content of the juice of the cane, as expressed at the mill, and the average market price, as determined by the New Orleans quotations of prime yellow clarified sugar, during each delivery week, plus the bounty; this price to be estimated on a basis of four dollars per ton for cane when the sucrose content of the juice is 11 per cent. and the average market price of prime yellow clarified sugar, plus the bounty, is five and a half cents per pound, or 6.6 cents for every one per cent. of sucrose in the juice, thus:

'11 per cent. x 6.6 x 5 1/2, equals $4.00.

'Article Twelfth. The parties of the first part shall have the right to appoint a representative, who shall have access to the mill at all times for the purpose of testing the juice, or for any other purpose legitimately and reasonably pertaining to the interests of the said parties of the first part under this contract.

'The juice shall be tested daily, or as often as either party may desire, and immediately, or as soon as practicable, after it is expressed. And, in case more than one determination is made during a day, the average result shall be taken as the basis of payment for that day. And, in case of disagreement between the parties hereto as to the percentage of sucrose content, Dr. W. C. Stubbs, of New Orleans, shall be the umpire; and his decision and figures shall be binding.

'Article Thirteenth. The price of cane as above determined shall be paid as follows:

'Two and 75/100 dollars per ton shall be paid every Monday for the cane delivered during the preceding week, until the delivery is completed. The balance, if any, per ton, shall operate as a lien and privilege, to the full extent of such balance, on the first bounty money received by the parties of the second part on sugar produced from cane ground at the Barbreck sugar house; and the said parties of the second part covenant and agree to consecrate solely to the payment of such balance all bounty payments so received by them, until the whole of the said balance shall have been paid.

'Article Fourteenth. But whereas, there is recorded against the premises hereinabove leased a mortgage to secure the payment at maturity of four promissory notes, each note being for the sum of four thousand one hundred and sixty-six dollars and sixty-six cents, and bearing interest at the rate of four per cent. per annum from the first day of January, 1890, until they respectively mature; and

'Whereas, the said notes mature on the first of January, 1893, the first of January, 1894, the first of January, 1895, and the first of January, 1896, respectively:

'Now, therefore, in order to secure the parties of the second part in the quiet enjoyment of the said leased premises and the prompt payment of the said notes, principal and interest, as they respectively mature:

'It is understood and agreed that the parties of the second part shall have the right and privilege of reserving each season, until all the aforesaid notes shall have been paid, the rent which may be due under the terms of this contract on the first day of January of each season, and, in addition, so many of the cash weekly payments for cane, hereinabove provided for, next preceding the first day of January of the said season, as will, together with the rent as aforesaid, aggregate the amount, principal and interest, of the note falling due on the first of January of that season.

'The amount so reserved shall be held by the said parties of the second part in trust for the parties of the first part, and, in case the said note is not promptly paid at maturity by the parties of the first part, then, for their own protection, the parties of the second part shall have the right to apply the amount reserved as above provided to the payment of the note, principal and interest, charging the amount so applied to the account of the parties of the first part.

'But, if the parties of the first part shall promptly pay at maturity the note falling due on the first of January of any season, then in that event the amount reserved, as above provided, by the parties of the second part for the payment of that note, shall immediately become due and payable to the parties of the first part.

'The parties of the first part further covenant and agree to remove all

other liens and privileges on the leased premises, and to keep the same free from all other liens and privileges during the term of this lease.

'Article Fifteenth. In the event of a temporary closing and shutting down of the mill as the result of fire, explosion, breakage, or other purely fortuitous cause, the parties of the second part shall not be bound to receive cane during such time, and shall not be liable in damages to the parties of the first part for such nonreceipt; but during such temporary shutting down of the mill the parties of the first part shall have the right to dispose of so much cane as the parties of the second part would otherwise have been compelled, under the terms of this contract, to receive, in any way they may see fit, and they shall furthermore have the right to use for such purpose, free of charge, all the tramways, cars, and other transportation facilities of the parties of the second part.

'And the parties of the second part stipulate and agree to use every reasonable effort to repair, and make all such delays as short as possible.

'Article Sixteenth. In case of total loss of the sugar house, mill, and machinery, by fire or otherwise, this contract may be terminated, at the option of the parties of the second part.

'Article Seventeenth. It is agreed and understood that the value of the Barbreck sugar house, machinery, and appurtenances, as they stand at the date of this contract, shall be estimated by three appraisers to be appointed as follows: One by each of the parties hereto, and the third by these two.

