WHITE, Circuit Justice,
after making the foregoing statement,, delivered the opinion of the court.
As the railway company and the Farmers’ Loan & Trust Company have made default, we are concerned only with the respective rights of the purchasing trustees, representing the first mortgage bondholders, and the Morgan Company, in the land-fund collections. The purchasing trustees assert a; paramount lien by reason of the fact that the expenses of operating the road under the receivership were made a lien upon all the property in the hands of the receivers, and were prior t© the lien of the first mortgage, and that as they were obliged to pay or assume such lien, as a condition of receiving the property, to the extent of such payment or assumption they are subrogated to the rights of the original holders of such claims against any property of the railroad company which during the receivership passed into the custody of the receivers.
Considered solely in their capacity as purchasers, this claim of the purchasing trustees is without merit. Their plain duty was to make payment of the purchase price. Obtaining the railroad property as the full equivalent therefor, they had no interest in the application of the proceeds of the sale, except to see that it had been used to cancel incumbrances upon the property, so that, as purchasers, they might receive the road free from all hens or claims.
Considered as bondholders, the claim advanced in argument is this: That as the railway company was the primary debtor for all claims asserted in the receivership, which had been given precedence over the claim of the bondholders against the proceeds of sale, they stood in the relation of surety towards such claims, and, by their payment out of moneys to which the bondholders were entitled as lien claimants, they were, in equity, subrogated to the rights of the original claimants, and entitled to have the assets in the custody of the court, through its [25]*25receivers, in the original cause, and. not embraced in the mortgage •security, applied in reimbursement. But, even though such a claim be ordinarily assumed to be sound, it cannot now be asserted. All the bondholders were before the court in the original suit, represented in the receivership proceedings by their trustee, the Farmers’ Loan & Trust Company. They had their day in. court as to the terms of the final decree, and, as the final decree shows, were then contemplating becoming bidders for the road upon the sale thereof. The time to have asserted the claim now advanced was before the entry of that decree, at which time, as now, the court had both funds in its control, and all claimants before it. Whether the claim was then made, or not, is now immaterial. The decree finally settled the rights of all parties, and the bondholders are concluded by its terms. It, beyond power of serious question, adjudged out of which fund payment of claims arising out of the receivership were to be made; and the decree can bear no other construction than that the court intended that the prior claims, when paid, should be absolutely extinguished, and should not be subsequently revived against the so-called “land fund.” That the court did not intend by the final decree that there should be a resort by the bondholders to the land fund for reimbursement of any of the claims directed to be paid out of the proceeds of the sale is shown by an analysis of the terms of the decree, in connection with the character of the controversy. The bill filed by the Morgan Company in 1885, under which the receiver was appointed, was not a general creditors’ bill. The Morgan Company had not obtained judgment upon its claim, but sought merely the enforcement of an alleged equitable lien upon all the property of the company, and the court assumed jurisdiction of the cause on that theory. So, also, the Fanners’ Loan & Trust Company, when it filed its cross bill, prayed simply the foreclosure of the lien in its favor arising from the mortgages executed to it by the railway company. Besides praying for the appointment of a receiver of all the property, real and personal, “used for and pertaining to the operation of the railway,” the Morgan Company asked that the receiver be required to take possession cf. “all and singular, all town lots, by gift, purchase, or otherwise, and now owned, or that hereafter may he owned, on the line of railroads now owned and operated by the said railway company in the state 'of Texas.” It is the proceeds of this latter property to which the purchasing trustees now assert a right.
