United States v. Oregon Lumber Co, 40

CourtUnited States Supreme Court
Citation260 U.S. 290,43 S.Ct. 100,67 L.Ed. 261
Docket NumberNo. 40,40
Decision Date27 November 1922

260 U.S. 290
43 S.Ct. 100
67 L.Ed. 261



No. 40.
Argued Oct. 9, 1922.
Decided Nov. 27, 1922.

Mr. Assistant Attorney General Riter, for the United States.

[Argument of Counsel from pages 290-292 intentionally omitted]

Page 292

Mr. W. Lair Thompson, of Portland, Or., for defendants in error.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

Page 293

This case is here upon a certificate from the Circuit Court of Appeals for the Ninth Circuit, under section 239 of the Judicial Code (Comp. St. § 1216).

The plaintiff in error brought an action at law against the defendant in error in the United States District Court for the District of Oregon to recover damages for the fraudulent acquisition of certain lands. The complaint was filed in February, 1918, and alleged that the Oregon Lumber Company, a corporation, and certain of its officers, named as codefendants, unlawfully conspired to acquire certain tracts of land in Oregon, under the Timber and Stone Act of June 3, 1878 (20 Stat. 89 [Comp. St. § 4671 et seq.]). The lands were patented in 1900, subsequently conveyed by the patentees to an officer of the defendant corporation, and thereafter (with the exception of a small tract) transferred by such officer to the corporation. The value of the lands was alleged to be $65,000 and judgment was asked for this amount.

The answer denied the material allegations of the complaint and pleaded, among other things, as separate defenses:

'(1) That pro tanto to the measure of damages the United States received from the several entrymen named in the complaint the aggregate sum of $16,400, which was the price fixed by law and the practices in the Land Office for the lands described in the complaint; (2) that in October, 1912, the United States brought suit in equity to set aside the patents for the lands, and alleged that it owned the property described in the complaint herein and that the patents for the lands which are the same as are involved in this action were secured through fraud of the defendants named in the present action and others, and prayed for the cancellation of the patents; that in the equity suit substantially the same facts were pleaded as are pleaded by the United States in this action; that issue was joined in the equity suit; that in 1916, after trial upon the merits, the District Court dismissed the equity

Page 294

suit, for the reason that the United States had had full knowledge of the matters complained of in its complaint for more than 6 years before the equity suit was instituted, and that no appeal was ever taken from the decree dismissing the complaint of the United States.'

The plaintiff in error demurred to these separate defenses, and the District Court having overruled the demurrer and the plaintiff in error having declined to plead further, the court dismissed the complaint and judgment was entered.

The District Court, in rendering its judgment, decided that, inasmuch as the suit in equity was brought by the United States with knowledge of all the facts, it constituted an election final and conclusive.

Upon these facts the following questions are propounded by the Circuit Court of Appeals:

'1. Is an action by the United States for the value of lands as damages, against the patentees for the lands for fraudulent acquisition of the lands patented under the Timber and Stone Act, barred where more than 6 years have elapsed after the United States, with knowledge of the fraud, brought a suit in equity to cancel the patents for the same lands, in which equity suit decree of dismissal was made against the United States on the ground that the suit was barred by the statute of limitations?

'2. If the foregoing question be answered in the negative, should any damages recoverable be reduced by such amounts as the United States may have received from the entrymen, as the price fixed by law for the lands described in the patents?'

Upon the facts stated the sale was voidable (Moran v. Horsky, 178 U. S. 205, 212, 20 Sup. Ct. 856, 44 L. Ed. 1038), and the plaintiff in error was entitled either to disaffirm the same and recover the lands, or affirm it and recover damages for the fraud. It could not do both. Both remedies were appropriate to the facts, but they were inconsistent, since the first was founded

Page 295

upon a disaffirmance and the second upon an affirmance of a voidable transaction. Robb v. Vos, 155 U. S. 13, 43, 15 Sup. Ct. 4, 39 L. Ed. 52; Connihan v. Thompson, 111 Mass. 270, 270; 2 Black on Rescission and Cancellation, § 562, and cases cited. The rule is applicable to the government in cases where patents have been procured by fraud. United States v. Koleno, 226 Fed. 180, 183, 141 C. C. A. 178. Any decisive action by a party, with knowledge of his rights and of the facts, determines his election in the case of inconsistent remedies, and one of the most unequivocal of such determinative acts is the bringing of a suit based upon one or the other of these inconsistent conclusions. Robb v. Vos, supra.

