Burdon Central Sugar Refining Company v. Payne/Opinion of the Court

By article 3183 of the Revised Civil Code of Louisiana, it is provided: 'The property of the debtor is the common pledge of his creditors, and the proceeds of its sale must be distributed among them ratably, unless there exist among the creditors some lawful causes of preference.' By article 3184: 'Lawful causes of preference are privilege and mortgages.' By article 3185: 'Privilege can be claimed only for those debts to which it is expressly granted in this Code.' By article 3186: 'Privilege is a right, which the nature of a debt gives to a creditor.' Article 2705 provides: 'The lessor has, for the payment of his rent, and other obligations of the lease, a right of pledge on the movable effects of the lessess, which are found on the property leased. * *  * ' And by article 3263 this privilege is made superior to the privilege of a vendor.

Judge Parlange, holding the circuit court, was of opinion that under the terms of the contract the purchase price of the cane delivered by the sellers, the lessors, to the purchasers, the lessees, was secured by the lessors' privilege, because under the contract the obligation to pay the price of the cane was one of the essential obligations of the lease, and therefore covered by the words 'other obligations of the lease.' 78 Fed. 417.

Counsel's contention is that by reason of these words the privilege extends to every obligation created by a contract of lease; and Warfield v. Oliver, 23 La. Ann. 612, Fox v. McKee, 31 La. Ann. 67, and Henderson v. Meyers, 45 La. Ann. 791, 13 South. 191, are cited as maintaining that view. In the first of these cases it was held that the obligation resulting from a clause in a lease providing that the lessee should repair and keep in repair the leased premises was secured by the lessor's privilege. In the two other cases it was decided that, when a contract of lease provided for an attorney's fee in the event of suit to recover the rent, the amount of the stipulated fee was also so secured. But it may be observed that repairs to be made to leased property are in their very nature incidental to a lease of the property, and that such a stipulation as to an attorney's fee is a mere accessory to the rent itself.

It is further contended that the Code Napoleon and the Louisiana Code on the subject of the lessor's privilege are substantially alike, and that the French commentators and the decisions of the French courts support the proposition that the lessor's privilege secures, not only the rent, but also advances made during the course of the lease for the execution of the lease; that the meaning of the Louisiana law should be regarded as settled by this construction; and that, as the price of the cane delivered under this contract would be secured by the privilege of the lessor under the law of France, the same conclusion follows here.

Article 2102 of the Code Napoleon provides that the lessor shall have a privilege for 'the repairs which the tenant is bound to make (r eparations locatives), and for everything that concerns the execution of the lease.' Many French commentators are referred to as establishing that under this provision the privilege of the lessor extends to and secures advances made by him to a lessee, and they undoubtedly maintain that under the French law the amount due for raw material delivered by a lessor to the lessee of a manufacturing establishment for the purpose of being worked at the factory, under the terms of the lease, would be secured by the lessor's privilege.

29 Laurent, Droit Civil Francais (4th Ed.; 1887) §§ 407, 408, states the principle thus:

'By execution of the lease, we understand all the obligations which the law or the contract imposes on the lessee. Those which the law establishes are considered as agreed between the parties. All, therefore, concern the execution of the contract. * *  * Are advances which the lessor makes under the contract of lease to the lessees secured by his privilege? The affirmative is adopted by jurisprudence. It is incontestable when the advances concern the lease; that is to say, the rights and obligations which result from it. In this case both the letter and spirit of the law are applicable. But if a loan of money were made to the lessee, in the contract of lease, without there being any relation between the loan and the lease, this would not be an advance; it would be an ordinary loan; and the law gives no privilege for such a loan. Jurisprudence adopts this view: for, if it grants a privilege to the lessor for the advance which he makes, it is because these advances concern the lease. The owner of an iron furnace stipulates to furnish to the lessee of his furnace the wood necessary to operate it; it has been adjudged that such an advance is privileged. Such is also the case when the lessor furnishes beets to the lessee of a sugar factory. The lessor furnishes 10,000 francs to the lessee of a mill, as a fund to be used in operating it. The advance being intended to operate the mill, therefore its object was the execution of the lease, and the claim is privileged.'