Early in the litigation the attention of the court was called to the fact that there was a dispute between the parties as to whether these town lots, and other tracts of real estate not used in the operation of the road, were subject to the mortgages; and the receivers were ordered to hold the proceeds arising from the sale of such land in a special fund. The final decree adjudged that the lien of the Morgan Company arose only out of the pledge of certain mortgage bonds; that such lien only covered the same property which had been mortgaged to the Farmers’ Loan & Trust Company; and it is conceded that the latter mortgages did not embrace the town lots and real estate referred to. Strictly speaking, therefore, objection might have been made, upon the settlement of the terms of the final decree, that the [26]*26court was without jurisdiction to administer upon and distribute this fund, as no case had been made entitling to any relief concerning it, and it might properly have been ordered restored to the Texas . Kailway Company. But as the fund, if surrendered to the owner, would have been subject to seizure under executions upon the deficiency judgments awarded to the Farmers’ Loan & Trust Company and the Morgan Company, the decree,—seemingly without objection, for no question as to this was made on the appeal to the supreme court of the United States,—in paragraph 19, gave leave to the holders of the deficiency judgments against the railway company to levy those judgments upon any fund in the hands of the receiver. The nature of this fund, therefore,—the fact that it was not property which the parties during the litigation had the right to bring under the jurisdiction of the court,—affords good reason for inferring that the court manifestly intended to impose the expenses connected with the operation of the road soleiy upon the property used in such operation, and which was covered by the mortgages. Aside from the fact that the court did not direct that the bondholders should be subrogated against the land fund to any rights of the original claimants which' had been awarded priority over the mortgages, conclusive evidence that the court did not intend that resort should be had against the land fund is contained in the provisions in paragraph 19 giving leave to the parties to levy their deficiency judgments on said fund. The land fund has realized only about $92,000. It was patent, in view of the enormous indebtedness upon the mortgages to the Farmers’ Loan & Trust Company,—over $4,000,000,—that there was a strong probability that deficiency judgments much in excess of the assets in the hands of the receivers, not covered by the mortgages, would exist; and the court cannot be assumed to have intended the inconsistency of awarding leave to the Morgan Company to resort to this land fund, and be held to have at the same time contemplated that the bondholders might absorb the whole of the fund under the claim of a prior right to it from the circumstance that the proceeds of sale had been used, as directed by the decree, to pay the expenses of the receivership.
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WHITE, Circuit Justice,
after making the foregoing statement,, delivered the opinion of the court.
As the railway company and the Farmers’ Loan & Trust Company have made default, we are concerned only with the respective rights of the purchasing trustees, representing the first mortgage bondholders, and the Morgan Company, in the land-fund collections. The purchasing trustees assert a; paramount lien by reason of the fact that the expenses of operating the road under the receivership were made a lien upon all the property in the hands of the receivers, and were prior t© the lien of the first mortgage, and that as they were obliged to pay or assume such lien, as a condition of receiving the property, to the extent of such payment or assumption they are subrogated to the rights of the original holders of such claims against any property of the railroad company which during the receivership passed into the custody of the receivers.
Considered solely in their capacity as purchasers, this claim of the purchasing trustees is without merit. Their plain duty was to make payment of the purchase price. Obtaining the railroad property as the full equivalent therefor, they had no interest in the application of the proceeds of the sale, except to see that it had been used to cancel incumbrances upon the property, so that, as purchasers, they might receive the road free from all hens or claims.
