Linn & Lane Timber Co. v. United States

• Decision Date: 20 May 1912
• Docket Number: 1,972,1,973.
• Citation: 196 F. 593
• Parties: LINN & LANE TIMBER CO. et al. v. UNITED STATES (two cases). UNITED STATES v. SMITH et al.
• Court: U.S. Court of Appeals — Ninth Circuit

196 F. 593

LINN & LANE TIMBER CO. et al. v. UNITED STATES (two cases).

UNITED STATES v. SMITH et al.

Nos. 1,972, 1,973.

United States Court of Appeals, Ninth Circuit.

May 20, 1912

These suits were brought by the government to obtain decrees annulling patents theretofore issued for certain lands entered under the act of Congress known as the Timber and Stone Act. Act June 3, 1878, c. 151, 20 Stat. 89 (U.S. Comp St. 1901, p. 1545).

Case numbered 1,972 involved 17 patents, each covering a quarter section of land situated in Linn county, Or. Eight of those patents were issued July 9, 1902, and nine of them August 12 1902.

Case numbered 1,973 involved 28 patents, each covering a quarter section of land in the same county and state, all of which patents were issued August 12, 1902.

The suits were commenced in the court below on May 25, 1908.

For the lands covered by the patents involved in case 1,973, the filings were made in January and February, 1900, and final proofs were made in April and May of the same year; all of the land covered thereby being at the time of, or within a few days after, the making of final proof conveyed by the applicants to one Willd in trust for the defendant C. A Smith. Willd thereafter, and on November 2, 1900, conveyed the same land to one Greacen, who on Feburary 11, 1901 conveyed it to one Rogers, who on December 21, 1904, conveyed it to one Werner-- all in trust for the defendant Smith, and all of which deeds were at the time of their execution placed of record, the legal title to the land standing in the name of Werner from the time of the conveyance of it to him until subsequently conveyed by him to the defendant Linn & Lane Timber Company, as hereinafter stated.

The entires involved in case 1,972 were made in May, June, and July, 1900, and final proof was made in August and October of that year, about which time the land covered by them was conveyed by the several applicants to the defendant Kribs in trust for the defendant Smith-- an undivided three-fourths of which Kribs, on the 24th of October, 1904, conveyed to Smith and on December 28th of the same year conveyed the other undivided one-fourth to one Swenson in trust for Smith-- all of which deeds were at the time of their execution filed for record. Subsequently those lands were also conveyed to the Linn & Lane Timber Company as hereinafter stated.

The defendant Smith, who was a manufacturer of lumber at Minneapolis, Minn., had previously acquired about 52,000 acres of other timber lands in Linn, Lane, and Douglas counties of the state of Oregon. In May, 1906, he caused to be organized under the laws of the state of Minnesota the defendant corporation called Linn & Lane Timber Company, with a capital stock of $100,000, divided into 1,000 shares of the par value of $100 each, for the purpose of taking and holding the title to the lands involved in these suits as well as the 52,000 acres theretofore acquired by him. Nine hundred and ninety-eight shares of the stock of the corporation were subscribed by Smith, and one share each by his wife and his attorney. The corporation was organized by the election of Smith as president; Johanna Smith, his wife, as vice president; Vernon Smith, his son, as secretary; and Nan A. Smith, his daughter, as treasurer. Thereafter, and on June 4, 1906, Smith tendered to the directors of the corporation, consisting of himself, his son, and his wife, a deed executed by himself and wife, covering all of his lands in the counties mentioned, in payment for the stock of the corporation; and on May 28 and August 15, 1907, respectively, Swenson and Werner, at Smith's request, conveyed the interests held by them to the same corporation, all of which deeds to the corporation were retained by Smith and not filed for record in the proper county until September 9, 1908, more than six years after the issuance of the patents involved in the present cases.