'And the parties of the second part covenant and agree to take out thereon, in the name and for the benefit of the parties of the first part, and to keep in force during the term of this contract, a policy of insurance against fire, for the full value as above determined, provided that this valuation shall not exceed the sum of ten thousand dollars, and to pay the premium on the said policy, for the benefit of the parties of the first part, during the term of this contract.

'Article Eighteenth. The parties of the second part further covenant and agree to pay during the term of this contract any and all extra taxes which may result from increased assessment of the leased property on account of the improvements put upon it by the said parties of the second part.

'Article Nineteenth. On the termination of this contract by limitation, or as otherwise provided therein, the parties of the second part shall have the right to remove and take away all the improvements, of whatever kind or description, including tramways, which they may have put upon the leased premises, on condition, however, of paying, before such removal, to the parties of the first part, an amount which shall represent the depreciation in value of the sugar house, machinery, and appurtenances belonging to the said

parties, as a means of manufacturing sugar from cane, the present value to be that determined by the appraisement hereinabove provided for, and the value at the termination of this contract to be determined by a similar appraisement; it being understood and agreed that the latter appraisement shall be made solely with reference to the relative efficiency and value of the said sugar house, machinery, and appurtenances for the manufacture of sugar from cane, without regard to the profits of the industry, or the depreciation in value of same as the result of the introduction of new and improved machinery or methods of manufacture.

'Article Twentieth. The parties of the first part agree to keep all such books and records as are required by the United States government in relation to the bounty, and to furnish to the parties of the second part all the details which may be necessary to enable them to effectuate their bounty rights.

'Article Twenty-First. Nothing in this contract shall be construed as to authorize the establishment or conduct of a store of any sort or description upon the leased premises by the parties of the second part or others.

'Article Twenty-Second. It is further mutually understood and agreed that, in case the bounty now paid upon sugar by the United States government is removed during the term of this contract, then and in that event either of the parties hereto may, at their option, terminate the contract; but, as regards the parties of the first part, it is understood and agreed that this right of terminating the contract shall extend only so far as their obligation to cultivate and deliver cane is concerned; the right and option being reserved to the parties of the second part, in the event of an exercise by the parties of the first part of their right to termination under this section, to continue the lease as herein stipulated upon the same terms and conditions, except as hereinabove provided.

'Article Twenty-Third. And whereas, the parties hereto recognize that despite the genuine and earnest efforts of the parties of the second part to construct and put in operation the contemplated mill in time for the next grinding season after the execution hereof, such a consummation may be rendered practically impossible by events absolutely beyond the control of the said parties hereto, it is therefore understood and agreed that if, by reason of such unforeseen events, it shall become practically impossible to construct and put into operation the said contemplated mill in time for the next grinding season after the execution hereof, then and in that event the said parties of the second part shall be bound to receive, under the terms and conditions of this contract, during said next grinding season, only the cane grown on the Barbreck plantation, and the parties of the first part shall have the right to dispose of the St. Peter's and Anchorage crops

during said season in any way they may see fit, with the privilege of using for such purpose, free of charge, any and all the transportation facilities of the parties of the second part.

'But nothing in this section shall be so construed as to relieve the parties of the second part from their obligation, under this contract, to purchase the crops of the three aforesaid plantations in case of their failure to construct and put in operation the said contemplated mill in time for the next grinding season, if such failure shall result from the financial inability of the said parties of the second part to meet their engagements, or from a want of exercise by them of all due caution, prudence, and foresight to that end.

'Article Twenty-Fourth. It is further understood and agreed that the parties of the second part shall have the right and privilege of subrogating to their rights and liabilities under this contract, at any time during the term thereof, a corporation duly organized, provided it be satisfactorily shown that the said corporation be legally organized and competent to contract; that it is the absolute owner and proprietor of the property, machinery, rights, and effects of every kind and description which shall have belonged to the parties of the second part hereto, and shall be situated upon the three aforesaid plantations, or either of them; and that the said property, machinery, rights, and effects are free from any and all liens and incumbrances except the lien of the lessors under this contract; and on this condition the parties of the first part covenant and bind themselves to accept the aforesaid corporation as the substitute of the parties of the second part hereto, and to release the said parties from any and all subsequent liability hereunder.

'Article Twenty-Fifth. It is finally understood and agreed that this is an entire contract, each stipulation and obligation herein being a part of the consideration for every other.

'In witness whereof, the aforesaid parties have hereeunto affixed their hands on this 16th day of June, 1892.

'[Signed] H. M. Payne.

%'j. u. p/ayne.

'J. U. Payne & Co.

'[Signed] L. Murray Ferris.

'Wm. L. Ferris.'

