tions intimately connected with the lease,-such, for instance, as the stipulations, not unusual in Louisiana, that the lessee shall leave on the leased premises, at the expiration of the lease, a certain number of acres of cane, of barrels of corn, etc.; that he shall manure the land, or fence it, or ditch it, or otherwise improve it. If Mourlon is correct in stating that a well-conceived public interest requires that the leasing of property be encouraged, and that lessors be so se cured that they may protect their property while in the hands of others, then it would be matter for regret if the Louisiana lawgiver had restricted lessors within the extremely narrow limits of the obligations imposed by law upon the lessee. If Mourlon's statement as to public interest is correct, and if, as Aubry and Rau tell us, the object of the lessor's privilege, under the Code Napoleon, is to secure the complete execution of the lease, it would also be matter for regret if the law of Louisiana only afforded the lessor security for a partial and incomplete execution of the lease. Interveners' counsel presented a view of the matter which may have force. He contended that it is clear that the lessee must enjoy the thing leased according to the use intended by the lease, and that if the lessee makes another use of the thing than that for which it was intended, and loss is thereby sustained by the lessor, the lessee shall be liable for the loss. Civ. Code La. arts. 2710, 2711. It was argued that, if the Ferris Sugar Manufacturing Company had refused to receive the cane of interveners, the refusal would have constituted a violation of the lessees' obligation to use the thing leased as the lease intended, and would have rendered the lessees liable for the damages; i. e. for the value of the cane to the interveners at the time appointed for its delivery. In such a case, the lessees would not have benefited from the cane, and it was urged that the interveners could not possibly be put in a worse position because the lessees received the cane, and benefited from it. After due consideration, I have come to the conclusion that I could not decide the point now under discussion adversely to the interveners without disregarding the decisions of the supreme court of the state and the persuasive authority of the highest French courts and of eminent French commentators. 3. The claim for the loss of part of interveners' crops must be rejected. A party to a contract must endeavor to minimize his loss. His claim for damages will be diminished to the extent to which he could have avoided the loss. Wicker v. Hoppock, 6 Wall. 99; Warren v. Stoddart, 105 U. S. 229; 1 Suth. Dam. (2d Ed.) § 88, and cases there cited. The question of damages involved the examination of a great mass of oral and documentary evidence. The question turns almost entirely on matters of fact. It would answer no useful purpose to go into an analysis of the evidence, but a careful consideration of it left my mind strongly impressed with the belief that, whatever may have been the omissions of contractual duties with which the Ferris Sugar Manufacturing Company may be charged, the interveners could have protected themselves from loss by the exercise of reasonable diligence. It was, of course, for the interveners to first establish the extent of their loss with reasonable certainty, and for them then to show that the loss occurred through the fault of the Ferris Sugar Manufacturing Company. I find that the losses which the interveners established by sufficient proof, and which might be chargeable to the Ferris Sugar Manufacturing Company, could have been avoided by the interveners had they used the means at their command. A circumstance which bears strongly against the interveners is that the receiver, very soon after his appointment, telegraphed the interveners, offering to grind the cane on certain terms. Had this offer been promptly accepted, the losses would, doubtless, have been materially diminished. The master has made a full report of the evidence on the question of damages, and has analyzed and discussed it very thoroughly. I agree with him in the conclusion that the claim must be disallowed. NATIONAL WATERWORKS CO. OF NEW YORK v. KANSAS CITY. (Circuit Court, W. D. Missouri, W. D. December 1, 1896.) 1. MORTGAGES TO SECURE BONDS-DUTIES OF TRUSTEE-AFTER-ACQUIRED PROPERTY. That a mortgage by a waterworks company to a trustee to secure an issue of bonds recites a purpose to extend the plant, and that it also contains a clause covering future-acquired property, and a covenant for further assurances, does not impose on the trustee a continuing duty to the extent of requiring it to take notice of what the mortgagor does with the money, or of the property which it purchases. 2. TRUSTS-PRIOR EQUITIES-NOTICE TO TRUSTEE-RIGHTS OF BENEFICIARIES. The doctrine that notice to the trustee is notice to the beneficiaries is of special significance only when the trustee is one of mutual selection by the grantor of the trust and the beneficiaries; and must not, when he is primarily a mere agent of the grantor, be applied so stringently as to defeat the equitable rights of the beneficiaries. Especially is this true when the beneficiaries are purchasers, from the trustee named in a mortgage, of negotiable bonds secured thereby, which were issued by the grantor to the trustee. 