To the original bill in case 1,972, C. A. Smith, Frederick A. Kribs, Charles J. Swenson, and various other individuals were made defendants, and in case 1,973 Smith, Kribs, Werner, and various other individuals were made parties defendant. Both bills charged that all of the entries were made in pursuance of a conspiracy, specifically set out, to defraud the government of the title to the lands covered thereby, and that Smith acquired the title to the lands involved with notice of such fraud. Subpoenas ad respondendum were issued upon the filing of the bills and placed in the hands of the marshal for service, and were in due time served upon the resident defendants. Smith, Swenson, and Werner were nonresidents of the state of Oregon, and in July following the filing of the bills the marshal returned the subpoenas without service upon them. On the 27th of that month, upon the application of the United States attorney, a warning was issued to them, which was subsequently served. In September and October, 1908, Smith, Kribs, and Werner filed pleas in abatement, alleging that the property in question had been conveyed to and was owned by the Linn & Lane Timber Company prior to the commencement of the suits, and that it was therefore an indispensable party. On November 16, 1908, the complainant filed an amended bill in each suit, making that company a party defendant, and subpoena was thereupon issued and placed in the hands of the marshal for service upon its resident agent, and service duly made. The amended bills contained substantially the same allegations as the original bills, and the additional allegation that the Linn & Lane Timber Company was organized by C. A. Smith to consummate the fraudulent acquisition of title to the lands in question; that the deed from himself to the company was not in fact made until after the commencement of the suits, but was fraudulently antedated; and that all of the deeds were concealed and kept from record in pursuance of such fraudulent purpose. To the bills as amended answers were filed denying all of the averments of fraud and setting up as affirmative defenses that Smith and the Linn & Lane Timber Company were purchasers of the property in good faith and without notice of any fraud; that the decision of the Secretary of the Interior directing that the applications for the lands pass to patent is conclusive on the government; and that the suits are barred by the statute of limitations because not commenced against the Linn & Lane Timber Company within six years from the date of the patents. Replications were filed in due time, and upon the issues joined the evidence was taken before the court below, upon which the judgments appealed from were given.

John McCourt, U.S. Atty.

Lind, Ueland & Jerome, of Minneapolis, Minn., for defendants

GILBERT, Circuit Judge (after stating the facts as above).

A careful consideration of the record satisfies us that the learned judge of the court below was quite right in finding that all of the entries in question were fraudulent, and the proofs in support of them false and fraudulent, and in holding that the defendant C. A. Smith, if not actually cognizant of the conspiracy in pursuance of which the entries and proofs were made, was at least bound by the acts of his agent, Kribs, who, according to the evidence, was an active participant in the frauds upon the government. Smith therefore cannot be regarded as an innocent purchaser. He acquired, directly and through trustees, the title to all of the lands covered by the patents issued pursuant to the entries and proofs referred to, and afterwards, as the records show, conveyed and caused to be conveyed such title to the Linn & Lane Timber Company, a Minnesota corporation, which he caused to be formed, himself subscribing for all of its capital stock with the exception of two shares, one of which was issued to his wife, and one to his attorney. That the legal title to all of the lands passed to the Linn & Lane Timber Company by virtue of the deeds executed to it is undisputed, and that that company was not made a party to the suits until more than six years after the issuance of the patents is also shown by the records. The important question in the cases, therefore, is whether the company's plea of the statute of limitations should be sustained. The court below sustained it in respect to the lands covered by the eight patents which were issued July 9, 1902, on the ground that six years had run before suit could be considered as having been commenced against C. A. smith, but not so with respect to the other patents involved. Treating Smith as the corporation, and the corporation as Smith, the court held that, as respects all the patents that were issued within six years of the commencement of suit against Smith, the plea of the statute was unavailing, saying, in its opinion:

'As a general rule the holder of the legal title is an indispensable party to a suit to set aside a patent (U.S. v. Winona & St. P.R., 67 F. 948, 15 C.C.A. 96; U.S. V. C.P.R.R. (C.C.) 11 F. 449), and the statute of limitations does not cease to run in his favor until he is made a party to the suit, and process issued and placed in the hands of the marshal with a bona fide intent that it shall be served. Miller v. McIntyre, 6 Pet. 61, 8 L.Ed. 320. But the identity of Smith and the Linn & Lane Timber Company, and their relation to the title to the property in controversy, is such that I do not think the rule should be applied in this case. Smith is the real party in interest and the beneficial owner of the property. The corporation was organized by him as a mere holding concern. He owned all of its capital stock. He and the members of his family composed its board of directors, and were the officers of the corporation. In fact, Smith was the corporation, and were

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