Board of Com'rs of Mattamuskeet Drainage Dist. v. A.V. Wills & Sons

• Decision Date: 16 August 1916
• Docket Number: 379.
• Citation: 236 F. 362
• Parties: BOARD OF COM'RS OF MATTAMUSKEET DRAINAGE DIST. et al. v. A. V. WILLS & SONS et al.
• Court: U.S. Court of Appeals — Fourth Circuit

236 F. 362

BOARD OF COM'RS OF MATTAMUSKEET DRAINAGE DIST. et al. v. A. V. WILLS & SONS et al.

No. 379.

United States District Court, E.D. North Carolina.

August 16, 1916

[Copyrighted Material Omitted]

E. L Travis, of Raleigh, N.C., for plaintiffs.

W. W Peirce, of Goldsboro, N.C., and William & Barry Mumford, of Pittsfield, Ill., for defendants.

CONNOR District Judge.

This is a bill in equity, in which plaintiffs ask for a mandatory injunction, compelling defendants to perform their contractual obligation in prosecuting the work of dredging and draining Mattamuskeet Lake, Hyde county, N.C.

The pleadings and exhibits disclose the following case: D. N. Graves, a citizen and inhabitant of the state of Massachusetts, together with D. H. Carter and John P. Kerr, citizens and inhabitants of the state of North Carolina, constitute the board of drainage commissioners of Mattamuskeet drainage district, Hyde county, N.C., as provided by chapter 442, Public Laws of North Carolina (modified by chapter 509 thereof) Session 1909. They will hereinafter be referred to as the 'drainage commissioners.' They are authorized and empowered to make the contracts hereinafter set forth. The Southern Land Reclamation Company, the name whereof has been changed, as will more fully appear, to the New Holland Farms, Inc., is a corporation created by and pursuant to the laws of North Carolina, and is the owner of the lands, hereinafter referred to, within the boundaries of the Mattamuskeet drainage district. It will hereinafter be referred to as the 'reclamation company' or the 'New Holland Farms, Inc.'

Defendants A. V. Wills & Sons, trading as partners, are citizens and inhabitants of the state of Illinois. The defendant Federal Trust Company is a corporation created by the laws of the state of Massachusetts. For the purpose of reclaiming the lands of the reclamation company, and of other landowners in said district, plaintiffs and defendants Wills & Sons, on the 16th day of July, 1913, entered into a contract in writing, the terms of which, so far as relevant to the decision of the questions presented here, are: Defendants, hereinafter referred to as the 'contractors,' agreed to construct certain canals, ditches, and levees for the purpose of draining the lake, containing 48,630 acres, and lands surrounding the lake, aggregating 99,868 acres, in accordance with the specifications, maps, etc., attached to the contract. They were to receive in payment for the work the sum of $266,965.28. Payments were to be made monthly, as the work progressed, in accordance with estimates of the engineers. For the construction work, as performed up to, and including, the sum of $159,000, the contractors were to be paid in cash, which sum the drainage district then had, and which was applicable to construction work, 'and no other use or purpose whatever.'

The contractors agreed with the drainage commissioners that they would receive in payment of the balance of the consideration agreed upon, for said material and work, the promissory notes of the reclamation company; that such notes should be duly executed by the reclamation company in the form attached to the contract and made a part thereof. They were to bear even date with the contract, and be payable to the order of the contractors. One hundred and nineteen of the notes to be made for the principal sum of $1,000 each, and one for the sum of $961.42; each of the notes, when delivered, to be indorsed and marked by the drainage commissioners with the date of the delivery, and each to be due one year from such date of delivery and to bear interest from that date until paid at the rate of 6 per cent. per annum. The notes of the reclamation company to be secured by a first mortgage, duly executed by the company and delivered to the contractors, at the date of the contract, upon about 13,500 acres of connected lands within the drainage district which land was then owned by the reclamation company. After the full cash payment of $159,000 was made, the notes were to be taken and received by the contractors in payment of such parts of the work, at 90 cents on the dollar of their face value. If, at any time, or times, when payments should be due the contractors, in notes of the reclamation company, the drainage district should pay, or cause to be paid, to the contractors, the estimates earned, in cash, instead of notes, the contractors agreed, in sufficient legal form, to release from the lien of their mortgage contiguous land described in the mortgage in the ratio of one acre of land for each ten dollars so paid.

