Central Trust Co. of Illinois v. George Lueders & Co.

• Decision Date: 02 March 1915
• Docket Number: 2539.
• Citation: 221 F. 829
• Parties: CENTRAL TRUST CO. OF ILLINOIS et al. v. GEORGE LUEDERS & CO. et al. In re J. RHEINSTROM & SONS CO.
• Court: U.S. Court of Appeals — Sixth Circuit

221 F. 829

CENTRAL TRUST CO. OF ILLINOIS et al. v. GEORGE LUEDERS & CO. et al.

In re J. RHEINSTROM & SONS CO.

No. 2539.

United States Court of Appeals, Sixth Circuit.

March 2, 1915

[Copyrighted Material Omitted]

L. F Wormser, of Chicago, Ill., for appellants.

D. V Sutphin, of Cincinnati, Ohio, for appellees.

Before KNAPPEN and DENISON, Circuit Judges, and SATER, District Judge.

KNAPPEN Circuit Judge.

This is an appeal from the order of the District Court allowing the claims of the appellees against the bankrupt estate as prior lien claims upon the property and effects of the bankrupt, by virtue of section 2487 of the Kentucky Statutes. The statute is printed in the margin of this opinion. ^[1]

The grounds of attack upon the order are (1) that the statute invoked is unconstitutional and in conflict with the Bankruptcy Act; (2) that the statute does not relate to manufacturing establishments other than those similar to rolling mills and foundries; and (3) that the bankrupt did not own or operate a manufacturing establishment.

1. The asserted ground of unconstitutionality is that the statute unreasonably discriminates in favor of those who furnish materials and supplies to manufacturing establishments, as against those furnishing money or machinery to the same establishments, as well as those furnishing materials and supplies to establishments not engaged in manufacturing, and discriminates against manufacturing establishments in favor of other establishments. We think this contention without merit.

The rule is well settled that the equal protection clause of the fourteenth amendment does not take from the states the power to classify the subjects of legislation, but leaves to the Legislatures a wide field of discretion in that regard, avoiding such classification only when unreasonable and arbitrary, and that a legislative classification is presumed to be reasonable unless it is apparent that there was and could be no reasonable basis therefor. Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 73-78, 31 Sup.Ct. 337, 55 L.Ed. 369, Ann. Cas. 1912C, 160, and cases there cited; Jeffrey Mfg. Co. v. Blagg, 235 U.S.

571, 577, 35 Sup.Ct. 167, 59 L.Ed. . . . . We see nothing arbitrary or unreasonable in preferring materialmen, whose supplies enter into the marketed product, over sellers of machinery, upon which liens for the purchase price may well be reserved, or over those loaning money, who not infrequently are in position to exact personal security or indorsement, nor in either of the other respects complained of. We cite in the margin several decisions of the Supreme Court which we think amply sustain the validity of this statute against the criticisms urged. ^[2] The statute in no way conflicts with the Bankruptcy Act. Section 64b of the act provides that

'The debts to have priority, except as herein provided, and to be paid in full out of bankrupt estates, and the order of payment shall be: * * * (5) debts owing to any person who by the laws of the states or the United States is entitled to priority.'

It was expressly held by this court in the Bennett Case that this section of the Bankruptcy Act adopts the Kentucky statute in question, and makes it the applicable federal law in determining priorities. 153 Fed.at page 674, 82 C.C.A. 531.