It is suggested in the brief for the plaintiff in error that there is not such inconsistency between a suit to recover lands patented because of fraud and an action to recover damages for the fraud as to bar the latter, citing Friederichsen v. Renard, 247 U. S. 207, 38 Sup. Ct. 450, 62 L. Ed. 1075. That case, however, lends no support to the suggestion. The petitioner, Friederichsen, brought suit to cancel a contract for the exchange of lands, on the ground of fraud practiced upon him. Upon the coming in of the report of the master it appeared that petitioner, pending suit, had cut a considerable amount of timber growing upon the lands which he had taken in exchange. Thereupon the court found that he was not entitled to equitable relief, because, by cutting the timber, he had ratified the contract and had rendered it impossible to put the defendant in statu quo, but his remedy was at law for damages. The court ordered that the master's report be vacated and the case transferred to the law side of the court, pursuant to equity rule 22 (33 Sup. Ct. xxiv), and 'that the parties 'file amended pleadings to conform with an action at law." The question was there presented for decision whether this was the commencement of a new action, so as to bring it within the bar of the statute of limitations, and it was determined in the negative. Holding further

Page 296

that under the circumstances the doctrine of election of remedies did not apply, this court said:

'Thus, we are brought to the conclusion that since the two remedies asserted by the petitioner were alternative remedies, and since the order made, requiring the conversion of the suit in equity into one at law, was entered by the court sitting in chancery, for us to affirm the judgment of the Circuit Court of Appeals that the petitioner, in obeying the order of the trial court, made a fatal choice of an inconsistent remedy, would be to subordinate substance to form of procedure, with the result of defeating a claim which the respondents stipulated had been sufficiently established to justify a verdict against them. This we cannot consent to do.'

But here in the equity suit the plaintiff in error, upon the coming in of the defendant's plea of the statute of limitations, made no offer to amend or request to transfer the case to the law docket, but proceeded to trial and judgment upon the original bill, with knowledge of all the facts for more than 6 years prior to the filing of its bill. Defeated in its equity suit, it brought its action at law upon the same allegations of fact. We think it is not admissible to thus speculate upon the action of the court, and having met with an adverse decision, to again vex the defendant with another and inconsistent action upon the same facts.

The justice of enforcing the doctrine of election of remedies in this case is emphasized by a consideration of the facts. The lands in question were conveyed by the United States in the year 1900. It was not until 1912 that the first suit was brought. The judgment, dismissing the bill in that suit, was rendered in 1916, and the present action was brought 2 years later. Thus a period of 18 years had elapsed since the transfer of the lands before the present action was begun, during more than two-thirds of which time the United States had possessed

Page 297

knowledge of all the facts upon which the plea of the statute of limitations was founded and sustained.

The mere filing of the bill in the first suit, according to many authorities, did not constitute an irrevocable election. But upon ascertaining from their plea that the defendants intended to rely upon the statute of limitations, and having knowledge of the facts upon which that plea was founded, and thereafter sustained, the plaintiff in error had fairly presented to it the alternative: (a) Of abandoning that suit and beginning an action at law or transferring it to the law side of the court and making the necessary amendments to convert it into an action for damages, as a 'mere incident in the progress of the original case' (247 U. S. 210, 38 Sup. Ct. 451, 62 L. Ed. 1075); or (b) of proceeding with the original case upon the issues as they stood. The plaintiff in error deliberately chose the latter alternative. If the election was not final before, it became final and irrevocable then. Rehfield v. Winters, 62 Or. 299, 305, 306, 125 Pac. 289; Bowker Fertilizer Co. v. Cox, 106 N. Y. 555, 558, 559, 13 N. E. 95; Moss v. Marks, 70 Neb. 701, 703, 97 N. W. 1031.

The case of Bistline v. United States, 229 Fed. 546, 144 C. C. A. 6, relied upon by the plaintiff in error, is not in conflict with this conclusion. That was an action by the government to recover damages for the fraudulent acquisition of certain public lands. A prior suit had been brought in equity to cancel the patent, but the defendant's answer showed that the...

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