Considered as bondholders, the claim advanced in argument is this: That as the railway company was the primary debtor for all claims asserted in the receivership, which had been given precedence over the claim of the bondholders against the proceeds of sale, they stood in the relation of surety towards such claims, and, by their payment out of moneys to which the bondholders were entitled as lien claimants, they were, in equity, subrogated to the rights of the original claimants, and entitled to have the assets in the custody of the court, through its [25]*25receivers, in the original cause, and. not embraced in the mortgage •security, applied in reimbursement. But, even though such a claim be ordinarily assumed to be sound, it cannot now be asserted. All the bondholders were before the court in the original suit, represented in the receivership proceedings by their trustee, the Farmers’ Loan & Trust Company. They had their day in. court as to the terms of the final decree, and, as the final decree shows, were then contemplating becoming bidders for the road upon the sale thereof. The time to have asserted the claim now advanced was before the entry of that decree, at which time, as now, the court had both funds in its control, and all claimants before it. Whether the claim was then made, or not, is now immaterial. The decree finally settled the rights of all parties, and the bondholders are concluded by its terms. It, beyond power of serious question, adjudged out of which fund payment of claims arising out of the receivership were to be made; and the decree can bear no other construction than that the court intended that the prior claims, when paid, should be absolutely extinguished, and should not be subsequently revived against the so-called “land fund.” That the court did not intend by the final decree that there should be a resort by the bondholders to the land fund for reimbursement of any of the claims directed to be paid out of the proceeds of the sale is shown by an analysis of the terms of the decree, in connection with the character of the controversy. The bill filed by the Morgan Company in 1885, under which the receiver was appointed, was not a general creditors’ bill. The Morgan Company had not obtained judgment upon its claim, but sought merely the enforcement of an alleged equitable lien upon all the property of the company, and the court assumed jurisdiction of the cause on that theory. So, also, the Fanners’ Loan & Trust Company, when it filed its cross bill, prayed simply the foreclosure of the lien in its favor arising from the mortgages executed to it by the railway company. Besides praying for the appointment of a receiver of all the property, real and personal, “used for and pertaining to the operation of the railway,” the Morgan Company asked that the receiver be required to take possession cf. “all and singular, all town lots, by gift, purchase, or otherwise, and now owned, or that hereafter may he owned, on the line of railroads now owned and operated by the said railway company in the state 'of Texas.” It is the proceeds of this latter property to which the purchasing trustees now assert a right.
Early in the litigation the attention of the court was called to the fact that there was a dispute between the parties as to whether these town lots, and other tracts of real estate not used in the operation of the road, were subject to the mortgages; and the receivers were ordered to hold the proceeds arising from the sale of such land in a special fund. The final decree adjudged that the lien of the Morgan Company arose only out of the pledge of certain mortgage bonds; that such lien only covered the same property which had been mortgaged to the Farmers’ Loan & Trust Company; and it is conceded that the latter mortgages did not embrace the town lots and real estate referred to. Strictly speaking, therefore, objection might have been made, upon the settlement of the terms of the final decree, that the [26]*26court was without jurisdiction to administer upon and distribute this fund, as no case had been made entitling to any relief concerning it, and it might properly have been ordered restored to the Texas . Kailway Company. But as the fund, if surrendered to the owner, would have been subject to seizure under executions upon the deficiency judgments awarded to the Farmers’ Loan & Trust Company and the Morgan Company, the decree,—seemingly without objection, for no question as to this was made on the appeal to the supreme court of the United States,—in paragraph 19, gave leave to the holders of the deficiency judgments against the railway company to levy those judgments upon any fund in the hands of the receiver. The nature of this fund, therefore,—the fact that it was not property which the parties during the litigation had the right to bring under the jurisdiction of the court,—affords good reason for inferring that the court manifestly intended to impose the expenses connected with the operation of the road soleiy upon the property used in such operation, and which was covered by the mortgages. Aside from the fact that the court did not direct that the bondholders should be subrogated against the land fund to any rights of the original claimants which' had been awarded priority over the mortgages, conclusive evidence that the court did not intend that resort should be had against the land fund is contained in the provisions in paragraph 19 giving leave to the parties to levy their deficiency judgments on said fund. The land fund has realized only about $92,000. It was patent, in view of the enormous indebtedness upon the mortgages to the Farmers’ Loan & Trust Company,—over $4,000,000,—that there was a strong probability that deficiency judgments much in excess of the assets in the hands of the receivers, not covered by the mortgages, would exist; and the court cannot be assumed to have intended the inconsistency of awarding leave to the Morgan Company to resort to this land fund, and be held to have at the same time contemplated that the bondholders might absorb the whole of the fund under the claim of a prior right to it from the circumstance that the proceeds of sale had been used, as directed by the decree, to pay the expenses of the receivership. .Presumably, the legal title to the real estate of the railway company vested in the receiver at the time cf. or subsequent to, his appointment. It is alleged in the answer of the Morgan Company to the cross bill in this proceeding, and not denied by replication, that after the rendition of the final decree it filed a certified copy thereof in all the counties in Texas in which the real estate in question was situated. It is nowhere alleged, however, nor does it appear by any evidence, that either of the parties holding deficiency judgments ever levied upon either the real estate or personal property in the possession of the receiver.
