OREGON & C. R. CO., Hammond v. Oregon & C.R. Co.

• Decision Date: 16 February 1926
• Parties: HAMMOND ET AL. v. OREGON & C. R. CO. [a1]
• Court: Oregon Supreme Court

243 P. 767

117 Or. 244

HAMMOND ET AL. v. OREGON & C. R. CO. ^[a1]

Supreme Court of Oregon, En Banc.

February 16, 1926

Appeal from Circuit Court, Multnomah County; Bobert Tucker, Judge.

Action by Andrew B. Hammond and another against the Oregon &amp California Railroad Company. Judgment for plaintiffs, and defendant appeals. Affirmed.

This is an appeal by defendant from a judgment in favor of plaintiffs and against defendant for the sum of $114,932.50. The cause was tried by the court without the intervention of a jury. Based upon a stipulation of facts and evidence offered, the court made findings of fact and conclusions of law and entered the judgment therein.

This cause was before this court upon a former appeal, involving a decision upon the demurrer to the complaint. The demurrer was overruled. The case is reported in 193 P. 457, 98 Or. 1. The facts stated in the complaint are set forth in the opinion upon the former appeal. The cause was remanded to the circuit court, and the defendant filed its answer to the complaint in which it admitted substantially all of the facts alleged therein and interposed several separate answers and defenses. To these separate answers and defenses the plaintiffs interposed a reply.

The facts necessary for an understanding of the case are substantially as follows:

On August 16, 1901, the plaintiffs and the defendant entered into a written contract under the terms of which the defendant agreed to sell and convey, and the plaintiffs agreed to purchase, 45,972.43 acres of land for which the plaintiffs agreed to pay the defendant the sum of $7 per acre, aggregating the sum of $321,807.01, in 10 equal installments with interest on deferred payments. This sum was duly paid by plaintiffs, but when the payments were completed the defendant was unable to convey a merchantable title to plaintiffs, for the reason that the lands in question were lands granted by the United States by the acts of Congress of July 25, 1866 (14 Stat. 239), April 10, 1869 (16 Stat. 47) and May 4, 1870 (16 Stat. 94).

The first of these grants was made in aid of the so-called "West Side Line." The act of April 10, 1869 amended the act of July 25, 1866, in the following respect:

"That the lands granted by the act aforesaid shall be sold to actual settlers only, in quantities not greater than one quarter section to one purchaser, and for a price not exceeding $2.50 per acre."

The other grant was made in aid of the construction of the so-called "East Side Line" by the act of May 4 1870. It contained the following provision:

"That the said alternate sections of land granted by this act * * * shall be sold by the company only to actual settlers, in quantities not exceeding 160 acres or a quarter section to any one settler, and at prices not exceeding $2.50 per acre." Section 4.

The defendant became the beneficiary under said acts of Congress as to all of the lands covered by the contract between the defendant and the plaintiffs. Before August 16, 1901, patents were duly issued by the United States under the acts of Congress conveying to the defendant all of the lands covered by the contract. These patents contained specific references to the act of Congress under which they were issued and were recorded in the Record of Deeds in various counties in which the lands were situated prior to August 16, 1901.

The railroad company made sales of the land granted to it by the United States, under the act of Congress mentioned, in violation of the provisions of the acts, setting forth the maxima of quantity and price of which said lands were permitted to be sold. Thereafter, and on April 30, 1908 (35 Stat. 571), Congress adopted a joint resolution authorizing the Attorney General to institute suits for the purpose of enforcing forfeiture in favor of the United States with respect to the lands included in the two grants. The United States instituted such suits, one of which, designated by No. 3340, was for the purpose of enforcing a forfeiture against the defendant as to the unsold lands remaining in the grants exceeding 2,000,000 acres in quantity. Another suit was that brought by the United States against the defendant and these plaintiffs in which the United States sought to enforce a forfeiture as to the particular lands covered by the contract now in question.

