United States v. Detroit Timber & Lumber Co.

after making the foregoing statement, delivered the opinion of the GOurt.

The able and elaborate opinions of both the Circuit Court and the Court of Appeals relieve us from much labor. There are two questions of fact: First, whether the parties making the entries had, prior to acquiring, title from the Government, made any agreement with the Martih-Alexander Company for a conveyance of an interest in the properties, or were seeking to acquire title solely for their own benefit. Second, whether

With reference to the second question of fact, the Circuit Court made no finding, having disposed of the case by its conclusion in respect to the first. The Court of Appeals found

Now we remark that there is no intimation in the testimony that the purchase price was not paid by the Detroit Company in cash and stock as agreed upon, no suggestion that the price was an unreasonable one. . There was nothing strange or unnatural in the contract between the companies; on the contrary it was one which might well be entered into by parties situated as these were. But it is contended by the Government that if the Detroit Company had examined with care the books of the Martin-Alexander Company, and the papers which it turned over as evidences of its titles, it would have perceived that the timber contracts were made shortly after the issue of the final receiver’s receipts, that the parties -making the contracts were all or nearly all employés of the Martin-Alexander Company, to whom moneys had been advanced, and with, each of whom an account was being kept; that it was its duty to critically examine these matters in order to be sure that the titles which it was acquiring were good. In their brief counsel for the Government say:

"We claim that the law as laid down in Hawley v. Diller, that one who takes title before the issuance of patent cannot claim to be a bom fide purchaser, made it the duty of the Detroit Company to make the most searching inquiry at least as to all of the timber contracts except the thirteen for which patents to the land had issued.”

We do not understand the law to be as stated, or that one who enters into an ordinary and reasonable contract for the

It is further said that the written contract of sale from the Martin-Alexander Company to the Detroit Company was not executed till March 1, 1901, and that on the fourteenth of January, 1901, Martin- resigned his position as president of the Martin-Alexander Company, and Clark, the president of the Detroit Company, was elected president of the former company; that, as the chief executive of that company, he was charged with knowledge of all that the company knew, and that therefore, before the written contract' was entered into, he and the Detroit Company had constructive notice of the wrongful- character of these timber contracts. But that is a mere evasive technicality. The bill charges and the answer admits the sale on January 14, and the facts, as disclosed by the testimony, are that Martin desired to leave at once on receipt of his-money and return to his home in Illinois; that Clark was put in his place as president to enable the Martin-Alexander Company to close up its putstanding affairs. The real contract between the parties was entered into before Clark became president, and all that was afterwards done was simply to put in writing the terms of the contract which had been

. “A chancellor will not be astute to charge a constructive trust upon one who has acted honestly and paid a full and fair .consideration without notice or knowledge. On this point we need only to refer to Sugden on Vendors, p. 622, where he says: ‘In Ware v. Lord Egmont the Lord Chancellor Cranworth expressed his entire concurrence in what, on many occasions of late years, had fallen from judges of great eminence on the subject of constructive notice, namely, that it was highly inexpedient for courts of equity to extend the doctrine. When a person has not actual notice he ought not to be treated as if he had notice unless the circumstances are su'ch as enable the court to say, not only that he might have acquired, but also that he ought to have acquired it but for his gross negligence in the conduct of the business in question. The question then, when it is sought to affect a purchaser with constructive notice, is not whether he had the means of obtaining and might by prudent caution have obtained the knowledge in question, but whether not obtaining was an act of gross or culpable negligence.’ ”

And, again, in Townsend v. Little, 109 U. S. 504 , 511:

“Constructive notice is defined to be in its nature no more than evidence of notice, the presumption o.f which is so violent that the court will not even allow of its being controverted. Plumb v. Fluitt, 2 Anst. 432; Kennedy v. Green, 3 My. & K. 699. ... As said by Strong, J., in Meehan v. Williams, 48 Penn. State, 238, what makes inquiry- a duty is such a visible state of things as is inconsistent with a perfect right in him who proposes to sell: See also Holmes v. Stout, 3 Green Ch. 492; McMechan v. Griffing, 3 Pick. 149 ; Harwick v. Thompson, 9 Alabama, 409.”

