United States v. Detroit Timber Lumber Company No 106 Martin 8212 Alexander Lumber Company v. United States No 165

Citation26 S.Ct. 282,200 U.S. 321,50 L.Ed. 499
Decision Date19 February 1906
Docket Number165,Nos. 106,s. 106
CourtUnited States Supreme Court

These are cross appeals from a decree of the circuit court of appeals for the eighth circuit, affirming in part and erversing in part a decree of the circuit court for the western district of Arkansas.

The bill was filed on April 5, 1902, by the United States against the Detroit Tamber & Lumber Company, the Martin- Alexander Lumber Company, and a number of individual defendants. The object of the bill was to set aside patents to 44 tracts of land, issued to the individual defendants, and all conveyances, contracts, and leases from them purporting to convey title to or a right to cut and remove timber from the lands, and also for an accounting of the timber cut and removed from the lands by the two companies, and judgment therefor.

The charge was that the lands were entered under the timber act of June 3, 1878 (20 Stat. at L. 89, chap. 151), and in fraud of its provisions, in that the purchase money was advanced by the Martin-Alexander Company under contracts with the entrymen that after the entries they should convey to it all the standing timber thereon. The Martin-Alexander Company denied that there were any such contracts, and the Detroit Company in addition pleaded that it was a bona fide purchaser from the former company. It appeared from the testimony that for some time prior to January 14, 1901, the Martin-Alexander Company owned and operated a sawmill plant in the vicinity of these lands; that most, if not all, of the entrymen were its employees; that it furnished all the money for the purchase prices of these lands, as well as for the expenses connected with the entries, and that after the entries the entrymen, with three exceptions, executed conveyances to it of all the standing timber. Fifty-eight and one half per cent of the stock of the Martin-Alexander Company belonged to E. B. Martin, while A. V. Alexander controlled the remainder, which was owned by himself, his wife, and J. O. Means.

On January 14, 1901, the Detroit Company purchased the entire property of the Martin-Alexander Company for $60,000 cash and an assumption of its obligations, amounting to $17,456.79. Prior to May 9, 1901, patents were issued for all the lands, thirteen having been issued before January 14, 1901. After the purchase from the Martin-Alexander Company the Detroit Company obtained deeds of the lands from the patentees of twenty-seven of the tracts.

The circuit court found that the transactions between the entrymen and the Martin-Alexander Company were not in conflict with the statute, that there were no agreements between them and it prior to the entries in respect to conveyances of the standing timber, and that there was only the mere expectation on the part of the company that it would be able to purchase the timber. Thereupon it dismissed the bill. 124 Fed. 393. The court of appeals, reviewing the testimony, held that there were contracts between the parties making the entries and the Martin-Alexander Company prior to the entries, and that therefore those entries were in fraud of the act, but it also found that the purchase by the Detroit Company was in good faith, and that therefore that company was entitled to protection in its purchase. It ordered the bill dismissed as to the 27 tracts for which patents had been issued and conveyances made to the Detroit Company. As to the seventeen which had not been conveyed, it ordered a decree canceling the patents, but dismissing the bill so far as respects any relief claimed against the Detroit Company. 67 C. C. A. 1, 131 Fed. 668.

Messrs.Marsden C. Burch, Fred A. Maynard, and Solicitor General Hoyt for the United States.

Messrs. W. E. Hemingway, James F. Read, Thomas C. McRae, U. M. Rose, and George B. Rose for the lumber companies.

Statement by Mr. Justice Brewer:

[Argument of Counsel from pages 325-328 intentionally omitted] Mr. Justice Brewer delivered the opinion of the court:

The able and elaborate opinions of both the circuit court and the court of appeals relieve us from much labor. There are two questions of fact: First, whether the parties making the entries had, prior to acquiring title from the government, made any agreement with the Martin-Alexander Company for a conveyance of an interest in the properties, or were seeking to acquire title solely for their own benefit. Second, whether the Detroit Company was a purchaser in good faith from the Martin-Alexander Company. With reference to the first question, the circuit court was of the opinion that there were no agreements between the parties. The court of appeals was of a different opinion, and held that the entries were made in pursuance of such agreements. This is a case in equity, and while in such a case questions of fact are always open to consideration by an appellate court, great respect is paid to the conclusions of the trial court in respect to them. Certainly, if the circuit court and the court of appeals had agreed, we should be very loath to disturb their conclusion. Differing as they do in the present case, we have examined this question, and agree with the court of appeals. The entire management of these entries was in the hands of an agent of the Martin-Alexander Company. It furnished the moneys, both for the purchase prices and all expenses; and it is not easy to believe that it did all this on a mere expectation that, after the entries had been made, it could purchase the timber. It is a much more reasonable conclusion that it had an understanding with the parties making the entries respecting purchases and prices. It is quite likely that the entrymen were not conscious of wronging the government, and thought that if it received the full price demanded, that was enough. The testimony of one witness suggests at least that they may have been advised that there was no contract unless it was in writing, and that hence they could conscientiously take the oath required in connection with an entry. So, without casting any imputation of intentional perjury on those parties, we agree with the court of appeals that the testimony points strongly to the fact that the entries were in pursuance of an understanding or agreement with the Martin-Alexander Company that, as it was advancing all the money, the entrymen should convey to it the standing timber at a fixed price.

With reference to the second question of fact, the circuit court made no finding, having disposed of the case by its conclusion in respect to the first. The court of appeals found that the Detroit Company was a purchaser in good faith from the Martin-Alexander Company. Here, too, we have examined the testimony, and are satisfied that the conclusion of the court of appeals was correct. A brief statement of the salient facts may be not unimportant. The headquarters of the Detroit Company were in St. Louis, of the Martin-Alexander Company in southwest Arkansas. They dealt at arm's length. On December 20, 1900, Alexander, of the Martin-Alexander Company, applied to U. L. Clark, presidernt of the Detroit Company, at St. Louis, to purchase Martin's interest in the Martin-Alexander Company. Clark declined, stating that the Detroit Company would make no purchase of a fractional interest in the property. Thereupon it was arranged that he should make an examination with a view to the purchase of the entire property. The Detroit Company's inspector was sent to Arkansas to examine the lands. Clark himself went down in the January following, and, after receiving the report of the inspector, terms of sale were, on January 14, agreed upon; $60,000 cash and the assumption of the Martin-Alexander Company's debts. The $60,000, by agreement between the stock-holders of the Martin-Alexander Company, were divided, $34,850 to Martin, $24,850 to Mrs. Alexander, $150 to A. V. Alexander, and $150 to J. O. Means. Martin and Means were paid at once; the debts were also promptly paid. Alexander desired to take stock in the Detroit Lumber Company in lieu of the money coming to his wife and himself. Clark was not then authorized to make such arrangement, but subsequently the stock of the Detroit Lumber Company was increased and the Alexanders were paid in full in that stock. The entire property of the Martin-Alexander Company, included in which were the sawmill, tram and logging roads, these timber contracts and other like contracts, and also all stock on hand, was, at the time of the purchase,—January 14,—turned over to the Detroit Lumber Company, which thereafter continued the business. The Martin-Alexander Company had no deeds of the lands in controversy, but simply contracts for the timber thereon, and, in order to be relieved from the necessity of keeping accounts with respect to the different tracts, the Detroit Company proceeded to obtain deeds from twenty-seven of the patentees, paying on an average $25 apiece therefor, which was a fair price for the lands after the timber had been cut off. It had no knowledge or intimation that there was anything wrong in the titles until the last of September or the first of October, 1901, more than four months after the government had issued its patents for all the lands,—when it received a notice to that effect from a government inspector.

Now we remark that there is no intimation in the testimony that the purchase price was not paid by the Detroit Company in cash and stock as agreed upon, no suggestion that the price was an unreasonable one. There was nothing strange or unnatural in the contract between the companies; on the contrary, it was one which might well be entered into by parties situated as these were. But it is contended by the government that if the Detroit Company had examined with care the books of the Martin-Alexander Company, and the papers...

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