Burdon Central Sugar Refining Co. v. Ferris Sugar Mfg. Co.

• Decision Date: 07 December 1896
• Docket Number: 12,355.
• Citation: 78 F. 417
• Parties: BURDON CENTRAL SUGAR REFINING CO. v. FERRIS SUGAR MANUF'G CO. (PAYNE et al., Interveners).
• Court: U.S. District Court — Eastern District of Louisiana

78 F. 417

BURDON CENTRAL SUGAR REFINING CO. v. FERRIS SUGAR MANUF'G CO. (PAYNE et al., Interveners).

No. 12,355.

United States Circuit Court, E.D. Louisiana.

December 7, 1896

Thos J. Semmes, for Receiver of Ferris Sugar Manufacturing Co.

Rouse &amp Grant, for Burdon Central Sugar Refining Co.

Fenner Henderson & Fenner, for interveners.

PARLANGE District Judge.

Three main questions are presented in this matter, to wit: (1) Have the interveners an equitable lien on the sugar bounty? (2) Is the unpaid balance of the price of sugar cane sold to the Ferris Sugar Manufacturing Company secured by interveners' lessor's privilege? (3) Are interveners entitled to damages for the loss of part of their crops? 1. The learned counsel for the receiver admits in his brief that future property may be assigned, but he insists that an equitable lien on future property can only be created by assignment or mortgage. While further admitting that there are many cases in which a fund or property in futuro is susceptible of assignment in equity, he states that he can find no case which extends the principle to the establishment of a lien on incorporeal rights to be acquired in the future, by a mere contract that the creditor shall have a lien. He concedes, however, that in such a case the lien could be created by assignment or mortgage. He urges that:

'A mere agreement to appropriate a fund when it comes into existence, or to give a lien thereon, does not operate as a lien, but an assignment or mortgage of such prospective fund is effectual, so as to give the assignee or mortgagee an equitable right in the fund, when it comes into existence.'

It may well be that an equitable lien will not result from a mere promise to pay a debt out of a fund not then in esse. The legal mind is fully satisfied with the result reached in the typical case of Trist v. Child, 21 Wall. 441. In that case, Justice Swayne, as the organ of the court, said:

'It is well settled that an order to pay a debt out of a particular fund belonging to the debtor gives to the creditor a specific equitable lien upon the fund, and binds it in the hands of the drawee. * * * But a mere agreement to pay out of such fund is not sufficient. Something more is necessary. There must be an appropriation of the fund pro tanto, either by giving an order, or by transferring it otherwise, in such a manner that the holder is authorized to pay the amount directly to the creditor, without the further intervention of the debtor.'

It is clear that no equitable lien is created when one does nothing to set aside a fund in futuro for the payment of his debt, nor to dispose of his rights in the fund, nor to incumber it, but merely promises to pay the debt from the fund, should it ever come into existence. Such a case rests entirely upon the personal obligation of the promisor. But a wholly different case is presented when one clearly and irrevocably divests himself of his rights in a thing to be acquired in the future, or pledges or assigns the property as a security for his debt. He thus consummates an agreement by which, from the moment the agreement is made, the creditor is invested with a right of which he cannot be deprived if the property is ever created. It is true that the right remains dormant until the property comes into being, but the right, though dormant, exists in the meantime.

Even an agreement to give a mortgage has been held to create a lien (1 Jones, liens, § 77, and cases there cited); also, a promise to give any other security (Id. § 78, and cases there cited). 'Every express executory agreement in writing, whereby the contracting express executory agreement in writing, whereby the contracting party sufficiently indicates an intention to make some particular property, real or personal, or fund, therein described or identified, a security for a debt or other obligation, or whereby the party promises to convey or assign or transfer the property as security, creates an equitable lien upon the property so indicated,' etc. 13 Am. & Eng.Enc. Law, verbo 'Liens,' p. 608, and cases there cited. These cases, arising from promises to give security, come under the maxim that 'equity regards as done what ought to be done,' and they do not in any manner conflict with the doctrine of Trist v. Child, supra. The agreement to give the property as security for the debt (taken in equity, as if the agreement were executed) is a sufficient appropriation to meet the requirements of the case just cited.