After the affirmance in 1891 by the supreme court of the United States of the final decree, and a sale of the road, the purchasing trustees made application to the court for relief as respects the possession of the property purchased by them, and the various orders entered thereon evidence the fact that the- court considered such trustees as before it merely with reference to that property; and by an order dated November 4, 1891, it was expressly “ordered, adjudged, and de[27]*27creed that this cause be, and the same is, retained and kept open, as to said purchasers, for the purpose of ascertaining and determining all claims, demands, and liabilities against said receivers growing out of the operation of said railways, or against said railways and other property hereinabove described, and to be surrendered to said purchasers, which have arisen or may arise out of said receivership.” The final clause, giving leave to the purchasers or receivers to apply at the foot of the decree “for such other and further relief as may be just,” in connection with the preceding paragraph of the order, makes clear the fact that the court regarded the orders as dealing only with the property purchased, and the rights and duties of the purchasers and the receivers in connection therewith. With those orders the Morgan Company had no concern, and cannot be injuriously affected thereby as to any right or interest it may have in the present fund. By the final decree of April 12, 1887, the court gave to the parties awarded deficiency judgments the right to proceed to enforce those judgments against the land fund. That fund, however, is still iii the possession and custody of the court, presumably because it was found to be difficult, if not impracticable, to reach the fund in the manner indicated in the decree, and neither party has knowingly waived the assertion of a right to the benefit of the decree as respects that fund. .We are of opinion that the purchasing trustees did not acquire any lien upon the fund by reason of the payment, as part of the purchase price of the road, of claims against the assets in the hands of the receivers. The railroad company, however, has abandoned all claim to the fund, and as there are no other claimants than the parties before the court, and as it is clear that the court below, by the final decree of April 12, 1887, intended to be guided by the maxim that “equality is equity,” and designed to give the mortgage bondholders and the Morgan Company equal pro' rata rights in this fund, we think the ends of justice will be subserved by a pro rata division of the land fund between the holders of the deficiency judgments.
An account should be stated, the net amount realized from the land-fund collections ascertained, and the same, after payment of all court costs and expenses, should be divided between the first mortgage bondholders (as succeeding to the rights of the Farmers’ Loan & Trust Company in the deficiency judgment awarded by the final decree of April 12,1887) and the Morgan’s Louisiana & Texas Railroad & Steamship Company in the proportions of the amounts due upon each deficiency judgment. The bondholders should, however, be charged in the account as having received such portions of the land-fund collections which were used by the receivers in the operation of the roads, and which, though constituting a claim against the general fund in the hands of the receivers, were not repaid to the land fund out of the cash payments made by the purchasing trustees. Of the net amount coming to the first mortgage bondholders, the purchasing trustees should only be paid a pro rata share of the bonds represented by them, while the pro rata share of the holdeis of bonds not represented by the trustees should be retained in the registry of the court, subject to be claimed by the holders of such bonds. As to the $1,531.80 remaining in the registry of the court, of the $25,000 cash payment made by the [28]*28purchasing trustees, this amount clearly belongs to all the holders of bonds entitled to receive a dividend from the proceeds of the sale of the road; and the purchasing trustees are only entitled to receive such portion thereof as will be equal to the proportion coming to the holders of bonds represented by them; and the pro rata share owing to holders of bonds not represented by the purchasing trustees should be held in the registry of the court for those owners. The decree of the circuit court is reversed, and the cause is remanded to that court for further proceedings in conformity to this opinion.