Ferry v. Udall

• Decision Date: 21 October 1964
• Docket Number: No. 19056,19058.,19056
• Citation: 336 F.2d 706
• Parties: Robert V. FERRY, Appellant, v. Stewart L. UDALL, Secretary of the Interior, et al., Appellees. Autrice Copeland FREEMAN, Appellant, v. Stewart L. UDALL, Secretary of the Interior, et al., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

336 F.2d 706 (1964)

Robert V. FERRY, Appellant, v. Stewart L. UDALL, Secretary of the Interior, et al., Appellees.

Autrice Copeland FREEMAN, Appellant, v. Stewart L. UDALL, Secretary of the Interior, et al., Appellees.

Nos. 19056, 19058.

United States Court of Appeals Ninth Circuit.

September 9, 1964.

Rehearing Denied October 21, 1964.

COPYRIGHT MATERIAL OMITTED

Herbert B. Finn, Stephen T. Meadow, Phoenix, Ariz., for appellant Ferry.

Elmer C. Coker, Phoenix, Ariz., for appellant Freeman.

Ramsey Clark, Asst. Atty. Gen., S. Billingsley Hill, Grace Powers Monaco, Attys., Dept. of Justice, Washington, D. C., Charles A. Muecke, U. S. Atty., Arthur E. Ross, Asst. U. S. Atty., Phoenix, Ariz., John E. Lindberg, Asst. U. S. Atty., Tucson, Ariz., for appellees.

Before HAMLEY, HAMLIN and BROWNING, Circuit Judges.

HAMLEY, Circuit Judge.

Stewart L. Udall, Secretary of the United States Department of Interior (Secretary), and certain other individuals connected with the Department, were made defendants in these two cases brought in the District Court of Arizona. The first case (Freeman case) was filed on December 12, 1962, by Autrice Copeland Freeman. The second case (Ferry case) was filed on April 17, 1963, by Robert V. Ferry and Irving Baker, collectively referred to herein as Ferry. The plaintiffs in both cases sought district court review under the Administrative Procedure Act of decisions of defendants involving the administration and sale of public lands.

A summary judgment for defendants was entered in each case and on identical grounds. Because of the similarity in the facts involved and the identity of issues raised, the two cases were consolidated for the purposes of this appeal.

The essential facts in both cases are undisputed. The Secretary invited bidding on certain isolated tracts of public lands exposed for sale pursuant to authority vested in him under the Isolated Tracts Act, Rev.Stat. § 2455, as amended, 43 U.S.C. § 1171 (1958). Freeman and Ferry submitted bids on the particular tracts involved in their respective cases. In both cases they were declared by the Land Manager to be high bidder,¹ paid the bid price, and received receipts therefor.²

In prolonged proceedings which followed in the Freeman case, the Manager's decision that Freeman was the preferred bidder was affirmed by the Secretary, through his Solicitor, who, in his decision, declared Freeman "purchaser" of the land. After prolonged proceedings in the Ferry case, the Assistant Secretary of Interior resolved, in Ferry's favor, a challenge that the bidding was unethical, but remanded the case to the Land Manager for further consideration.

In each case, before the cash certificate was issued, the Secretary determined that the appraisal value of the lands in question had been understated and that the true value of the land at the time the bids were received was several times higher than the bid price. On the basis of this, the Secretary entered orders vacating the sales.³ Freeman and Ferry then instituted the actions involved in this appeal.

The numerous arguments advanced by Freeman and Ferry on this appeal present two basic issues: (1) whether Freeman and Ferry are entitled to the lands in question despite the fact that cash certificates have not been issued; and (2) whether it was an abuse of discretion, subject to review under section 10 of the Administrative Procedure Act, for the Secretary not to issue the cash certificates.

With regard to the first issue, we hold that Freeman and Ferry are not entitled to any property or contractual rights in the lands in question absent the issuance of the certificates. The Secretary has discretionary authority to decide whether "* * * in his judgment, it would be proper * * *" to expose for sale at public auction, for not less than appraised value, certain isolated and disconnected tracts and parcels of public land. Isolated Tracts Act, Rev.Stat. § 2455, as amended, 43 U.S.C. § 1171.

