State of Or. v. BUREAU OF LAND MGT.

• Decision Date: 09 July 1987
• Docket Number: Civ. No. 85-646 LE.
• Citation: 676 F. Supp. 1047
• Parties: STATE OF OREGON, By and Through the DIVISION OF STATE LANDS, Plaintiff, v. The BUREAU OF LAND MANAGEMENT, DEPARTMENT OF THE INTERIOR, UNITED STATES, Defendant.
• Court: U.S. District Court — District of Oregon

676 F. Supp. 1047

STATE OF OREGON, By and Through the DIVISION OF STATE LANDS, Plaintiff, v. The BUREAU OF LAND MANAGEMENT, DEPARTMENT OF THE INTERIOR, UNITED STATES, Defendant.

Civ. No. 85-646 LE.

United States District Court, D. Oregon.

July 9, 1987.

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Dave Frohnmayer, Atty. Gen., Robert W. Muir, Asst. Atty. Gen., Dept. of Justice, Salem, Or., for plaintiff.

Charles H. Turner, U.S. Atty., D. Or., Thomas C. Lee, Asst. U.S. Atty., Portland, Or., for defendant.

OPINION

LEAVY, Circuit Judge, Sitting by Designation.

The State of Oregon brought this action for judicial review of two decisions of the Interior Board of Land Appeals (IBLA) under 5 U.S.C. § 701 et seq. Pending review, both the State and the defendant, the Department of the Interior, Bureau of Land Management, move for summary judgment.

In 1968, the State made four applications to the Oregon State Office of the Bureau of Land Management (BLM) to obtain federal land. The State believed it was entitled to the land under the Admission Act, 11 Stat. 383, an agreement reached with the United States when Oregon was first admitted to the Union. That agreement granted to the State two of the thirty-six sections in every township of public land within Oregon for the use of its schools.

On April 12, 1973, the BLM denied the State's applications. It did so on the basis of an audit of all school land transactions which had taken place between the State and the federal government since Oregon became a state in 1859. On the basis of this audit, the BLM concluded that Oregon had received public lands for school support in excess of its entitlement.

The State appealed the BLM's decision to the IBLA. The IBLA issued two decisions, 78 IBLA 255 (Jan. 10, 1984) and 80 IBLA 354 (May 10, 1984), which determined Oregon's rights to select additional land. The IBLA, while ruling in the State's favor in some issues, upheld the BLM's conclusion that Oregon had received public land in excess of its entitlement, and therefore was not entitled to select more land.

In its motion for summary judgment, the State assigns as error the IBLA's conclusion that the BLM has authority to conduct an audit of past land transactions in order to determine the State's present right to select land. The State also contends the IBLA erred in deciding the United States, rather than Oregon, had title to certain lands which Oregon used as base to exchange for other federal land between 1929 and 1932. Finally, the State claims the IBLA erred in deciding the State could not receive indemnification for actual acreage in school land sections defined by protractions of unsurveyed federal land.

FACTS

In 1859, when Oregon was admitted into the Union, the United States agreed to provide certain federal land to Oregon for the support of its schools. The Admission Act, 11 Stat. 383, provides in relevant part:

"That the following propositions be and the same are hereby offered to the said people of Oregon for their free acceptance or rejection, which, if accepted, shall be obligatory on the United States and upon the said State of Oregon, towit: First, that sections numbered 16 and 36 in every township of public lands in said state, and where either of said sections, or any part thereof, has been sold or otherwise disposed of, other lands equivalent thereto, and as contiguous as may be, shall be granted to said state for the use of schools." 11 Stat. 383 § 4.

However, a problem arose when the sections designated for the State were unavailable because the federal government already had disposed of them. To indemnify the State for those losses, Congress enacted several statutes providing for the selection of other public lands in lieu of the unavailable sections. Some of these statutes were consolidated and codified in 1874, revised in 1891, later amended, and are now codified in 43 U.S.C. §§ 851 and 852.

Another statute, the Forest Lieu Exchange Act (Forest Lieu Act) of June 4, 1897, Ch 2, 30 Stat. 11, 36 provided for indemnity selections when sections 16 and/or 36 were located within a national forest.

"That in cases in which a tract covered by an unperfected bona fide claim or by a patent is included within the limits of a public forest reservation, the settler or owner thereof may, if he desires to do so, relinquish the tract to the Government, and may select in lieu thereof a tract of vacant land open to settlement not exceeding in area the tract covered by his claim or patent."