The only decision of the French courts cited in argument is referred to by Laurent, and is the case of Vanderaghen c. Decocq, decided April 18, 1850, by the court of appeals of Douai (not by the court of cassation, as inadvertently stated by counsel), and reported in 1 Journal du Palais (1851) p. 395.

The following statement made by the court of original jurisdiction was adopted by the court of appeals in affirming the judgment:

'Considering that, as regards the claim of 6,800 francs for rentals, the privilege of Decocq is not contested by the defendant, and is, besides, expressly established by article 2102 of the Civil Code; that, according to paragraph 1 of that article, the same privilege takes effect for repairs chargeable to the tenant, and for everything that concerns the execution of the lease; that it is by virtue of a clause of the lease, and for the execution of that clause, and in order to insure the operation of the factory leased, that the Decocqs have delivered and furnished to Blanquart beets to value of 8,086 francs; that article 9 and following of said lease required them to plant beets on 53 hectares and 19 acres, and to furnish and deliver to the factory the entire product of the crop at the price of 16 francs per 1,000 kilos of beets, and under a penalty of 150 francs damages for each 35 acres of beets not delivered; that all the authors and jurisprudence grant the privilege of article 2102 to the lessor, who has made advances and furnished commodities, as in this case, by virtue of a clause of the lease, and for the execution of the lease,-it is held that under the terms of article 2102 the claim of Decocq is privileged as well for the beets furnished as for rentals.'

Whether the language of the Louisiana Code, 'every obligation of the lease,' may not justly be held to be narrower than the words 'everything that concerns the execution of the lease,' as found in the Code Napoleon, and therefore whether the latter would secure by the lessor's privilege an advance made by the lessor, which would not be so secured under the Louisiana law, we need not discuss; for, even conceding that the two Codes are alike, and that the provisions of both support the theory relied on, yet we think that under the provisions of this contract the price of the cane was not secured by the lessor's privilege. The test applied by the French writers to ascertain whether the particular obligation is secured by the lessor's privilege is whether the obligation created by a particular clause in a contract of lease is really a part of the contract of lease proper, or an obligation necessary for its execution. Thus Laurent, as we have just seen, says: 'But, if a loan of money were made to the lessee in the contract of lease, without there being any relation between the loan and the lease, this would not be an advance; it would be an ordinary loan, and the law gives no privilege for such a loan.'

And the conclusion of the court of appeals of Douai in the case cited rested on the fact that the particular contract there considered made the price of the beets a part of the contract of lease, and intended for the execution of the lease.

'It is clear, then, that, though we concede the view of the Louisiana law contended for by appellee, the question still remains: 'Did the obligation to pay for the cane as stipulated in this contract make such obligation a part of the lease itself, or did the duty to pay under the contract result, not from the lease, but from another and distinct contract, namely, one of sale, not contemplated by the parties to be considered as a part of the lease as such, and therefore not secured by the lessor's privilege? The learned district judge proceeded on the ground that there was an identity between the French and the Louisiana law, that the interpretation of the one was persuasive in respect of the other, and that under both laws the privilege claimed should be allowed; but to reach this result he also held that the contract was brought within this view of the law because the sale of the cane, as between the parties to the contract, was 'an essential consideration of the lease, both on the part of the lessors and lessees.'

We should remember that the contract must be so construed as to give meaning to all its provisions, and that that interpretation would be incorrect which would obliterate one portion of the contract in order to enforce another part thereof (Rev. Civ. Code La. art. 1951), and that as privileges, under the law of Louisiana, are in derogation of common right, they cannot rest on implication, and can only result from express terms, or from clear and irresistible intendment (Shaw v. Grant, 13 La. Ann. 52; Citizens' Co. v. Maureau, 37 La. Ann. 857).

In Case v. Taylor, 23 La. Ann. 497, the supreme court of Louisiana said: 'It matters not what name the parties have given to the instrument; its character is determined by its constituent elements.' Article 2063 of the Revised Civil Code of Louisiana (an article not found in the French Code) provides: 'A conjunctive obligation is one in which the several objects in it are connected by a copulative, or in any other manner which shows that all of them are severally comprised in the contract. This contract creates as many different obligations as there are different objects; and the debtor, when he wishes to discharge himself, may force the creditor to receive them separately.' And article 1883, that 'every contract has for its object something which one or both of the parties oblige themselves to give, or to do, or not to do.'

