Booth-Kelly Lumber Co. v. Oregon & C.R. Co.

• Decision Date: 09 November 1920
• Court: Oregon Supreme Court
• Parties: BOOTH-KELLY LUMBER CO. v. OREGON & C. R. CO.

193 P. 463

98 Or. 21

BOOTH-KELLY LUMBER CO. v. OREGON & C. R. CO.

Supreme Court of Oregon

November 9, 1920

In Banc.

Appeal from Circuit Court, Multnomah County; John P. Kavanaugh Judge.

Action by the Booth-Kelly Lumber Company, a corporation, against the Oregon & California Railroad Company, a corporation. From judgment for defendant, plaintiff appeals. Reversed, and cause remanded.

This is an action to recover money paid by plaintiff to defendant for land which by statute defendant was prohibited from selling. A demurrer to the complaint was sustained, and, the plaintiff declining to amend or plead further, judgment that plaintiff take nothing by its action was entered. Plaintiff appeals. Error is assigned in sustaining the demurrer and entering the judgment.

The complaint contains substantially the following allegations By two instruments in writing, dated December 21, 1901, and January 2, 1903, respectively, the defendant agreed to sell and convey, and the plaintiff's assignor agreed to purchase, 19,283.71 acres of land at $10 per acre, the defendant agreeing that when the purchase money was paid, it would "cause to be made and executed * * * a deed assigning, transferring and setting over * * * all the land" therein described. The purchase money was paid to the defendant, and all was done by the plaintiff and its assignors as agreed, but the defendant never performed its stipulations, and refuses to do so. The land described in the written instruments was a part of a grant of over 2,000,000 acres by the United States to the defendant, by an act of Congress of July 25, 1866 (14 Stat. 239) as amended April 10 1869 (16 Stat. 47). The act of Congress of April 10, 1869 required the defendant to sell the land "to actual settlers only, in quantities not greater than one quarter section to one purchaser, and for a price not exceeding two dollars and fifty cents per acre." Prior to the date of the transaction between the parties hereto, patents were issued by the United States to the defendant for the land described in the instruments mentioned and over 2,000,000 acres besides. These patents contained nothing to indicate that any such statutory prohibition existed, and did not mention the act of 1869 in which it was contained. Beginning many years prior to the date of the written instruments, the defendant had made a large number of sales of land granted by the acts of Congress, to purchasers who were not actual settlers, in quantities much greater than one quarter section to one purchaser, and for prices greatly exceeding $2.50 per acre. This was a matter of general knowledge in the vicinity of these lands, where the title of the defendant to its granted lands was generally regarded as a perfect title in fee simple, without incumbrance or restriction, and customarily accepted as such, without question or examination. The plaintiff and its assignors knew and relied upon these facts, and had no knowledge of the statute prohibiting the defendant from making such a sale. The defendant knew of that statute, knew that the plaintiff and its assignors had no knowledge thereof, and knew that they relied upon the facts, knowledge, and custom above mentioned. The defendant represented to the plaintiff and its assignors that it was the owner of an unincumbered and unrestricted fee-simple estate in the lands described in the instruments. The plaintiff and its assignors relied thereon, and understood that such an estate in the land was to be conveyed to them. This and other like transactions of the defendant, violative of the requirements of the provisos of the granting act as to the sale of the land, came to the attention of the United States. By subsequent legislation and judicial proceedings, the United States took from defendant, not only this land which defendant had undertaken to convey to plaintiff, but all the rest of the 2,000,000 acres of land granted to it, and provided for the payment, by the United States to the defendant of $2.50 an acre for the entire land grant, including the land which was the subject of the present transaction. Such forfeiture of the grant has been upheld by the Supreme Court of the United States.

It is deemed essential that reference be made to the acts of Congress concerning this land grant and the judicial decisions interpreting the grant and determining the rights of the defendant. The land which defendant undertook to sell to plaintiff is part of over 2,000,000 acres granted to defendant, known as the "East Side Grant." This granting act, as amended, provided:

"That the lands granted * * * shall be sold to actual settlers only, in quantities not greater than one quarter section to one purchaser, and for a price not exceeding two dollars and fifty cents per acre."

