Source: https://caselaw.findlaw.com/us-supreme-court/167/127.html
Timestamp: 2019-04-21 11:18:09+00:00

Document:
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).
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 [167 U.S. 127, 144] 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 [167 U.S. 127, 145] 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.
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 [167 U.S. 127, 146] 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 [167 U.S. 127, 147] 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.
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 [167 U.S. 127, 148] 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 [167 U.S. 127, 149] 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.
[ Footnote 1 ] (1) H. M. Payne, J. U. Payne, and J. U. Payne & Co., a commercial firm composed of J. U. Payne, J. U. Payne, Jr., and R. W. Foster, all residents of New Orleans, La., were the owners of three contiguous plantations in St. Landry parish, Louisiana, known as Barbreck, St. Peter's, and Anchorage.
'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.
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.
'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.
'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.
'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.
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.
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.
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.
'J. U. Payne & Co.
(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.
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.
'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.

References: art. 1951
 v. 
 v. 
 art. 2439
 art. 1769
 art. 2669
 v. 
 v.