The writing before us embodies, in fact, two contracts,-a contract of lease and a contract of sale. If we were compelled to treat it as a single, indivisible contract, what would be its proper denomination? The sale of the cane was manifestly more important to Payne & Co. than the lease of the sugar house. By the contract they severed their lands into two parcels; leasing, for a time and price fixed, one part thereof, with the sugar house, and retaining the remainder, which they were to cultivate, and the crop upon which the Ferrises agreed to purchase. Apparently the lease was the inducement to the sale, rather than the sale the inducement to the lease. So that, if there was a loss of identity, which form of contract absorbed the other? We do not think, however, the effect of the document was to fuse the two into one, but that a contract of sale and a contract of lease were both provided for. The preamble recites: '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.' And articles 1 to 5 regulate, in substance, the relations between the parties as landlord and tenant, while articles 6 to 13 govern the sale of the crops.

Article 6 says: '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 11: '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,' etc.

Article 13: '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,' etc.

We do not see how it can be successfully denied that there was a contract of sale as well as a contract of lease, and, this being the fact, it is impossible to so read the writing as to destroy the one in order to give effect to the other. And, in interpreting the contracts, if all the obligations which they created, excepting those essentially necessary to the existence of the contract of sale, should be attributed to and treated as obligations of the lease, this would not make the duty to pay for the cane an obligation of the lease, because price is of the essence of the contract of sale, under the law of Louisiana, and without price there can be no sale. Rev. Civ. Code, art. 2439. This conclusion is strengthened when we consider that the contracting parties themselves sedulously separated the obligation to pay the price of the cane from the other obligations by stipulating that the price should be secured by a privilege and lien entirely independent of the lease. Thereby the duty to pay for the cane was treated as resulting from a sale, and secured by a privilege specially provided for upon the bounty money, which is inconsistent with the view that the contracting parties contemplated that the duty to pay for the cane resulted, not from a sale, but purely from a lease. It is true that the mere taking of security for the obligations of the lease would not import that the lessor's privilege created by law in favor of these obligations was abrogated, yet when the necessary effect of the contract under consideration is to separate the duty to pay for the cane from the obligations of the lease as such, and to secure it separately, the stipulation as to security is entitled to great weight, as tending to show that the parties regarded the obligations of the lease as one thing, and the obligation to pay the price separately secured as another.

Privilege, says the Code, is the right 'which the nature of the debt gives to the creditor.' Now, the stipulation was that the price of the cane should be secured by a privilege on the bounty money; and this clearly justifies the assumption that the parties proceeded on the theory that the price of the cane arose from a different consideration and created a different boligation from the obligations created by the lease.

Again, the twenty-second article of the contract expressly provided for the continuance of the lease at the option of the lessee, the manufacturing company, even after the lessors had been discharged from all obligation cultivate or deliver cane to the company. That article is:

'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 of termination under this section, to continue the lease as herein stipulated under the same terms and conditions, except as hereinabove provided.'

How can it be concluded that the cultivation, delivery, and sale of the cane, on the one hand, and the payment of the price therefor, on the other, was an essential and necessary part of the continuance of the contract of lease, when the contracting parties themselves declared that, although all obligation to cultivate and deliver cane and to pay for the same should be dispensed with, the lease itself might continue to exist for its full term? And it may be observed, in this connection, that the contingency as to the bounty had happened before any delivery whatever had been made under the contract. If, in the year following, the vendor had exercised his option to cease delivering cane, and the vendee had continued to lease, could it have been said that there was no lease, because the obligation to deliver cane had disappeared, when the contract itself provided that this should not be the case? As the contract of lease provided for the erection by the lessor of new machinery in the sugar house, and therefore must be considered to have contemplated a debt as arising from its execution, it appears to us that it was the plain duty of the lessors, if their intention was that the purchase price of the cane should be an obligation of the lease secured by a lessor's privilege, to have so stipulated in unambiguous terms. And as this was not done, but, on the contrary, as the obligation to pay for the cane was stated in the contract as arising from the sale, and was separated from the obligations of the lease by the reservation of a privilege and lien on the bounty money, the rule of strict interpretation precludes us from so reading the contract as to enlarge its terms to import a privilege not necessarily resulting therefrom.