In the light of these authorities we see nothing which casts any imputation on the conduct of the Detroit Company, or

. Now, what is the law controlling under these circumstances? Much reliance is placed by the Government on Hawley v. Hiller, 178 U. S. 476 , which, affirming prior cases, holds that an entry-man under the timber act acquires only an equity, and that a purchaser from him cannot be regarded as a bona fide purchaser within the meaning of the act. But the Detroit Company purchased twenty-seven tracts after the issue of the patents therefor. And in making these purchases it dealt, not with the Martin-Alexander Company, but directly with the patentees. While the amounts paid were small, yet, as counsel for the Government admit in their brief that “the land without the timber is of no value, ” there can be no suggestion of inadequacy of price. As, also, ,it had no knowledge or suspicion of wrong in the titles, it is, as to these tracts, strictly and technically, within the language of the act, a bona fide purchaser. If it be contended that, by .virtue of the contracts for the sale of timber, it had acquired some interest in the lands prior to the issue of patents, it is sufficient to say that by the doctrine of 'relation the patents, when issued, became operative as of the dates of the entries. It is true that this doctrine is but a fiction of law, but it is a fiction resorted to whenever justice requires. It is that principle by which an act done at one time is considered to have been done at some antecedent time. It is a doctrine of frequent application, designed to promote justice. Thus, a sheriff’s deed takes effect not of its date, but of the time when the lien of the judgment attached. The ordinary railroad land grants have been grants in presentí, and' under them the title has been adjudged to pass, not at the completion of the road, but at the date of the grant. Leavenworth, Lawrence & Galveston Railroad v. United States, 92 U. S. 733 ; St. Paul &c. Railway Co. v. Phelps, 137 U. S. 528 ; St. Paul & Pacific v. Northern Pacific, 139 U. S. 1 ; United States v. Southern Pacific Railroad, 146 U. S. 570 . A patent from the United States operates to transfer the title, not merely from the date of the

“To protect purchasers, the rule applies, ‘that where there are divers acts concurrent to make a conveyance estate, .or other thing, the original act shall be preferred; and to this the other acts shall have relation,' as stated in Viner’s Abr. tit. Relation, 290. . . .

“Cruise on Real Property, vol. V, pp. 510, 511, lays down the doctrine with' great distinctness. He says :• ‘ There is-no rule better founded in law, reason, and convenience than this, that all the several parts and ceremonies necessary to complete a conveyance shall.be taken together as one act, and operate from the substantial part by relation.’ ...

“Applying the doctrine of relation, and taking all the several parts and ceremonies necessary to complete the title together, ‘as one act/ then the confirmation of 1811 and the patent of 1845 must be taken to relate to the first act; that of filing the" claim in 1805.”

In Simmons v. Wagner, p. 261:

“Where the right to a patent has once become vested in a purchaser of public lands, it is equivalent, so far as the Government is concerned, to a patent actually issued. The execution and delivery of the patent after the right to it has become complete are the mere ministerial acts of

the officers charged with that duty. Barney v. Dolph, 97 U. S. 652 .”

See also United States v. Freyberg, 32 Fed. Rep. 195 , a casé in the Circuit Court for the Eastern District of Wisconsin, in which it was held by Judge Dyer that an action brought by the Government to recover for timber cut from land, which had been entered as a homestead, but the full equitable title of which had not then passed to the entryman, either by the required occupation of the premises or by a commuting of the homestead to a preemption entry — an action maintainable at the time it was commenced — was defeated by the issue of the final receiver’s receipt and the consequent perfection of a full equitable title.

Counsel for the Government deny the application of this principle in' the present case on the ground, first, that it gives vitality and validity to a wrongful acquisition of title from the Government. They say that equity is never founded on a wrong, and that because the original entries were wrongful, the doctrine of relation will hot be. applied. But this is a clear misunderstanding of the purpose and scope of the doctrine of relation. If the original entries were rightful' there is no need of its application, for the patents would pass perfect titles. The. equity is founded on the rightful conduct of the purchaser and not on the wrongful conduct qf the entrymen. It upholds the -purchaser in his honest purchase notwithstanding the wrongful character of the entries. This is akin to the ordinary rule in respect to a bona pie purchaser. Equity sustains the title in spite of the fact that his grantor. may have wrongfully obtained it, and upholds it because of his rightful conduct.

Counsel also say that the question is settled by the decision in Hawley v. Dillar, supra, relying upon the second paragraph in the heádnotes:

An entryman under this act acquires only an equity, and a purchaser from him cannot be regarded as a bona pie purchaser within the meaning of the act of Congress unless he 'becomes

such after the Government, by issuing a patent, has parted with the legal title.”

