Source: https://caselaw.findlaw.com/us-supreme-court/246/69.html
Timestamp: 2019-04-20 13:24:24+00:00

Document:
[246 U.S. 69, 70] Mr. William V. Hodges, of Denver, Colo., for appellant.
This is an appeal from a decree of the United States Circuit Court of Appeals for the Eighth Circuit, reversing a decree of the District Court of Colorado, which dismissed a bill of complaint filed by the United States against Emma T. Krueger for the cancellation of a certain patent upon public lands in Colorado.
The government alleged in its bill that the land eighty ac res, patented to William E. Moses June 6, 1910, upon a soldiers' additional homestead entry (U. S. Rev. Stats. 2306, 2307 [Comp. St. 1916, 4594, 4602]; Act Aug. 18, 1894, c. 301, 1, 28 Stat. 397 [Comp. St. 1916, 4601]), had been secured by means of false affidavits, one by the entryman, Moses, who had made oath that the land was unoccupied, unimproved, and unappropriated by any person other than himself, and the other by John. A. McIntyre, that the land was not in any manner occupied adversely to the selector; whereas in truth and in fact the land had been for several years previously in the open and notorious possession of one P. C. Benson under title deraigned from the Denver Pacific Railway & Telegraph Company under a land grant of Congress made July 1, 1862. It was also charged that the fraud was perpetrated by agreement between Moses, the entryman, and one C. M. Krueger, the husband of the defendant, Emma T. Krueger. It is charged in the bill that Mrs. Krueger took the conveyance through Moses and her husband with notice of the fraud and without consideration.
Upon issue joined and the allegation of the answer that the defendant was a purchaser in good faith without notice of any fraud, the District Court found that the patent had been obtained by fraud, but that Mrs. Krueger was a bona fide purchaser without notice, and as such entitled to hold the land. The Court of Appeals took the same view of the evidence as to the fraudulent manner in which the land was acquired, and reached the conclu- [246 U.S. 69, 74] sion that the patent should be set aside for fraud committed against the United States unless the defendant had shown that she was an innocent purchaser without notice.
With some hesitation the Circuit Court of Appeals reached the conclusion that Mrs. Krueger at the time she purchased the land must be held to have had constructive notice of facts which, if investigated, would have led her to the knowledge of the fraud, and that she was not entitled as a bona fide purchaser to hold the land as against the government. 228 Fed. 97, 142 C. C. A. 503.
The pendency of Woodward's filing prevented the title from vesting in the railroad company, for it caused the land to be excepted from the grant. Kansas Pacific Ry. Co. v. Dunmeyer, 113 U.S. 629 , 5 Sup. Ct. 566.
A copy of the abstract of title showing the chain of title from the Denver Pacific Railway & Telegraph Company to Perry C. Benson was stipulated into the record; the abstract also showing the chain of title to and including the purchase by Mrs. Krueger of one half interest in the land from C. M. Krueger.
'Upon a search of the records, I find that you are the present owner of the W/2NE/4, Sec. 17, Tp. 5 N, R 69 West of the 6th P. M. (the tract in controversy), and that the title thereto is imperfect. If you are sufficiently interested, I would be pleased to correspond with you relative to the matter and assist you in curing the defect.
Krueger had been chief clerk of the United States Land Office at Denver until February 12, 1907, and thereafter practiced as an attorney in land and mining matters at Denver. Moses procured the soldier's additional homestead right upon which the entry was made, and made the entry at the request of Krueger who had bought the soldier's additional right from Moses for $780. Moses deeded the land to Krueger, and never claimed any interest in it. The Land Department's regulations required [246 U.S. 69, 77] an affidavit that the land located or selected was not in any manner occupied adversely to the locator or selector. Moses obtained a receiver's receipt upon April 8, 1910, and conveyed by deed to Krueger April 15, 1910. On April 22, 1910, Krueger conveyed to Mrs. Krueger and Mrs. McIntyre, the wife of one who had made a corroborating affidavit also containing the statement that t e land was not in any manner occupied adversely to the selector. The patent was issued to Moses June 6, 1910, and on April 22, 1913, Mrs. McIntyre conveyed her one-half interest in the premises to Mrs. Krueger. Mrs. Krueger testified that she paid her husband $400 in cash for the undivided one-half interest, and that she paid Mrs. McIntyre $1,500 by check for her one-half interest. She testifies that when she bought from her husband after final receipt, and before the patent issued, she had not seen the land and knew nothing about it, and did not in fact see it until March 27, 1913; that she knew nothing about the statements made in the affidavit signed by Moses or the affidavit of McIntyre; that before she purchased the interest of Mrs. McIntyre she had been upon the land and found there a Mrs. Benson, who said that her father-in law was P. C. Benson, and that she and her husband were farming the land.
If Mrs. Krueger had used these sources of information she would have ascertained that the Moses affidavit wherein it was stated that the lands were not in any manner occupied adversely was untrue, constructively she is held to have knowledge of these facts. Washington Securities Co. v. United States, 234 U.S. 76, 79 , 34 S. Sup. Ct. 725. And see Dellemand v. Mannon, 4 Colo. App. 262, 264, 35 Pac. 679. The defense of bona fide purchaser is an affirmative one, and the burden was upon Mrs. Krueger to establish it in order to defeat the right of the government to have a cancellation of the patent, fraudulently obtained. Wright-Blodgett [246 U.S. 69, 79] Co. v. United States, 236 U.S. 397, 403 , 404 S., 35 Sup. Ct. 339; Great Northern Railway Co. v. Hower, 236 U.S. 702 , 35 Sup. Ct. 465.
We agree with the Circuit Court of Appeals that Mrs. Krueger did not sust in the burden of showing that she was a bona fide purchaser for value, and under the circumstances shown she had constructive notice of the manner in which the land had been procured from the United States. The Circuit Court of Appeals did not err in holding that the government was entitled to a cancellation of the patent.
[ Footnote 1 ] Sec. 5. That where any said company shall have sold to citizens of the United States, or to persons who have declared their intention to become such citizens, as a part of its grant, lands not conveyed to or for the use of such company, said lands being the numbered sections prescribed in the grant, and being coterminous with the constructed parts of said road, and where the lands so sold are for any reason excepted from the operation of the grant to said company, it shall be lawful for the bona fide purchaser thereof from said company to make payment to the United States for said lands at the ordinary government price for like lands, and thereupon patents shall issue therefor to the said bona fide purchaser, his heirs or assigns.
No entry will be allowed under this section until it shall have been finally determined by this department that the land was excepted from the grant.
If the applicant is not the original purchaser from the company it is immaterial what the qualifications of his immediate grantor the intervening purchasers may have been.

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