Nor do we think that the twenty-fifth article, providing that 'this is an entire contract, each stipulation and obligation herein being a part of the consideration for every other,' tends to impair the conclusions we have indicated. The parties treated the written agreement as embodying both a sale and a lease, as independent contracts. Rev. Civ. Code. La. art. 1769. The contract of lease is essentially commutative. Id., art. 2669. And article 1768 of the Code defines such contracts thus: 'Commutative contracts are those in which what is done, given or promised by one party, is considered as equivalent to, or a consideration for what is done, given, or promised by the other.' It was because the parties considered the agreement as embodying independent stipulations that the provision before quoted was inserted, for it would otherwise have been superfluous; while, considering them as independent contracts, the stipulation making them interdependent created the right to rescind the one in case of the violation of the other.

We hold, then, that the price of the cane delivered under the contract was not secured by the lessors' privilege, and that the first question must be answered in the negative.

2. The thirteenth article of the contract reads as follows:

'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.'

If it was within the power of the contracting parties to create an equitable lien upon the bounty collected, the terms of the contract effectuated that purpose. Walker v. Brown, 165 U.S. 654, 17 Sup. Ct. 453, and cases cited.

The right of the parties, however, by the contract to create an equitable lien, and the power of a court of equity to enforce such lien, are denied upon the ground that as, by the provisions of the law of Louisiana, equality of distribution is the rule among creditors, and preferences can only result from privileges and mortgages, and as the subject-matter from which the lien here arose was not one of the cases to which the law of Louisiana gives a privilege, therefore an equitable lien could not be created by contract or enforced in violation of the terms of the statutes of Louisiana. But, without passing on the correctness of this proposition, we think it has no relation to the matter under consideration. The bounty on sugar was derived wholly from the act of congress of October 1, 1890, providing therefor (26 Stat. 567, c. 1244), and the act of March 2, 1895, making a partial allowance for the repealed bounty (28 Stat. 910, c. 189). U.S. v. Realty Co., 163 U.S. 427, 16 Sup. Ct. 1120. The bounty was given, by the terms of the act of 1890, not to the manufacturer of sugar manufactured within the United States, but to the producer of such sugar from 'beets, sorghum and sugar cane grown within the United States.' In this way the law, in conferring a bounty, created a link between the manufacturer of the sugar and the grower of the beets, sorghum, or cane from which it was manufactured. And this connection between the manufacturer and the grower being created by the act of congress in conferring the bounty only for sugar manufactured from cane grown within the United States, the relation between the grower and the manufacturer was one arising from the laws of the United States, and not from the local law of the state of Louisiana. As a transfer of the claim against the United States derived from the bounty could not have been given by the manufacturer who received the cane of the grower without a violation of section 3477 of the Revised Statutes, the contention of appellants denies to the grower of cane, on its delivery to a manufacturer, any security whatever; but this would be incompatible with the purposes and objects of the acts of congress, and would cause the statutes of Louisiana to operate upon, and, in a measure, render nugatory, laws of the United States. The parties to the contract had in view in making it the necessary relation between them accorded by the act of congress, for the contract stipulated that the parties of the first part should '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.' The right to collect the bounty having arisen from a law of the United States, and the provisions of that law creating a necessary relation between the grower and the manufacturer, making them, in effect, joint producers of the sugar, the right to the equitable lien stipulated by the contract was not controlled by the provisions of the local law of Louisiana, even although, as a general rule,-and in regard to this we express no opinion,-the effect of that law would be to deprive contracting parties, except when expressly allowed, of the right to contract for an equitable lien, and to deny to courts of equity the power to enforce the same.

These considerations lead to an affirmative answer to the second and third questions.

The first question is answered in the negative, and the second and third questions in the affirmative, and it will be so certified.