In 1905, the Forest Lieu Act was repealed because of a scheme, known as the Hyde Fraud Combine (HFC), to obtain illegally public land in California and Oregon for speculative purposes. Between 1898 and 1902, one F.A. Hyde and others conspired to obtain State school lands within the boundaries of national forests and to exchange them for more valuable federal land, using the indemnity selection process provided by the Forest Lieu Act. The State held title to these school lands (the "base" lands) within the national forests. Hyde arranged for applicants, some of whom were apparently fictitious, to purchase the base lands from the State. Under Hill's Code § 3618, Oregon citizens could purchase Oregon land, but were limited to 320 acres for personal use, but not for speculation. By affidavit, the citizen represented to the state that he had no contract to sell or dispose of the land. Hyde's elaborate scheme avoided these limitations. Ultimately, the HFC defrauded the State of Oregon of about 47,000 acres of its school lands, and the federal government issued patents to the HFC for approximately 27,000 acres of indemnity lands subsequently selected by the HFC. The school lands cost Hyde $1.25 per acre. Selection rights to the indemnity lands were then sold for a considerable profit. State v. Hyde, 88 Or. 1, 32, 169 P. 757 (1918). The HFC persuaded employees of the General Land Office (GLO) in Washington, D.C. to expedite HFC applications for indemnity land in violation of a policy requiring them to be processed in the order received. Id.

When the Secretary of the Interior became aware of the fraud in November, 1902, he ordered all applications suspended for forest lieu selections bearing Hyde's name as the applicant or as the attorney for the applicant. Later, the Secretary suspended all applications bearing names of individuals thought to be involved in the HFC. The Department also tried to cancel all patents issued to the HFC for indemnity land, but a statute of limitations prevented cancellation of all but patents to 1,680 acres. On January 1, 1904, the Department suspended all applications for forest lieu selections in which Oregon school lands had been offered as base.

In February 1904, a federal grand jury in Washington, D.C. indicted Hyde and others with conspiracy to defraud the United States of its land. In 1908, Hyde was found guilty of criminal fraud. His conviction was affirmed by the U.S. Supreme Court. Hyde and Schneider v. United States, 225 U.S. 347, 32 S.Ct. 793, 56 L.Ed. 1114 (1912).

In 1910, the United States commenced adverse proceedings against Hyde's selections of federal land, based upon fraudulent acquisition of title to Oregon base lands used in the exchange. In 1912, this action was suspended so that Oregon could proceed to cancel the deeds to the base lands. In 1918, the Oregon Supreme Court decided the state's lawsuits against Hyde. State v. Hyde, 88 Or. 1, 169 P. 757 (1918); State v. Hyde, 88 Or. 61, 169 P. 774 (1918); State v. Hyde, 88 Or. 66, 169 P. 775 (1918); State v. Hyde, 88 Or. 73, 169 P. 777 (1918); and State v. Hyde, 88 Or. 81, 169 P. 779 (1918). Its decisions, discussed later in this opinion, resulted in the cancellation of some, but not all, of the deeds the State issued to Hyde for its base lands.

Several issues in this action stem directly from the fraudulent activity of the HFC in the early years of this century. The BLM and the State contest which of them held title to certain base lands the State deeded to the HFC, which in turn deeded them to the United States in the process of applying for indemnity lands with the GLO. Later, the State acted as titleholder to these base lands when it exchanged them for indemnity land between 1929 and 1932. The BLM audit determined the State's use of these base lands was invalid, because the United States, not the State, properly held title at that time. Now, the State claims it held equitable, if not legal, title to the base lands because it was defrauded by the HFC.

The January 10, 1984 decision of the IBLA, 78 IBLA 255, determined who held title to base lands involved in the HFC's fraudulent scheme and later offered in exchanges in 1929-32. The IBLA issued a second opinion, 80 IBLA 354, on May 10, 1984 deciding another issue: how much idemnity land is Oregon entitled to select when new surveys or protractions reveal the existence of new fractional townships? The State assigns as error the IBLA's determination that it is not entitled to indemnity for the actual acreage in sections in a new fractional township which was determined by protraction, or the projection of cadastral survey lines over unsurveyed areas. The IBLA held instead that the State must use the pro rata rule specified by statute to determine the acreage it is entitled to as indemnity for sections within a fractional township.

The issues to be decided are complex in that transactions which occurred around the turn of the century and in the early 1930s must be examined. In its request to bar this litigation with doctrines of repose the Government states; "The decision of this case on its merits will compel the Court to become a judicial archaeologist, unearthing the `bones of the past' to reconstruct transactions better left to history."¹ Nonetheless, this task is not insurmountable, and I decline the Government's request to impose the doctrines of repose against the State with respect to this litigation.

SUMMARY...