State Trust Co. v. De La Vergne Refrigerating Mach. Co.

After reciting the facts as above, the opinion of the court was ’ delivered by PARDEE, Circuit Judge. The first assignment of error is general, and needs no particular attention. The second assignment of error is not well taken. It does not appear in the record that the circuit court held that by the judgment of the state court the State Trust Company was in any wise bound as to the character of the privilege claimed by theDe La Yergne Refrigerating Machine Company. The holding below was apparently that, as between the parties thereto, the De La Yergne Refrigerating Machine Company and the New Orleans & Western Railroad Company, the judgment was conclusive, and as to the State Trust Company not conclusive, but strongly persuasive. Tlie third assignment of error raises the question whether, as between the De La Yergne Refrigerating Machine Company and the New Orleans & Western Railroad Company, the former was a subcontractor having only a subcontractor’s lien, or was a vendor with a vendor’s privilege; and whether any hen that the refrigerating company had as subcontractor was lost for failure to record the same as required by the statutes 'of Louisiana. Hie case shows prima facie that originally the De La Yergne Refrigerating Machine Company was a subcontractor, and afterwards became a direct contractor, when the New Orleans & Western Railroad Company intervened in the contract, asserted that it was made for its benefit, and assumed all its obligations. However this may be, by the judgment of the supreme court of the state the relation between the parties as that of vendor and vendee is clearly established, and we are of opinion- that the matter is not open for rehearing in this proceeding. The fourth assignment of error assumes that the De La Yergne Refrigerating Machine Company had a vendor’s lien on the presses and appurtenances, and raises the question whether or not, as against the prior mortgage creditor, it was necessary to record the privilege under the laws of the state of Louisiana. Rev. Civ. Code, arts. 3271, 3273, 3274. This assignment presents the really difficult question in the case, and, as it is one of the construction and effect of the registry laws of the state of Louisiana, we must look to the decisions of the supreme court of that state for the proper rule to follow and apply. In Gary v. Burguieres, 12 La. Ann. 227, it is held that an engine and gearing attached to a plantation with the presumed consent of the vendor must be considered a part of the immovable itself, citing Louisiana (Old) Code, arts. 455, 460; and tbat a privilege of the vendor can only be preserved by registry of the contract under article 3239 (Old) Code, as follows: ‘Architects, contractors, masons and other workmen, those who have supplied the owner with materials for the construction or repair of his buildings or other works, those who have contracted, in the manner provided by the police regulations, to make or put in repair the levees, bridges, canals and .roads of a proprietor, preserve their privileges, only In so far as they have recorded-with the register of mortgages,- the act containing the bargains they [474] have made, or the amount or acknowledgment of what is due to them, in all cases where the amount of the bargain or agreement, or the amount of the account or acknowledgment, exceeds the sum of five hundred dollars.” In Lapene v. McCan, 28 La. Ann. 751, the question as to whether boilers not paid for, but attached to the sugar house with vendor’s consent, were a part of the immovable, was not decided, because held to be res adjudicata under a previous judgment; but Judge Wyly, concurring, said: “1 agree with the district judge that 'defendants, having judgment with vendor’s privilege on the four boilers, could enforce it by seizing and selling the said boilers separately from the plantation. When they were set up at the sugar house the vendor’s privilege was upon them, and I know of no law whereby the purchasers could destroy the privilege by using the property for the purpose it was adapted. X cannot consent that a vendor’s privilege on a movable can be' lost simply because the purchaser may use it on his plantation. If such were the case, the vendor’s privilege would furnish but little security in an agricultural district. The law has' not declared that the use of a movable by a purchaser shall destroy the vendor’s privilege. ‘Privileges become extinct: First — By the extinction of the thing subject to the privilege. Second — By the creditor acquiring the thing subject to it. Third — By the extinction of the debt which gave birth to it. Fourth — By prescription.’ Rev. Code, art. 3277. ’ As defendants have a privilege upon the boilers as separate things, I see no reason why they may not sell them separately from the plantation. If they remain separate things, so that a privilege may rest upon them, they remain separate for the'enforcement of such privilege. They cannot be things, and not things. If they are movables, the vendor’s privilege is upon them. If they are part of the plantation — an immovable — there can be no vendor’s privilege, because defendants did not sell the plantation. Defendants had a privilege upon them as movables when they sold them to plaintiffs, and that privilege has been recognized in the judgment sought to be executed.” This quotation is particularly pertinent because of its subsequent approval by the supreme court in Carlin v. Gordy, 32 La. 1285. This last-cited case was a contest between a mortgage creditor and the holder of a subsequent vendor’s lien claimed on a sugar mill and machinery. The court held that recording the note given for the price on the day of its date was a sufficient registry; and as to the status of the mill and machinery, movable or immovable, and of the vendor’s privilege, said: “Defendant had a privilege on these movables, perfectly valid, not only as between the parties, but against all third persons. The purchaser subsequently set up this mill and machinery upon his plantation: They were thereby converted into immovables by destination; but this conversion did not and could not operate to the prejudice of the vendor’s privilege existing thereon prior to their attachment to the plantation. * * * The