Washington Irr. Co. v. California Safe Deposit & Trust Co.

MORROW, Circuit Judge, after the foregoing statement of facts, delivered the opinion of the court. The appellant assigns as error the action of the court below in (i) denying to the Washington Irrigation Company, appellant herein, the moneys in the hands of the receiver at the date of sale; (2) denying to the appellant the moneys collected by the receiver from all sources between the date of sale and the date of confirmation of sale, less the operating expenses. The language of the decree of foreclosure and sale was necessarily broad and comprehensive to include all the property to be sold. The property was a going concern. The canals and ditches were in. full operation, distributing water for irrigation purposes under continuing contracts, that were to be transferred, with the other prop *26 erty, to the purchaser. The purpose of the decree was to sell all this property in the hands of the receiver, but not to sell funds in the possession of the court. As said by the court in Strang v. Railroad Co., 23 Fed. Cas. 219 (No. 13,523): “The surplus earnings of a railroad in tlie hands of a receiver are not the property of the railroad company, and are not included in a general description of its property. The possession of the money is in the court, and the equitable title to it is in the creditors of the railroad company.” This doctrine is equally applicable to property of the character involved in this case. Moreover, the primary object of a judicial sale of mortgaged property is to convert all the property into money for distribution among the creditors. The income and surplus earnings of the property need not be sold. They are already in shape for distribution, and are properly applied to the payment of the expenses of operating the property, and to defray the expenses incident to the foreclosure proceedings. These expenses are always to be paid first, whether the funds for this purpose are derived from income, or from the proceeds of the sale of the property. To sell the money in the hands of a receiver would, under such circumstances, be an absurd procedure. “A court should not be presumed to order so futile a thing as the selling of money, unless its decree to that effect-is clear and specific.” Strang v. Railroad Co., supra. Appellant, then, must show its right to receive the money in the hands of the receiver at the date of the sale upon other grounds than that such money passed to it by reason of the sale, as part of the proceeds of the sale. The decree must provide for it in express language. No mere inference drawn from general terms can justify such a claim, and no declaration of a master in chancery can enlarge the terms of the decree. The circuit court was therefore right in denying the petition of the Washington Irrigation Company for the moneys in the hands of the receiver at the date of the sale. With respect to the moneys collected by the receiver after the date of the confirmation of the sale by the court, no controversy as to the right of the appellant to the net earnings of the property is presented by the record. The only question is as to the amount, and perhaps as to the date when the purchaser’s right accrued. The appellant claims that the amount is $5,826.65, while the final account of the receiver states the amount to be $1,067.63. This controversy has been foreclosed by the fact that when the Washington Irrigation Company, on July 26, 1900, receipted to the receiver for the property purchased by its grantor at the master’s sale, it described the property as, “all and singular, the property in his [receiver’s] control and possession as such receiver, as the same appears by his final account and report.” The receiver’s final account showed the amount due to the Washington Irrigation Company to be the sum of $1,067.63. The appellant received the property thus described without objection, and, by the terms of its receipt, confirmed the correctness of the account in all respects. The receiver’s final account was filed with the court on July 27, 1900; and on August 8, 1900, the court entered an order that the parties to the proceedings *27 should have 20 days in which to file exceptions to the account, or to enter objections thereto. No exceptions or objections to the ac-_ count were ever filed or noted, and on September 11, 1900, the account was approved and the receiver discharged. The order distributing the funds remaining in the hands of the clerk was based upon the final account, and, if erroneous, could only be corrected by a correction of that account. The effect of accepting the property without objection, under these circumstances, extended to all the previous orders, and renders appellant’s objections thereto unavailing. The orders of the circuit court are therefore affirmed.