3. MORTGAGES TO SECURE BONDS - PRIOR EQUITIES NOTICE TO TRUSTEE AND BONDHOLDERS. The N. Water Co., owning a plant in Kansas City, Mo., mortgaged the same to a trust company, to secure an issue of negotiable bonds. The mortgage recited that the purpose of the loan was to extend the plant; and it contained a clause covering future-acquired property, and also a covenant for further assurances. The N. Co. bought all the stock of another water company (which subsequently became the K. Co.), having a plant in Kansas City, Kan., and, by connecting the same with the Kansas City, Mo., plant, reached a new source of supply. Thereafter the N. Co. caused the K. Co. to execute a mortgage to the same trust company on its plant in Kansas, to secure a new issue of negotiable bonds. Held, that innocent purchasers of these bonds were entitled to rely upon the fact that the record title to the plant in Kansas was in the K. Co., and were not chargeable with the knowledge which their trustee had. or might have had, that the property was equitably within the after-acquired clause of the mortgage given by the N. Co. 4. NOTICE FROM ADVERSE POSSESSION-JOINT POSSESSION. Before one can be deprived of rights based on the record evidence of title, on the ground of notice from adverse possession, it must appear that such possession was open, notorious, and unequivocal; and no joint and indefinite possession, such as that of two corporations, one of which owns all the stock of the other, through officers, who are officers of both, is sufficient to give notice of the equitable rights of one as against the record title of the other. Scammon, Crosby & Stubenrauch and H. A. Clover, for inter vener. George Hoadley, Karnes, Holmes & Krauthoff, and E. S. Hosmer, for Bannard committee. BREWER, Circuit Justice. This matter comes before me on exceptions to the report of the master on the intervening petition of L. A. Coquard and others. The original suits were in equity, between Kansas City and the National Waterworks Company, in reference to the sale of the plant of the latter to the former. This litigation was protracted through several years, and the facts concerning it may be found fully stated in prior opinions. See 10 C. C. A. 653, 62 Fed. 853; 65 Fed. 691. By the terms of the final decree, entered on November 28, 1894, the city was ordered to pay $3,000,000 for the plant, and the company to convey a full and unincumbered title to the property. Both parties complied with the terms of the decree, and this intervention was an application of the interveners for a portion of the money paid by the city. It is unnecessary to repeat the whole story of the case; yet, in order to a clear understanding of the present question, some facts must be stated. The contract, in 1873, between the city and the company, by which the latter constructed the plant, was made under express legislative sanction, so that all parties dealing with the company dealt with notice of the limits of power and right. At first the company drew its supply of water from the Kaw river, but, as the years passed, this became objectionable, and the company was constrained to look elsewhere. After examination, it determined to obtain it from the Missouri river, at Quindaro, on the Kansas side. In order to accomplish this, it was necessary to establish a reservoir and supply works at Quindaro, and carry the water by a flow line through the then Kansas towns of Wyandotte and Kansas City, Kan. There was in existence a Kansas corporation, known as the Wyandotte-Armourdale Water Company, with authority to supply the former place, among others, with water, which had constructed a system of waterworks, with a limited supply station, at the mouth. of Jersey creek. The National Waterworks Company bought up the entire stock of this corporation, whose name was subsequently changed to that of the Kansas City Water Company. After this, it constructed a reservoir and supply station at Quindaro. About this time, Wyandotte, Kansas City, Kansas, and Armourdale were consolidated into one city, under the name of Kansas City, Kan. Through the streets of this city the National Waterworks Company carried the water to its distributing system in Kansas City, Mo., and at the same time, and from the same supply station, supplied water to Kansas City, Kan., in pursuance of the contract between the Kansas company and the town of Wyandotte. The land at Quindaro upon which the works were placed was purchased in the name of B. F. Jones, the superintendent of the National Waterworks Company, who, on November 11, 1887, conveyed the property to the Kansas corporation, at the request and by the direction of the National Waterworks Company. At the date of the decree, the property in Missouri and in Kansas belonging to the National Waterworks Company and the Kansas corporation was incumbered as follows: A mortgage on the Missouri property, executed by the National Waterworks Company, August 1, 1883, for $1,500,000; a mortgage, dated June 1, 1885, by the same grantor to the Central Trust Company, securing a like sum of $1,500,000; and a third mortgage, dated November 11, 1887, executed by the Kansas corporation to the Central Trust Company (the trustee in the second of the foregoing mortgages), for the sum of $900,000; or a total of $3,900,000. The decree required the conveyance of the Quindaro property and the flow line to the distributing system in Kansas City, Mo., as a part of the plant, within the terms of the original contract between the city of Kansas City, Mo., and the waterworks company, but it provided that the city should only pay $3,000,000 therefor. No question arose as to the necessity of paying the mortgage of August 1, 1883, and it was so done, which left a balance of $1,500,000 to be used in satisfying the two mortgages of June 1, 1885, and November 11, 1887, amounting to $2,400,000. The mortgage of November 11, 1887, was subsequent in date to that of June 1, 1885, but the property it covered was outside of Missouri, the legal title to which was not standing in the name of the National Waterworks Company, but which the decree required should be conveyed to Kansas City free of incumbrance. Negotiations were