There are two or. three answers to this contention. In the first place, the headnote is not the work of the court, nor do.es it state its decision — though a different rule, it .is true, is prescribed by statute, in some States. ■ It is simply the work', of the reporter, gives his understanding of the decision, and is prepared for the convenience of the profession in the examination'of the reports. In the second place, if the patent referred ■ to in that headnote is a patent, issued upon a wrongful entry, no such fact appeared in the case, because no patent was issued upon the entry charged to have’been wrongful; but after that-entry had been cancelled, a patent was issued to Differ on a new' entry. If it refers to some other patent than one issued upon' a wrongful entry, it has no pertinency, for the doctrine of relation never carries a patent back to the date of any. other- entry,' than that upon which it is issued. And finally the headnote is a misinterpretation of the scope of the decision. .

With reference to the other tracts and the., denial of any relief, by accounting or otherwise, against the Detrtiit Company, it is contended that as prior to the issue of a patent tlie’ Land Department could have set aside the entries on account of the_ fraudulent contracts, the courts will now grant the same relief; and further, that- inasmuch as the patents are by this decree' cancelled and the title restored to the Government the Detroit Company must be regarded as a wrongdoer in respect to the' timber which it took' from the lands prior to the decree, and an accounting should have been ordered. But this ignores the fact that the Detroit Company acted in good faith and purchased the timber from those having an apparently perfect equitable title thereto. It becomes necessary to inquire what is the significance of a final receiver’s receipt and the effect of a' cancellation by the Land Department of such a receipt. The receipt is an acknowledgment by the Government that it has received full pay for the land, that it holds the legal title in trust for the entryman and will in due course issue to

Indeed, in some of the opinions of this court, emphasizing the value of a receiver's receipt, there are expressions which seem to underestimate the significance of a patent. Wisconsin Central R. R. Co. v. Price County, 133 U. S. 496 , 510; Deseret Salt Co. v. Tarpey, 142 U. S. 241 , 251. For it must be remembered that the latter is the instrument which passes the legal title, and that until it is issued the legal title remains with the Government.and is subject to investigation and determination by the Land Department. Barden v. Northern Pacific R. R. Co., 154 U. S. 288 , 326; Michigan Land & Lumber Co. v. Rust, 168 U. S. 589 , 592; Guaranty Savings Bank v. Bladow, 176 U. S. 448 . But while until the issue of the patent the land is under the control of the Land Department, which, upon proper investigation and for sufficient reasons, may set aside the certificate of entry, yet this power of the Land Department cannot arbitrarily be exercised without notice to the entry-man, and if improperly exercised the rights of the entryman may be enforced in the courts after the patent has issued to other parties. Guaranty Savings Bank v. Bladow, supra. It is true, as against the Government, and while the title remains in the Government, he may not be able to enforce his equity, because no action can be maintained against the Government, except upon contract, express or implied. United States v. Jones, 131 U. S. 1 . But while he may not sue on his equity, be may protect that equity when sued by the Government. It is sometimes said that a legal title with an equity is paramount to an equity alone, but this is not strictly true unless the equities are equal, for sometimes a superior equity

It is a mistake to suppose -that for the determination of equities and equitable rights we must look only, to the statutes of Congress. The principles of equity exist independently of and anterior to all Congressional legislation, and the statutes are either annunciations of those principles or limitations upon their application in particular cases. In passing upon transactions between the Government and its vendees we must bear in mind the general principles of equity and determine rights upon those principles except as they are limited by special statutory provisions. And clearly upon those principles a party purchasing an equitable right is entitled to be protectetj in his purchase so far as it can be done without trespassing upon the rights of other parties. The statute provides that if an entry is wrongfully made it may, prior to patent, be set aside by the Land Department, the entryman forfeiting the money which he has paid. In other words, by the action of the Department the equitable title is cancelled and restored to the Government. It then has both the full title to the land and the money which had been paid for. it. And this is the penalty which is imposed for the wrongful entry. Certainly when the Government retains the full price which it has placed upon the land and also recovers the land itself it is abundantly compensated for any wrong which has been attempted by the entryman. And a party who deals with such entryman— relying upon, the evidences of his entry, which are in all respects in form good and sufficient, and are an acknowledgment by the Government officials of a rightful entry — is justly entitled to the consideration of a court of equity. In this case, finding

We think the decision of the Court of Appeals was right, and it is

Affirmed.

' Mr. Justice Harlan and Mr. Justice McKenna dissent.