Source: https://caselaw.findlaw.com/us-supreme-court/243/114.html
Timestamp: 2019-04-20 11:26:46+00:00

Document:
[243 U.S. 114, 115] Messrs. B. S. Grosscup and Corwin S. Shank for appellants.
The property in controversy is block 430 of Seattle tide lands, a tract of some 12 acres, and the leasehold of the harbor area lying in front of that block. In conformity with the provisions of the state law, the Merchants' National Bank had, prior to its failure, made application to purchase these lands. After the failure and the appointment of Charles H. Baker, receiver, this application was accepted by the State Board of Land Commissioners, and upon January 12, 1897, a contract was entered into between the state of Washington and the bank, through the receiver, by which the state agreed to sell and the bank to purchase block 430 of Seattle tide lands for $1,488, payable in ten annual instalments, sub- [243 U.S. 114, 116] ject to all liens for filling, and all taxes and assessments that might be levied or assessed on the land, and with a forfeiture clause in case the bank should fail to pay any of the amounts, either principal, interest, taxes, or assessments, when the same should become due and for six months thereafter. Permission to make this contract was obtained by the receiver from the Comptroller of the Currency, and thereafter partial payments were made upon the contract.
In March, 1899, the contract between the bank and the state of Washington for the purchase of block No. 430, together with the harbor lease, was transferred by Simpson to Baker in his personal capacity, the record title continuing in the name of Simpson. On August 11, 1905, Simpson, acting for and on behalf of Baker, assigned the [243 U.S. 114, 117] contract for the purchase of block No. 430, together with harbor lease No. 181, to one Norton, the consideration named being $1. This assignment contained the same authorization as to the patent to be issued by the state as was contained in the assignment to Simpson. On October 16, 1905, the state of Washington issued to Norton a patent covering block No. 430, with the exception of a strip of land, 30 feet wide, which had been granted to a railroad company. In August, 1907, there was organized under the laws of the state of Washington the Seattle Water Front Realty Company. Upon incorporation of this company, Norton conveyed to it block No. 430, together with harbor lease No. 181, in payment for the issue of its capital stock of $250,000. About 95 per cent of the stock was issued to Baker, or to others, who held for him.
Under this state of facts, the district court entered a decree adjudging that the assignment by Baker to Simpson was fraudulent, and was made for the sole use and benefit of Baker, and that the assignment of the contract to the defendant Norton by Simpson, and the conveyance of Norton to the Seattle Water Front Realty Company, were null and void. The decree provided that the Realty Company should execute and deliver to the clerk of the court below, for the benefit of the plaintiff, as receiver, a deed covering its interest in block No. 430 and the assignment of harbor lease No. 181, and the receiver was directed to pay to the clerk of the court, for the Realty Company, the sum of $10,977.13, being the amount of the payment, with interest, made by the defendants to the state of [243 U.S. 114, 118] Washington under the contract for the purchase of block No. 430, and upon the harbor lease, and for taxes. 212 Fed. 504. Upon appeal, this decree was affirmed by the circuit court of appeals for the ninth circuit. 136 C. C. A. 320, 221 Fed. 322.
Both the district court and the circuit court of appeals found that the sale from Baker to Simpson was only colorable, and that Simpson purchased the property for Baker. Our consideration of the evidence must be governed by the well-settled rule in this court that, when two courts have reached the same conclusion on a question of fact, their finding will not be disturbed unless it is clear that their conclusion was erroneous. Stuart v. Hayden, 169 U.S. 1, 14 , 42 S. L. ed. 639, 643, 18 Sup. Ct. Rep. 274; Baker v. Cummings, 169 U.S. 189, 198 , 42 S. L. ed. 711, 715, 18 Sup. Ct. Rep. 367; Towson v. Moore, 173 U.S. 17, 24 , 43 S. L. ed. 597, 600, 19 Sup. Ct. Rep. 332; Hy-Yu-Tse-Mil-Kin v. Smith, 194 U.S. 401, 412 , 48 S. L. ed. 1039, 1045, 24 Sup. Ct. Rep. 676; Dun v. Lumbermen's Credit Asso. 209 U.S. 20, 23 , 52 S. L. ed. 663, 665, 28 Sup. Ct. Rep. 335, 14 Ann. Cas. 501; Texas & P. R. Co. v. Railroad Commission, 232 U.S. 338, 339 , 58 S. L. ed. 630, 34 Sup. Ct. Rep. 438; Washington Securities Co. v. United States, 234 U.S. 76, 78 , 58 S. L. ed. 1220, 1222, 34 Sup. Ct. Rep. 725; Gilson v. United States, 234 U.S. 380, 383 , 58 S. L. ed. 1361, 1362, 34 Sup. Ct. Rep. 778. The concurrent decisions of the courts upon the establishment of a trust is a question of fact, which will be followed unless shown to be clearly erroneous. Brainard v. Buck, 184 U.S. 99 , 46 L. ed. 449, 22 Sup. Ct. Rep. 458.
That the secret arrangement between Baker and Simpson was fraudulent and a gross breach of the receiver's duty is too plain to require detailed consideration. Michoud v. Girod, 4 How. 503, 555, 11 L. ed. 1076, 1099; Magruder v. Drury, 235 U.S. 106, 119 , 59 S. L. ed. 151, 156, 35 Sup. Ct. Rep. 77.
It is urged that the contract of purchase was ultra vires the corporate powers of the bank. The court of appeals, in deciding this point, referred to the decisions of this court which have held that objections to the passing of title in [243 U.S. 114, 119] conveyances to national banks, although made in excess of any legal authority given the bank by the law, can only be made by the government in a direct proceeding, and will not defeat the vesting of the title in the bank when it takes a conveyance in good faith, for a valuable consideration. Union Nat. Bank v. Matthews, 98 U.S. 621 , 25 L. ed. 188; National Bank v. Whitney, 103 U.S. 99 , 26 L. ed. 443; Reynolds v. First Nat. Bank, 112 U.S. 405 , 28 L. ed. 733, 5 Sup. Ct. Rep. 213; Thompson v. St. Nicholas Nat. Bank, 146 U.S. 240 , 36 L. ed. 956, 13 Sup. Ct. Rep. 66; Schuyler Nat. Bank v. Gadsden, 191 U.S. 451 , 48 L. ed. 258, 24 Sup. Ct. Rep. 129.
As to the defense of laches, both courts below found that the facts show entire want of knowledge on the part of the present plaintiff or his predecessor in office of the secret arrangement by which Baker acquired the title to [243 U.S. 114, 121] the contract of purchase. Until knowledge of this fraudulent transaction, or facts equivalent thereto, was brought home to those authorized to act, there could be no laches in the failure to prosecute the suit.
Nor do we find merit in the contention that the seven-year Statute of Limitations (Rem. & Bal. Code [Wash.] 789) in favor of persons in the actual and notorious possession of lands, under claim of title in good faith, has any application here. Under the facts found Baker does not come within the class protected by this statute.

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