entered into with a view of effecting some arrangement by which, with the use of the $1,500,000, the two latter mortgages could be canceled. Messrs. Bannard and others, the defendants to this intervening petition, acting as a committee for and in behalf of the holders of 1,368 bonds of the mortgage of June 1, 1885, agreed that the $900,000 mortgage of November 11, 1887, should be paid in full, and the $600,000 remaining distributed among the 1,500 bonds of the mortgage of June 1, 1885, the balance due on such bonds to be secured by a mortgage on all of the property belonging to the Kansas corporation not conveyed under the terms of the decree to the city. The holders of the remaining 132 bonds, secured by that mortgage, declined to enter into this arrangement; and the petitioners, representing 101 of the bonds, intervened, as legally authorized by the terms of the decree, and claimed payment in full. In accordance with this arrangement, the $900,000 mortgage was paid in full, an amount retained in the registry of the court sufficient to pay the bonds of interveners in full, and the balance distributed among the holders of the 1,368 bonds; and the question is whether the holders of these 101 bonds are entitled to be paid in full, or must be content with the pro rata of the $600,000 reserved by the arrangement for the payment of the mortgage of June 1, 1885. The master held that the mortgage of June 1, 1885, covered property secured by the mortgage of November 11, 1887, and, being prior in time, gave priority of right, and that the holders of the 101 bonds were entitled to payment in full. It will be borne in mind that the legal title to the property in Kansas was in the Kansas corporation, and that the legal title to the property in Missouri was in the Missouri corporation, the National Waterworks Company. Did this mortgage of 1885 include the property in Kansas, and did the holders of bonds secured by the mortgage of November 11, 1887, take with notice of that fact? At the time of the execution of the mortgage of June 1, 1885, the National Waterworks Company owned none of the Kansas property. The mortgage recited that: "The said party of the first part is desirous of obtaining the means of increasing and improving its supply of water, and extending and enlarging its works in the states of Kansas and Missouri, and for such purpose has resolved to issue its bonds, numbered consecutively from 1 to 1,500, both inclusive, amounting in the aggregate to the sum of $1,500,000." And the property assigned and conveyed is described as follows: "All the rights, powers, privileges, and franchises granted to and conferred upon the said party hereto of the first part under and by virtue of the act of the general assembly of the state of Missouri and the ordinances of the common council of the city of Kansas herein before recited, or which may hereafter be granted or conferred by said state or city; and also all rights, powers, privileges, and franchises which may have been granted, and conferred upon said parties of the first part by the laws of the state of Kansas, or by the city of Kansas City, in said state, or which may hereafter be so granted and conferred, together with all the real estate and property, personal and mixed, now owned or which may hereafter be acquired by the said party of the first part situated in the said city of Kansas and Kansas City; and all erections and buildings and machinery, engines, reservoirs, pumps, wells, pipes, or other constructions, tools, implements, or fixtures, of every kind and nature, made, manufactured, constructed, built, laid, purchased, or in any way acquired in and about the construction, maintenance, and operation of waterworks in the cities aforesaid, or either of them; and also all the net income, rents, profits, emoluments, and money derived from the said waterworks, including any sum or sums of money which may be paid by the city of Kansas under and by virtue of the ordinances aforesaid, and including also any sum or sums of money which may be paid by Kansas City, in the state of Kansas, for water furnished to the last-mentioned city by the party of the first part; and also all the privileges, rights and franchises of the said party of the first part incident or appurtenant to or belonging to the said waterworks, or which it has acquired, holds, or owns in connection therewith, together with all and singular the tenements, hereditaments, and appurtenances thereunto belonging or in any wise appertaining, and the reversion or reversions, rent or rents, issues or profits, thereof; and also all estate, title, and property, possession, claim, or demand whatsoever, as well in law as in equity, of the said party of the first part of, in, or to the abovedescribed premises, and every part and parcel thereof, with the appurtenances ' And the covenant for further assurance is in these words: "The said party of the first part shall from time to time, and at all times hereafter as often as thereto requested by the said Central Trust Company, its successor or successors, execute, acknowledge, and deliver all such deeds, conveyances, and assurances in the law for the better assuring unto the said Central Trust Company, its successor or successors in the trust hereby created upon the trusts herein expressed, the waterworks and appurtenances and the premises and property herein before conveyed, or intended so to be conveyed, and all other property and things whatsoever which may be hereafter acquired for use in connection with the same or any part thereof, and all franchises now held or incident or appurtenant thereto or connected therewith, as by said Central Trust Company, its successor or successors, or its or their counsel learned in the law, shall be reasonably advised." |