The Act itself does not specify the procedure to be followed in selling these tracts. The Secretary may therefore promulgate regulations, pursuant to his general rule-making power, concerning how the sale may be had. Rev.Stat. § 2478, 43 U.S.C. § 1201.⁴ The rules promulgated with regard to these sales were, at the time of the bidding, as follows:

"* * * until the issuance of a cash certificate, the authorized officer may at any time determine that the lands should not be sold, the applicant or any bidder has no contractual or other rights as against the United States, and no action taken will create any contractual or other obligation of the United States."⁵

Under this procedure the Secretary, in the exercise of his discretionary authority to sell, merely invites bids from the public. The procedure established resembles an auction with reserve, since the Secretary reserves the right to reject any and all bids prior to the issuance of the certificate. See Restatement, Contracts § 27; Willcoxson v. United States, 114 U.S.App.D.C. 203, 207, 313 F.2d 884, 888.

Freeman argues that the public notice had to state that the auction was being held with reserve, in order for these conditions to be binding upon the bidders. However, in this kind of auction, as in any other, the auction is deemed to be conducted with reserve, unless there is an express announcement or advertisement to the contrary before the auction takes place. 1 Williston, Contracts (3d ed.) § 29, pages 76-77. For this reason, even without the regulations, the Secretary had a right to reject a bid. It would be immaterial whether the bid was the high bid or whether the advertisement announcing the auction implied that the Secretary would sell to the highest bidder. See Levinson v. United States, 258 U.S. 198, 201, 42 S.Ct. 275, 66 L.Ed. 563.

The regulations state that offers to purchase the land could be accepted only by the issuance of the cash certificate and that no other action taken would confer rights in the land upon bidders. Both appellants argue that these regulations do not apply to them since the public notice did not call their attention to the fact that the auction was being held pursuant to 43 C.F.R. § 250.5. Freeman and Ferry are bound by these regulations, however, since their publication in the Federal Register provided constructive notice. 49 Stat. 502, 44 U.S.C. § 307; Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384-385, 68 S.Ct. 1, 92 L.Ed. 10; Maryland Cas. Co. v. United States, 251 U.S. 342, 349, 40 S.Ct. 155, 64 L.Ed. 297.

Two arguments advanced by the appellants are based on the presumption that some event other than the issuance of the cash certificate will constitute acceptance of their bids. The first such argument is that the obligation to sell lands became complete when the Land Manager accepted, and gave receipts for, the bid price paid by them. Appellants argue that the "general rule of real estate" applicable here is that where the applicant for a patent to public lands performs the prescribed conditions and pays the price, the equitable title thereto passes to the applicant and the United States thereafter holds mere legal title subject to a trust.

As pointed out in Willcoxson v. United States, 114 U.S.App.D.C. 203, 206-207, 313 F.2d 884, 887-888, the cases upon which the appellants rely are those involving statutes which made it mandatory for the Secretary to transfer the land to those who complied with the statutory requirements, and which limited the Secretary's discretion to that of determining that the requirements had been met.⁶

Sale of property under the Isolated Tracts Act involves an entirely different method of disposing of public property. Under this Act, Congress has left entirely to the Secretary's discretion whether to dispose of the land or not. Accordingly, this is not a case where a member of the public can acquire parts of the public domain merely by the compliance with or paying a price. In this case, no right to the land arises until the Secretary accepts a bid by issuing a certificate.

The second argument along this line is that the offers of the appellants were accepted when they were declared to be "high bidder" and "purchaser." The significance of this, they argue, is that 43 C.F.R. § 250.5 is directed only to "applicants" and "bidders" and, by being designated "purchasers," they were put in a category of persons to whom the regulations do not apply. The argument overlooks the fact that 43 C.F.R. § 250.5 expressly states that bids are accepted only by the issuance of the cash certificate and that no other action "taken will create any contractual or other obligation of the United States."⁷

The result we reach is identical in principle with that of Willcoxson v. United States, 114 U.S.App.D.C. 203, 313 F.2d 884. Freeman, however, seeks to distinguish the Willcoxson case from the one before us. First, he argues, the Secretary decided not to sell in Willcoxson because minerals were discovered on the land after the bids were made, because there were adverse claimants to the land and issuance of the certificate would have resulted in litigation, and because there were irregularities in the application, whereas in this case, the Secretary refused to sell because the bid price was less than the actual value of the land. In our view, however, the difference in reason given for refusing to sell is no basis for distinguishing the cases, since the Secretary, in his discretion, may refuse to sell for whatever reason he finds adequate.

Second, Freeman argues, the cases are distinguishable because the relief sought in Willcoxson, was "in the nature of mandamus and under the Tort Claims Act," while in this case relief is sought under the Administrative Procedure Act. However, whether or not there is a binding obligation to sell the land prior to the issuance of the cash certificate is a question of substantive law, the answer to which will be the same without regard to what procedure is...