The case at bar may be said to be stronger than a case based upon a promise to give security. The contract in the instant case provided that a lien should exist, and did not merely promise to give a lien in the future. When it is admitted, as in this case, that property in futuro may be assigned or mortgaged, I am unable to understand how it can be contended, consistently with the admission, that a lien upon future property cannot be created by an express stipulation that a lien shall exist. There is nothing sacramental in the words 'to assign' or 'to mortgage.' In all cases of assignments to secure debts, the whole object sought to be attained is not the assignment per se, but the creation of a right to be paid out of the property, or fund,-- in other words, a lien. While, in an assignment, the parties may make no mention of the lien, a court of equity will say that the equitable result of the assignment is a lien. Equity jurisprudence would be in an irrational condition if it were true that an assignment of property in futuro creates a lien, though no lien is expressly stipulated by the parties, but that if the parties, pretermitting the assignment, expressly stipulate for a lien, then no lien shall be created. The case at bar presents a question of express, not of implied, lien. In plain and unambiguous words, the parties created a lien by express terms. The contract now before the court (article 13) distinctly provides that the unpaid balance of the price of the sugar cane 'shall operate as a lien and privilege on the bounty,' and also that 'the 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 such balance shall be paid. ' The matter is therefore entirely free from the difficulties which sometimes attend questions of implied liens. It is perfectly plain to me that the parties agreed that a lien upon the bounty, to secure any unpaid balance of the purchase price of sugar cane, should exist from the instant the sugar bounty was paid, and that no further act on the part of the Ferris Sugar Manufacturing Company, with regard to the creation of the lien, was necessary or contemplated by the contract. The matter reduces itself to the question whether parties can, by clear and express terms, create a lien upon future property. That question almost answers itself.

'An equitable lien arises either from a written contract which shows an intention to charge some particular property with a debt or obligation, or is declared by a court of equity out of general considerations of right and justice as applied to the relations of the parties and the circumstances of their dealings. Equitable liens by contract of the parties are as various as are the contracts which parties may make.' 1 Jones, liens, § 27.

'Whenever a positive lien or charge is intended to be created upon real or personal property not in existence or not owned by the person who grants the lien, the contract attaches in equity as a lien or charge upon the particular property as soon as he acquires title or possession of the same. An equitable lien upon future property may be even more effectual than such a lien upon property in existence, for the registration laws apply to liens upon property in existence, but not to liens upon future property. Therefore it happens that while, as against creditors, a lien cannot be created by consent upon a personal chattel in existence at the time of such contract without registration, yet, as this rule does not apply to a contract in regard to future property, a lien effectual as against creditors may be created by agreement upon future property, such, for instance, as the products of a farm or the profits of a farm not then in existence.' 1 Jones, Liens, § 42, and authorities there cited.

'By agreement, a lien may be given on any property not in existence or owned by a person at the time of the agreement, to take effect when the property comes into existence or is obtained.' 8 Am. & Eng.Enc. Law, verbis 'Future Acquired Property,' p. 987, and cases there cited.

Justice Clifford, at the circuit, said in Barnard v. Railroad Co., 4 Cliff. 351, Fed.Cas.No. 1,007:

'Argument to show that the parties intended to create a lien or charge upon property of the kind enumerated, subsequently acquired, as well as upon property in existence and in possession, is hardly necessary, as the affirmative of the proposition is supported by the express words of the indenture of mortgage; the rule being that, when parties intend to create a lien upon property not then in actual existence, it attaches in equity as soon as the person who grants the lien acquires the possession and title of the same. Mitchell v. Winslow, Fed.Cas.No. 9,673; Pennock v. Coe, 23 How. 117. * * * Many other authorities support the proposition that, whenever parties by their contract intend to create a positive lien or charge, either upon real or personal property, whether owned by the assignor or contractor or not, or, if personal property, whether it is then in being or not, the contract attaches in equity, as a lien or charge upon the particular property, as soon as the assignor or contractor acquires a title thereto.'

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