It was further provided:

'That any and all extra work done under this contract, by the contractors, beyond and in excess of, the principal work for which the sum of $266,965.28 is hereinabove contracted to be paid, shall be paid in cash by said drainage district, out of assets provided for that purpose.'

Supplemental to and at the date and place of the contract of July 16, 1913, an agreement was executed by the reclamation company, in which it was stipulated that:

'If the said reclamation company shall, before the complete performance of the foregoing contract, or the payment in full of all notes of the Southern Land Reclamation Company, which was to be delivered to A. V. Wills & Sons, under the terms of the foregoing contract, sell any land belonging to it, lying in the Mattamuskeet drainage district, not included in the mortgage referred to in the foregoing contract, the said Southern Land Reclamation Company will deposit one-half of the cash proceeds of any such sale and one-half in amount and value of any notes or other securities, hereinafter known as, and called, 'purchase notes,' taken to cover the other part of the purchase price of any of such lands as sold, with some bank to be agreed upon by the parties hereto, such deposits of cash, and of purchase notes, to be held and used in accordance with the following provisions.'

It was, in said supplemental contract, further provided that such cash so deposited should be applied to the payment, in the order of their number, of such of the said mortgage notes as may then have been delivered by the drainage district. Such purchase notes, as may have been deposited to be held by the custodian, as further security for the payment of such mortgage notes, as may have been delivered, and were then unpaid, when payments were made of such purchase notes, the amount was to be applied in the same manner as cash payment. The cash payment, or purchase notes, taken for land by the reclamation company, deposited as provided by the supplemental contract, were not to exceed the amount of the notes held by the contractors and if, at any time, either the cash or purchase notes did exceed the amount of said notes, they were to be redelivered to the reclamation company to the amount in excess of such notes held by the contractors, at that time. The reclamation company reserved the right to pay, in cash, without discount, any amount which it should owe to the contractors and for which the drainage district held its notes to be delivered under the terms of the original contract, 'and in case such cash payments being made, the mortgage notes for which such cash payments are substituted, shall thereupon be delivered by the drainage district or by its commissioners to the Southern Land Reclamation Company, instead of the contractors, and the contractors shall, thereupon, in accordance with the terms of said mortgage covering approximately 13,500 acres, make partial release from the said mortgage at the rate of an acre of land for each ten dollars in cash so paid.'

Pursuant to the terms of said contract, the reclamation company on July 26, 1913, by its duly authorized officers and under its corporate seal, executed its corporate notes in the denominations, and in accordance with the terms of said contract, aggregating the sum of $119,961.42 and, on the same day, delivered said notes to the board of drainage commissioners for the purpose and upon the trusts set forth in said contract, and on the same day, said reclamation company duly executed to C. E. Dunham and C. T. Laird, trustees, a deed in trust, conveying to them a part of the land belonging to said reclamation company, being a part of what is known as 'Mattamuskeet,' described by metes and bounds, containing 13,511 acres, in special trust to secure the payment of said notes, which were particularly referred to and described, with power of sale in said trustees, in default of payment thereof, as they fell due. This deed of trust was duly recorded in the office of the register of deeds of Hyde county, N.C., on August 14, 1913, and constituted the first lien on said land. The deed was duly executed by said corporation and was, in all respects, a good and valid conveyance of the land for the purpose for which it was executed.

On February 14, 1914, the board of drainage commissioners having decided to make certain changes in the character of levees, required by the original contract, entered into a supplemental contract with the contractors to construct the boundary levee in accordance with said supplemental contract at the price of ten cents per cubic yard. It was stipulated that the said contract should be supplemental to the contract of July 16, 1913, and, except as to matter of boundary levee, in no way affect any other agreement between the parties thereto-- that the work contracted for should be regarded as extra work done upon said contract. There does not appear to be any substantial disagreement between the parties in respect to the terms of the supplemental contract. The contractors, proceeding under the two contracts, began work about March 4, 1914, and continued until March 31, 1915, when it was...