(3) Under article twenty-four (24) of said contract, the said L. Murray Ferris and Wm. L. Ferris transferred all their rights and liabilities under said contract to the Ferris Sugar-Manufacturing Company, Limited, a corporation organized under the laws of Louisiana.

(4) The McKinley tariff act, passed October 1, 1890, which provided for a bounty to sugar producers, was repealed on August 28, 1894, and on September 3, 1894, it was stipulated between the parties to said contract that the provisions of articles eleven and thirteen thereof should be extended so as to apply to any bounty that might thereafter be granted by congress to sugar produced from the crop 1894.

(5) The Ferris Sugar-Manufacturing Company, Limited, operated the Barbreck sugar house under the terms of said contract from October, 1894, to January 4, 1895, and the said parties of the first part, J. U. Payne & Co. et al., delivered to the said Ferris Sugar-Manufacturing Company during that season, under said contract, ten thousand three hundred and seventy-seven (10,377) tons of cane grown upon premises other than those leased to said Ferris Company, for which the said Ferris Company owed a balance on the purchase price of four thousand five hundred and sixty-four and 73/100 dollars ($4,564.73) on the contract basis of $2.75 a ton, and a further sum of six thousand five hundred and seventy-nine and 30/100 dollars ($6,579.30) in the event that the bounty should be collected.

(6) In the fall of 1894 the Ferris Sugar-Manufacturing Company, Limited, became heavily involved in financial difficulties, and prior to this a number of creditors (among them, the Reading Iron-Works Company and John H. Murphy) recorded vendors' privileges upon the machinery by them to the said Ferris Sugar-Manufacturing Company, Limited, and erected by it in the said Barbreck sugar house.

(7) On January 4, 1895, the Burdon Central Sugar-Refining Company, Limited, a corporation organized under the laws of New York, and an unsecured creditor of the Ferris Company to the extent of forty thousand four hundred and four and seventy-four one-hundredths dollars ($40,404.74), its entire debt, filed a bill in equity in the circuit court of the United States for the Eastern district of Louisiana, alleging that the Ferris Sugar-Manufacturing Company, Limited, was heavily indebted and insolvent, and that its assets would be sacrificed by numerous creditors who were about to bring suit. The bill prayed for the appointment of a receiver to take charge of all the assets of said company. On the same day the defendant company filed an answer, with a resolution of its board of directors annexed authorizing such action, admitting all the facts charged in the bill, and uniting in the prayer for a receiver. A receiver was thereupon appointed.

(8) On March 25, 1895, H. M. Payne, J. U. Payne, and J. U. Payne & Co. filed a petition of intervention in this suit, stating, among other things not relevant to this certificate, the said balance of $4,564.73 and of $6,579.30 due them for cane delivered to the said Ferris Sugar-Manufacturing Company, Limited, and claiming that both sums were secured by a

lessor's privilege on the property of the defendant company at the Barbreck sugar house, and that the latter sum, namely, $6,579.30, was also secured by an equitable lien on any bounty that might thereafter be collected by the receiver. The receiver and the Ferris Company filed an answer to this petition, admitting the correctness of the amounts claimed, but denying that they were secured as averred. The Burdon Central Sugar-Refining Company adopted the answer of the receiver. Issue was joined by replication, and the matters in issue were referred to a master to report upon the law and the facts. The master allowed the amounts claimed by interveners, but rejected their claims both to a lessor's privilege to secure these amounts and to an equitable lien on the bounty. Upon exceptions to the master's report the court decreed that interveners were entitled to a lessor's privilege upon the movable effects of said Ferris Company and of third persons upon leased premises to secure both said sums due for the unpaid price of the sugar cane, in addition to an equitable lien on the bounty to secure the said sum of $6,579.30, in preference to all other creditors of the said Ferris Sugar-Manufacturing Company, Limited.

(9) From this decree the Burdon Central Sugar-Refining Company, complainants, the Reading Iron Company, and John H. Murphy, interveners in this suit, as creditors of the Ferris Sugar-Manufacturing Company, Limited, for large amounts, took an appeal, and made the following assignment of errors:

'First. Said court erred in decreeing that said interveners, J. U. Payne et al., are entitled to a privilege and right of pledge, as lessors, upon the movable effects of the defendant on the leased premises, to secure the sums due said interveners for cane sold and delivered by them to said defendant, amounting to $4,564.73 and $6,579.30.

'Second. Said court erred in decreeing that said interveners are entitled to an equitable lien on the bounties which may be collected on sugars made from cane belonging to said interveners, and taken off by the defendant or its receiver.'
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