Pending the determination of either of these cases brought by the United States, Congress, by act approved August 20, 1912 (37 Stat. 320), authorized the Attorney General to enter into a compromise with any purchaser of the granted lands against whom suit had been brought upon the condition that such compromise should require the entry of a decree of forfeiture against the purchaser, and that, within six months from the entry of such decree, the purchaser should be entitled to receive a patent from the United States, conveying the interest of the United States in the land on the payment by the purchaser to the United States of the sum of $2.50 an acre. As a result of the inability of the defendant to convey a merchantable title to the lands sold by it, the plaintiffs were compelled, in order to secure a valid title to the lands, to pay to the United States the sum of $2.50 per acre, under the provisions of the act of Congress of August 20, 1912, on account of which payment a patent was issued to the plaintiffs confirming the title to the lands.

Rand J., dissenting.

Alfred A. Hampson, of Portland (Ben C. Day, of Portland, on the brief), for appellant.

S. W. Williams, Sp. Asst. U.S. Atty. Gen., amicus curiæ, in behalf of the United States.

James B. Kerr, of Portland (Charles H. Carey, of Portland, on the brief), for respondents.

BEAN, J. (after stating the facts as above).

In passing upon the demurrer involved in the former appeal, this court, in view of the acts of Congress, as interpreted by the federal courts regarding the public policy indicated, stated:

"If it be conceded that the plaintiffs had constructive notice of the provisos as contained in the granting acts referred to, then it would seem that the federal court and Congress deemed the plaintiffs to be not in pari delicto with the defendant, and therefore entitled to relief."

By its first defense interposed, the defendant presented the contention that, at the time the contract was entered into, the plaintiffs knew the only source of defendant's title to be the patents to it from the United States based upon the acts of Congress referred to. The contract, by its terms, provided:

That the railroad company, upon the punctual payment of the purchase money and "faithful performance of all the covenants in this agreement herein made on the part of the parties of the second part, their heirs and assigns, and the surrender of this agreement that thereafter it will within thirty days from demand cause to be made and executed to the parties of the second part, their heirs and assigns, a deed assigning, transferring and setting over to the parties of the second part, their heirs or assigns, all the land hereinbefore described and selected."

Defendant contends that it was the intention of the parties that the defendant give and the plaintiffs receive such title only as the defendant received from the United States by virtue of the patents in question and that any payment made by the purchaser under the contract or in the acquirement from a third person of a paramount title, or in the extinguishment of an incumbrance upon the title contracted for, is a payment made voluntarily by the purchaser and one which cannot be recovered by him from the vendor. In effect, the defendant contends that, although it had solemnly contracted to convey a good title to the lands in question for $7 per acre, which it received in full, plaintiffs, when they found that defendant could not convey good title, were guilty of folly in spending the sum of $2.50 per acre to confirm the title.

This court in the former opinion held that the plaintiffs took the only course open to them, saying:

"The matter was then wholly at sea, and any novice in legal matters would advise plaintiffs to take the course they did." 193 P. 463, 98 Or. 21.

And in regard to the contention that the payment was voluntary this court then said:

"In order to obtain the interest of the United States to the lands and perfect and confirm their title, plaintiffs were compelled to, and did, pay the United States the sum of $2.50 per acre, aggregating $114,932.50."

Defendant argues that the plaintiffs were charged with constructive notice of the provisions of the acts of Congress mentioned; that because the lands were patented and the patents showed that they were issued pursuant to these acts of Congress, although making no reference as to the provisions as to sale, the plaintiffs are charged with constructive notice of these provisions of the granting acts therefore the contract was unlawful. Anent this question, upon the former appeal, 193 P. 457, 462, at page 18 of 98 Or., this court stated as follows:

"The patents to the lands issued to the railroad, by the United States contained no reference to the provisos respecting alienation contained in the granting acts. These patents named as the grantee, not the original grantee, the Oregon Central Railroad Company, but a stranger to the legislation of Congress, namely, the Oregon &amp California Railroad Company, The language of Mr. Justice Brewer in United States v. California & Oregon Land Co., 148 U.S. 31 (37 L.Ed. 354, 13 S.Ct. 458, see, also, Rose's U.S. Notes), in speaking of the diligence required of a purchaser of titles founded on a patent of the United States, is peculiarly apt. He says:

" 'If a patent from the government be presented, surely a purchaser from the patentee is not derelict, and does

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