2. The proposition that the statute relates to manufacturing establishments only of the class of rolling mills and foundries invokes the doctrine of ejusdem generis. We think this question should be regarded as foreclosed against appellant's contention by the repeated decisions of the Court of Appeals of Kentucky and of this court, extending over a period of several years. In Winter v. Howell's Assignee (1900) 109 Ky. 163, 58 S.W. 591, the statute was applied to the case of one whose business was the sale of mixed paints and the manufacture of a cut-off for a cistern. In Graham v. Magann Fawke Lumber Co., 118 Ky. 192, 80 S.W. 799, 4 Ann.Cas. 1026, and in Bogard v. Tyler, 119 Ky. 637, 55 S.W. 709, it was held that a sawmill was a manufacturing establishment within the meaning of this statute. In Hall & Son v. Guthrie's Sons (Ky.) 103 S.W. 721, a flouring mill was held to be a manufacturing establishment within the same statute. In the case of In re Bennett, 153 F. 673, 82 C.C.A. 531, the priority provided by the statute was applied by this court in the case of a manufacturer of barrels in favor of the seller of heading and staves; and in Re Starks-Ullman Saddlery Co. (1909) 171 F. 834, 96 C.C.A. 506, the statute was held by this court to apply to the manufacture of harnesses, bridles, and other horse leather goods. True, in the Bennett Case the application of the statute was not directly discussed; but in the later case of Starks-Ullman Saddlery Co. it was said of the claims involved in the Bennett Case that they 'were indisputably for materials and supplies furnished for the 'carrying on' of an indisputable manufacturing business.' 171 Fed.at page 835, 96 C.C.A.at [221 F. 833] page 507. It is true that in none of the cases cited was the doctrine of ejusdem generis referred to; but that rule is merely an aid in determining legislative intent, and each of the decisions referred to necessarily involved the finding of legislative intent as including the establishments held respectively to be included within the 'manufacturing establishments' of the statute, and so is necessarily inconsistent with the construction here urged. That the reason here assigned for finding a different legislative intent was not mentioned in the opinions referred to would not, in view of the language and history of the statute, justify us in reaching a different conclusion. The fact that since the disposition of this case below the Legislature of Kentucky has amended the statute by the omission of manufacturing establishments does not, in our opinion, affect the question of legislative intent in the passage of this act 30 years or more previous to such amendment.

3. The remaining question, viz., whether the bankrupt's business was that of manufacturing, presents greater difficulties. The subject was elaborately discussed below by Judge Cochran, in an opinion reported as In re Rheinstrom & Sons Co., 207 F. 119. The purpose of the bankrupt's business, as stated in its articles of incorporation, is 'buying, selling, dealing, preserving, and packing fruits, vegetables, fruit products, and similar articles, in the state of Ohio and elsewhere. ' Its actual business was confined to putting up and selling what are popularly known on the market as 'Maraschino cherries,' but which were not actually such.

According to the record here, the real Maraschino cherry is grown in Dalmatia, Austria. ^[3] The cherries used by the bankrupt were large, white-meated, free stone cherries, grown in Greece or Italy; they were packed with the stems on, bleached by a sulphuring process, and finally placed in casks, where they were immersed in a solution of brine and sulphurous acid, to prevent fermentation and spoiling while in transit. The treatment up to this point was done by the foreign grower. The bankrupt purchased the cherries in the condition stated. At the bankrupt's establishment the casks were emptied, the cherries washed in various changes of water to effectually remove the brine and acid. They were then stemmed by hand, then pitted by machinery, then washed again in various changes of water to remove any trace of brine or acid which might have penetrated the meat of the cherry. The washings consumed about 24 hours, their object being to restore the cherries as nearly as possible to their condition before packing in the brine and acid solution. The cherries were then colored either red or green by immersion in a coloring solution, then sweetened by immersion in a syrup of cane sugar and water contained in vacuum kettles, where they were kept hot for 12 hours, and boiled for from 24 to 48 hours. They were then flavored by adding to the syrup the desired flavoring substance, were then sorted and graded, and then put into bottles or other containers, which were labeled and shipped by the bankrupt to its customers. The entire treatment in the bankrupt's establishment took six days. A part of the product was flavored with true 'Maraschino' water made from real Dalmatian cherries. Another part was flavored with Marasque water, made from cherries grown in Southern France, and being an imitation of the real Maraschino water. The red ones were large and luscious, and until 1911 had been labeled 'Maraschino cherries,' by which name they were popularly known. Since the taking effect of the Pure Food and Drugs Act in 1911 they were labeled simply as cherries, artificially colored, and, if flavored with real Maraschino water, that fact was stated. This change in labeling has not affected their sale, nor presumably to any extent the name by which they are popularly known. The chief, if not the only, use to which these so-called Maraschino cherries are put is as a garnish in various mixtures of alcoholic liquors, in salads, ice cream, and desserts. Their flavor is not that of the original cherry, nor even that of the real 'Maraschino' (or Marasca) cherry

The specific question is whether the putting up and marketing of these cherries, including their preservation, coloring, and flavoring, so as to produce the articles of commerce known as Maraschino cherries, specially adapted to the use stated, is properly speaking, manufacture within the Kentucky statute. At the threshold we are met with the proposition that manufacturing necessarily implies transformation, the emerging of a new and different article, bearing a distinct name, character, or use. This general proposition has in numerous cases been declared and applied to the facts...