evidence fully establishes that the mill and machinery in this case can be removed without damage to the s.ugar house, and the case falls fully within the facts and principles of the ease of Lapene v. McCan, 28 La. Ann. 749, the doctrine of which case is much more satisfactory to our minds than the contrary doctrine of Gary v. Burguieres, 12 La. Ann. 227, where we think the court puts too narrow an interpretation upon the expressions of Troplong. The concurring opinion of Justice Wyly in the ease of Lapene v. McCan, while perhaps too broad in its general statements, we think is thoroughly correct, so far as it applies to movables, which, though attached to a plantation, are capable of removal without damage to the structures in which they are contained, or tvitb which they are connected. In such case there is no reason why the vendor’s privilege which attached to them as movables prior to their being placed on the plantation should not continue in force, and why they should not be sep [475] arately sold in satisfaction thereof. The privileges resting upon movables are, in some cases, affected by the changes which may take place In the nature or destination of the things. But such changes must he so radical as to create a new species of things, and destroy that species which originally existed; as, to use the illustration of Cujas, when a pine or cypress log is converted into a ship, or when wool is converted into a garment, or when marble Is made into a statue. In the case at bar the mill and machinery have suffered no such change by the use which the vendee has made of them. They-remain the mill and machinery which were sold, and the privilege subsists in all its force. Had their destination as immovables been effected in such manner as to preclude their detachment without injury to independent rights of ownership in the soil or structures, the privilege might have been subjected to such limitation in its exercise as would prevent the separate sale or removal of the thing subjected to it. But where, as in this case, no such difficulty exists, or, if at all, to an Inappreciable extent, we see m» reason for imposing any restriction upon the rights of the privileged creditor. The privilege of the vendor is founded on the right of property. Payment of the price is essential to the vesting of an indefeasible title in the vendee. .The vendor’s right to and securities for the payment of the price have always commended themselves to the favorable consideration of our courts.” In Baldwin v. Young, 47 La. Ann. 1466, 17 South. 883, the contest was between the unpaid vendor in a conditional sale and the mortgage creditor as to the right of the vendor to remove a heating apparatus attached to the realty, and we quote at length as directly bearing on the question, when do movables attached to the realty become a part of the immovable as against the unpaid demand of the vendor for the purchase price? “The principle that movables added to the Immovable for its improvement, while inflexibly applied as between the owner and his vendee or mortgagee, is yet subject to well-defined exceptions. The Code itself recognizes the right of "the third person to remove or claim compensation for his works or constructions on the immovable of another; yet, if made by the owner, the improvements would undoubtedly he subject to any mortgage by him on the immovable. Civ. Code, arts. 506, 507. So the privilege accorded by law to the vendor of movables still subsists, though the movables are attached by the purchaser to the immovable, and will he enforced against the mortgage creditor. The French commentators state the law by a commonplace illustration: The workman sells the farmer a tub, which he places on Ills farm for its improvement. The tub thus becomes a part of the immovable. But shall tills change deprive the workman of his privilege? The commentators answer in the negative, and affirm, until paid for, the vendor, notwithstanding the change, preserves nn droit reel on the article sold. 1 Troplong, Priv. & Hypoth. No. 113; Lapene v. McCan, 28 La. Ann. 749; Hall v. Wyche, 31 La. Ann. 735; Carlin v. Gordy, 32 La. Ann. 1285. The authorities, we think, sustain the right of the unpaid vendor to enforce his privilege on the movable sold, although by the act of the purchaser it has become part of the immovable. The vendor of a movable is apprised by law that without registry lie preserves a privilege on the thing sold. Civ. Code, art. 3227; Const. art. 176. It is difficult to see, in the light of the provision in the constitution, that the privilege can he defeated by the use the purchaser makes of the thing sold. There is a decision in 1857 that the privilege must he recorded to avail if the thing sold has been incorporated with, so as to become part of, the immovable. The decision has no support in the French authorities, nor in the later adjudications of this court; and where they deal with registry at all it is because the constitution in existence required all privileges to be recorded. Gary v. Burguieres, 12 La. Ann. 227; Const. 1868, art. 123. In this ease ft is not his privilege for the price on which the-vendor insists. It is his ownership of the movable he demands. If the law will not allow the mortgage creditor to defeat the privilege on the movable which, unpaid for, happens to he placed in the building subject to the mortgage, it is not easy to appreciate why, on the [476] same principle, the ownership of the movable should, not be equally protected ¿gainst the mortgage creditor. On what principle can the mortgage be extended beyond the property .of the debtor? ' Civ. Code, art. 3278. Instances, are not infrequent of the property of third persons' placed by them on the mortgaged property, but it has never been supposed such articles were subject to the mortgage. In this case there is no controversy on the issue of the ownership of the heater.’ It belongs to the vendor under his conditional sale. It is the case of the property of the third person never subjected to the mortgage, unless it is to be maintained'that our Code transforms the property of the vendor, who has never parted with his ownership, into that of the purchaser. Can it be said the law will enforce against the mortgage creditor the privilege of the vendor for the price of the thing sold on the mortgaged premises, but for the benefit of the mortgage creditor will not permit the vendor to remove, that property, though no price has ever been paid, and un-, der the conditional sale the vendor is the owner of the property? We find no warrant in our Code for this view of the law. It seems to rest on the protection it is claimed the law gives to the creditor who takes the mortgage on the faith of the public records showing no incumbrance on the property, or who spreads on the records his mortgage; notice to all, it is urged, that no lien can be acquired to the prejudice of the mortgage. There are striking analogies, at least, opposed to this view. The law, notwithstanding the unrecorded mortgage, will enforce against the creditor the claim of the workman for work on the property mortgaged. The owner of the immovable is not permitted to profit by the construction or works of a third person on the immovable. The mortgage creditor must pay for the improvements of the third possessor; and we think it beyond doubt that the mortgage yields to the vendor’s privilege on the movable sold and attached to the mortgaged property. Civ. Code, arts. 507, 3268; Penn v. Bank, 32 La. Ann. 195; Bank v. Miller, 44 La. Ann. 199, 10 South. 779; Lapene v. McCan, 28 La, Ann. 749; Carlin v. Gordy, 32 La. Ann. 1285; 1 Troplong, Priv. & Hypoth. No. 113. It seems to us on the same principle the claim of the vendor who remains the owner of the movable placed in the mortgaged premises must be admitted against the mortgage creditor, and in reaching this conclusion we have given the fullest consideration to the argument and authorities cited by plaintiff’s counsel.” In Walburn-Swenson Co. v. Darrell, 49 La. Ann. 1044, 22 South. 310, Hall v. Hawley, 49 La. Ann. 1046, 22 South. 205, and Association v. Johnston, 51 La. Ann. 470, 25 South. 383, it is again held that the privilege of the unpaid vendor on the movable is not lost because it has been attached to the immovable. In each of these last three cited cases the contest was between the mortgage creditor and the vendor of the movable, but in neither is there any reference to any registry of the vendor’s privilege as in any wise affecting the rights of the parties. The opinion of the court in Baldwin v. Young, supra, so far as it overrules and modifies Gary v. Burguieres, supra, is vigorously attacked as obiter, because the case showed that the movables involved were sold under a contract that, until paid for, the vendor should be the owner of the thing sold, and registry vel non was not in question. So far as the necessity of registry was concerned, we think it depended on the determination of an issue as to whether quoad the vendor the movable sold had been so merged in the immovable that the vendor could no longer assert his privilege on the identical thing sold; and, to the extent that this question was involved, we cannot agree that the enlightened views so well expressed by Mr. Justice Miller, delivering the opinion of the court, were obiter; and, so far as anything favorable to appellant here can be claimed, because the sale in Baldwin v. Young, supra, was a coiiditional sale, we may inquire what substantial difference can [477] be urged between a so-called conditional sale and an ordinary sale in which the vendor’s privilege is preserved, so far as the right to recover the unpaid price is concerned? “The privilege of the vendor is founded on the right of property. The payment of the price is essential to the vesting of an indefeasible title in the vendee.” Carlin v. Gordy, supra. Whether the sale he conditional or absolute, retaining the vendor’s privilege, the vender in each case may subject the thing sold to the payment of the unpaid purchase money; and in equity the results in each case are the same. In Louisiana it is well understood that, as against third persons, the vendor’s privilege on an immovable must be recorded. Rev. Civ. Code, art. 3274. See Act No. 45 of 1877. In substance, this has been the law since the Code of 1825. The variations have been with regard to the manner and time of registry. It is equally understood in Louisiana that the vendor’s privilege on a movable is not lost by failure to record the same. ’This has been the law since the adoption of the constitution of 1879. The real question considered in the above-cited cases was, when, in favor of third persons and against the vendor, does a movable attached to land, tenement, or building become an immovable, or part thereof, by destination? And we understand the decisions of the supreme court of the state to be uniformly (except in Gary v. Burguieres, supra) to the; effect that, so long as the price is unpaid, and the movable has not lost its identity, and can be separated from the land, tenement, or building to which it has been attached without injury to the immovable, as to the vendor it remains a movable, and he may subject the same to his. vendor’s privilege, the registry of the same being immaterial. This seems to be in accord with the equities of the case as they are regarded in De L’Isie v. Succession of Moss, 34 La. Ann. 166: ‘•The privilege accorded for the payment of the unpaid price of sale is one of great value, resting on considerations of the plainest equity. It would, indeed, he unjust to place an unpaid vendor on a footing of equality with the other creditors of the purchaser, and permit these to devour his substance: for it is only on the condition that the price of the thing sold has been paid that the purchaser acquires an indefeasible title of ownership to the property, and that his creditors can be paid. * * * Tt confers rights of a high character, superior to tho-se which flow from a mortgage. * * * It is the price which is protected by the privilege. By the sale the vendor Increases the estate of the purchaser. It would be iniquitous to permit the property sold to become the prey of the creditors of the purchaser, without requiring, as a condition precedent, the payment of its cost. * * * The word ‘price’ signifies the sum stipulated as the equivalent of the things sold, and also every incident taken into consideration for the fixing of the price, put to the debt of the vendee, and agreed to by him.” The decree of the circuit court is affirmed.