Farmers' Loan & Trust Co. v. Burlington & S. W. Ry. Co.

Brewer, J. The question is as to the duty of a court in respect' to a contract made by its receiver under its directions. The theory of the one side seems to be that the issue of receiver’s certificates, or the execution of other similar obligations, simply gives to the holder a lien which he may enforce in any of the ordinary methods of judicial foreclosure. He is not a party, must intervene if he wishes to insist on payment, and, intervening, occupies the position of any other lienholder. He has advantages in that his priorities are judicially declared in advance, but beyond that, nothing. Thus it is conceded that the inter-venors are now in court, that they have a prior lien on the road south of Lexington, and that the court may adjudicate its amount, and order u sale therefor. But all that any lienholder may acquire. The inter808 venors might have done this before their contract with the receiver. Did that profit them nothing? On the other hand it is insisted that it is the d.uty of the court to see that contracts made by its orders are performed; .th.a,t it ought not to remit the holder of such a contract to the remedies of lien or debt holders; but on the mere suggestion of omission or failure itself, take measures to secure performance, and such measures as will 'most certainly and promptly secure it. In other wqrds, it owes to the holders of its contracts, not the duty merely of providing a forum in which such holders' may enforce performance; it owes performance. To that end it should continue its receivers in office, and retain possession 'of the property until every contract has been fully performed, and if purchasers of the property fail to discharge all the obligations it has placed upon such property, it should not let the purchase stand. The condition of a final and absolute confirmation is the satisfaction of all such obligations. Here a sale has been conditionally confirmed. An obligation cast by the receiver under orders of the court remains unpaid. The confirmation should not be made absolute, or the property passed from the control of the court, with that obligation outstanding. I agree with the last-named views. -The court should be chary of promise, but eager of performance; careful not to burden property in its possession with obligations, and equally careful to see that every obligation is discharged before that possession is finally surrendered. It owes performance, and should assume all its burdens, and not turn the holder of its contracts off with simply the assurance that he has a valid lien which he may foreclose. The confirmation which was entered was only conditional and with a reservation, such as gives the court still full control. Burnham v. Bowen, 111 U. S. 776, 4 Sup. Ct. Rep. 675. Doubtless the court might, prior to the sale, have modified the decree so as to provide for separate sale of the two parts of the road lying respectively north and south of Lexington; in which case, even if the ■rights of the intervenors had not been protected by the purchasers, only the sale of the latter part need have been disturbed. But the sale was made of the road as a whole, and there is nothing before me to justify an apportionment of the proceeds. Counsel for the receivers and purchasers say that the road south of Lexington had ceased to be of any value, and that to set aside the sale of the whole, unless this debt, chargeable only upon a valueless part, is paid, would simply be coercing the purchasers and owners of valuable property to pay for other property which ■they do not want. Assuming it to be valueless, although it is in evidence that $600,000 was expended in work upon it, and still there are strong equities why the intervenors should not be remitted to a foreclosure of their lien, and some equities in favor of charging their debt upon the entire road. This now claimed valueless part was valuable enough •to be included in the mortgage, the decree, and the sale. When negotiations were pending for a sale by the intervenors, the receiver, representing the entire properties, deemed it of sufficient value to interfere by injunction, break up the negotiations, and prevent the intervenors from ■realizing on their claim. Subsequently he deemed it of sufficient value 809 to apply for and obtain authority to borrow $-500,000 on receivers certificates to complete the road, and further authority to purchase the claim of inter venors. After thus baffling and delaying them, it may not be inequitable to hold that the road, as a whole, should bear the burdens and losses of delay. But it is unnecessary now to determine absolutely the rights of the parties. It is enough to hold that the sale of the prop- • erty as a whole should not stand, with this receiver’s obligation on a part unsatisfied. The order will therefore be that the order of confirmation and the sale bo set aside, and the receiver directed to take possession of the property, unless within 90 days the claim of the intervenors be paid. If it be paid, the order oí confirmation will be final.