In re I. Rheinstrom & Sons Co.

• Decision Date: 16 June 1913
• Citation: 207 F. 119
• Parties: In re I. RHEINSTROM & SONS CO.
• Court: U.S. District Court — Eastern District of Kentucky

207 F. 119

In re I. RHEINSTROM & SONS CO.

United States District Court, E.D. Kentucky.

June 16, 1913

De Camp & Sutphin and Burch, Peters & Connolly, all of Cincinnati Ohio, for petitioners.

Harmon Colston, Goldsmith & Hoadly, of Cincinnati, Ohio, for Covington Savings Bank & Trust Co.

Lessing Rosenthal, Chas. Hamill, and Leo F. Wormser, all of Chicago Ill., for Central Trust Co. of Illinois.

COCHRAN District Judge.

This case is before me on petition of eight creditors of the bankrupt, who claim priority over the other creditors under sections 2487 to 2491, inclusive, of the Kentucky Statutes by virtue of section 64b (5) of the Bankrupt Act (Act July 1, 1898, c. 541, 30 Stat. 563 (U.S. Comp. St. 1901, p. 3447)) for review of an order of the referee denying them such priority. The bankrupt owned and operated an establishment at Ludlow, Ky., in this district, where it produced what are known as 'Maraschino cherries,' and the debts of the petitioning creditors were for materials and supplies furnished for the purpose of carrying on its business. The provisions of those sections of the Kentucky Statutes under which priority is claimed may be found set forth in full in my opinion in the case of In re Bennett, 153 F. 680, 82 C.C.A. 531. ^[1]

The right thereto depends solely on the question whether or not the bankrupt was the owner or operator of a manufacturing establishment, within the meaning of section 2487. That is the only question which has been presented and argued before me. It is claimed by the trustee and creditors, other than petitioners, that it was not the owner or operator of such an establishment, and the referee so held. Under that section and section 2491, in certain contingencies, the employes of and persons furnishing, for the purpose of carrying on its business, materials and supplies to 'any mine, railroad, turnpike, canal or other public improvement company,' or 'any owner or operator of any rolling mill, foundry or other manufacturing establishment,' acquires a lien on its property and effects.

The position of the trustee and objecting creditors is twofold. They contend that the bankrupt was not the owner or operator of a manufacturing establishment at all, and that, if it was, it was not the owner or operator of the kind of a manufacturing establishment covered by the statute. They contend that it does not cover every kind of a manufacturing establishment, but only such manufacturing establishments as are like the two specified, to wit, rolling mill and foundry, and the bankrupt's establishment was not of such character. The referee based his holding on the first branch of the position; i.e. that the bankrupt's establishment was not a manufacturing establishment at all.

The problem in hand, therefore, is one of interpretation-- the ascertainment of the thought of the Legislature of Kentucky as to the character of establishment necessary to bring the owner or operator thereof within the statute. What kind of an establishment did it have in mind when it used the words 'other manufacturing establishment.' Generally such a question is stated to be concerned with the intent of the Legislature or the spirit of the legislation. I prefer to put it as having to do with the thought of the Legislature.

It is urged on behalf of the respondents that this statute should be strictly construed. By this I understand to be meant that it must clearly appear that the bankrupt's establishment was such an establishment as the Legislature had in mind in enacting the statute; otherwise, the claim to priority should be denied. I accede to the soundness of this position, particularly as from my experience with it, in the Bennett Case, I have found that it is capable of working a very great hardship. In that case foreign materialmen, who did not know that they were entitled to priority until after bankruptcy, took the entire estate, and local banks, who, in like ignorance, had furnished money, not only to buy material, but to pay the employes, and by so doing had aided materially in keeping the concern on its feet for many months, went without anything. But if the bankrupt's establishment comes clearly within the statute, I have no other recourse than to sustain the claim to priority.