The "West Side Grant" of May 4,1870, contained a like provision, both known as the "settler's clause." The defendant in its dealings with the lands granted to it by these acts had for a long time entirely disregarded these provisos. On May 28, 1908, pursuant to an act of Congress of April 30, 1908 [35 Stat. 571], authorizing and directing him to proceed to enforce any rights or remedies of the United States growing out of the above-mentioned acts of Congress, the Attorney General of the United States filed a bill in equity against the defendant and others, and in January, 1909, 45 other bills in equity, the railroad company being a party defendant in each of them. In each of these cases there was joined as an additional party defendant some individual or corporation to whom the defendant had attempted to sell some of the land in violation of the prohibition contained in the granting acts, the plaintiff being such an additional defendant in one of those suits. The suit of May 28, 1908, called for convenience the "Main Case," involved the title to granted land which the defendant had not in any way attempted to sell, and each of the 45 later suits, known as the "Innocent Purchaser Cases," concerned only the land which the defendant had attempted to sell to such an additional party defendant. The United States in all these suits asserted that by reason of breaches by the defendant of the so-called "settler's clause" in the grants the title had been forfeited to and revested in the United States. This contention of the government was sustained by Judge Wolverton in a decision of April 24, 1911, in the main case ( United States v. Oregon & California Railroad Co. et al. [ C. C.] 186 F. 861).

The act of Congress of August 20, 1912, authorized the Attorney General to enter into a compromise with any purchaser of the granted lands against whom suit had been brought under the joint resolution of April 30, 1908, and it was provided that such compromise should require the entry of a decree of forfeiture against such purchaser, and that within six months of the entry of such decree the purchaser should be entitled, on payment of the sum of $2.50 per acre to the United States, to receive a patent for the lands covered by such decree. Pursuant to section 4 of this act, the Attorney General stipulated with the plaintiff, the additional party defendant in one of the 45 suits above mentioned, and a decree of forfeiture was entered in that case. The defendant, a party to that suit, was present, and offered no objection to the entry of that decree. All this was done in February and March, 1913. Thereafter plaintiff made application to the Secretary of the Interior to purchase the lands forfeited, paid the Treasurer of the United States $2.50 per acre for all the lands so applied for, and on July 21, 1913, the Secretary of the Interior caused a patent to be issued to plaintiff, conveying the land to it. The main case, involving the rights of the defendant in the entire grant, was decided by the Supreme Court of the United States on June 21, 1915 ( Oregon & California Railroad Co. v. United States, 238 U.S. 393, 35 S.Ct. 908; 59 L.Ed. 1360), about two years later. The Supreme Court held that the only interest the defendant ever had in this land was the right to receive not more than $2.50 an acre for it by selling it to actual settlers only in tracts of a quarter section or less; that under the terms of the grant, a law as well as a grant, it was unlawful for the defendant to sell in violation of its provisions; and that the United States might sell the lands, provided only it secured to the defendant all that the granting acts conferred upon it, namely, $2.50 per acre. Thereafter Congress, acting on this suggestion, enacted what is known as the "Chamberlain-Ferris Act," of June 9, 1916 (39 Stat. 218), providing for the sale of the land by the United States and the payment from the proceeds to the defendant of an amount equal to $2.50 an acre for the entire land grant. Section 7 of this act reads:

"That the Attorney General of the United States be, and he is hereby authorized and directed to institute and prosecute any and all suits in equity and actions at law against the Oregon & California Railroad Company, and any other proper party which he may deem appropriate, to have determined the amount of moneys which have been received by the said railroad company or its predecessors from or on account of any of said granted lands, whether sold or unsold, patented or unpatented, and which should be charged against it as a part of the 'full value' secured to the grantees under said granting acts as heretofore interpreted by the Supreme Court. In making this determination the court shall take into consideration and give due and proper legal effect to all receipts of money from sales of land or timber, forfeited contracts, rent, timber depredations, and interest on contracts, or from any other source relating to said lands; also to the value of timber taken from...