In the argument before me the last branch of respondents' position-- i.e., that the Legislature did not have in mind any manufacturing establishment, but only such establishments as were like the two specified, and the bankrupt's establishment, assuming it to have been a manufacturing establishment at all, was not such an one-- has been put to the front. It seems to me, however, that it is more logical to deal first with the other branch of respondents' position assuming for the time being that the Legislature had in mind any such establishment, and I shall pursue that course. In so doing I think best at the outset to come to an understanding as to two matters. One is as to what bankrupt did at its establishment, and what were the so-called 'Maraschino cherries' which it produced thereat. The other is as to respondents' argument in favor of the position that the establishment was not a manufacturing establishment.

What the bankrupt did at its establishment had to do with natural cherries in a certain condition. The cherries were large, white-meated, free-stone cherries. They had been grown in the north of Greece or Italy; then picked just before reaching the ripened stage-- i.e., as they began to turn-- with their stems attached; then treated with sulphuric acid to bleach them, the color produced thereby being white or light brown; and finally immersed in brine and a percentage of sulphuric acid in casks or barrels to preserve them, in which condition they were purchased by the bankrupt. There were ten distinct stages in what it did to them after they had been received at its establishment. It first drained off the brine and sulphuric acid; then washed the cherries in various changes of fresh water, to remove all traces of the brine and acid; then stemmed them by hand; then pitted them by machinery; then washed them again in various changes of fresh water to remove any brine or acid which might have gotten under the skin in stemming and pitting; then colored them by immersing them in a solution of coloring matter and water; then sweetened them, by immersing them in a syrup made of cane sugar and water, contained in a vacuum kettle within an open kettle containing water, and, whilst in this condition, keeping the water in the outer kettle hot for 12 hours, and then converting that kettle into a vacuum kettle, also, and keeping the water therein boiling for 24 to 48 hours, this operation being termed the 'cooking' operation; then flavored them, by adding to the syrup such flavoring substance as might be desired; then sorted and graded them; and finally bottled them with the syrup thus flavored. It does not appear what was the original name of the cherries so purchased chased and treated. It was not Maraschino. There is a cherry of that name grown in the mountains of Dalmatia in Austria, but they were not such cherries. Amongst the substances with which some of them were flavored was what was termed real 'Maraschino water,' made from the real Maraschino cherries, and with which others were flavored was what is termed 'Marasque water,' made from cherries grown in southern France, an imitation of the real Maraschino water.

The cherries so treated were given two colors, red and green. The red ones are characterized as luscious, big, red cherries, and up to the year 1911 had been labeled 'Maraschino cherries,' and that was the name by which they were popularly known. In that year, under the Pure Food and Drug Act, it was forbidden to so label them. Thereafter they were labeled simply as cherries. It was stated that they were artificially colored, and, if flavored with real Maraschino water, that also was stated. It is not likely that this change in the label has to any extent affected the name by which they are popularly known. It is testified that it has not affected their sale. The referee has put the bankrupt's connection with these articles, to which I have given so much detail, in a single sentence. He says:

'In short, the bankrupt bought cherries, preserved in brine and sulphuric acid, extracted the preservative, stemmed, pitted, sweetened, colored, flavored, and preserved them, and sold them as cherries.'

The principal, if not only, use to which these cherries are put, is as a garnish in various mixtures of alcoholic liquor, salads, ice cream, and deserts. Their flavor is not that of the original cherry, not even of the real Maraschino cherry.

The argument of respondents' counsel in support of the position that the bankrupt's establishment is not a manufacturing establishment hardly deals with the subject as a matter of principle. They rely on certain decisions, some from noncontrolling jurisdictions, and others from controlling jurisdictions. Those from controlling jurisdictions are by the Court of Appeals of Kentucky, the Sixth Circuit Court of Appeals, and the Supreme Court of the United States. It must be conceded that the decision of any of these three courts, if in point. is binding on me. I have no right to do otherwise than follow it whether I deem it sound or not. I deem it important to make a rather full presentation of these decisions. Those from noncontrolling jurisdictions will be noted first.

Two decisions from the Supreme Court of Louisiana are much relied on. They arose under the Constitution of that state exempting manufacturers from a certain tax. They were in the cases of City of New Orleans v. Mannessier, 32 La.Ann. 1075 and City of New Orleans v. New Orleans Coffee Co., Ltd, 46 La.Ann. 86, 14 So. 502...