Source: https://law.justia.com/cases/federal/appellate-courts/F2/256/522/274121/
Timestamp: 2019-04-18 16:35:04+00:00

Document:
Donald M. Bushnell, Ferndale, Wash., for appellants.
Perry W. Morton, Asst. Atty. Gen., Roger P. Marquis, Reginald W. Barnes, Attys., Dept. of Justice, Washington, D. C., Charles P. Moriarty, U. S. Atty., F. N. Cushman, Asst. U. S. Atty., Seattle, Wash., for appellee.
Before LEMMON, FEE and HAMLEY, Circuit Judges.
The Hoods brought a suit in a Superior Court in the State of Washington against the United States to quiet title1 to lands formerly within the boundaries of the Lummi Indian Reservation, but which are now indubitably owned by them in fee simple and upon which the United States claimed a lien.2 The cause was removed to the federal court by the government,3 where a counterclaim for foreclosure of the lien was filed against the Hoods. The trial court held the lands were subject to a lien for the construction costs, together with operation and maintenance charges, of dikes built under Act of Congress to reclaim some 4,000 acres of land in and adjacent to the Reservation.
There are two questions involved. First, did Congress intend to and possess the power to impose a lien upon the lands here involved? Second, are charges for operation and maintenance a lien upon the lands?
The following facts appear from the record. The lands were patented to Mary Yah-Him-A-Loo, in fee simple, subject to restrictions against alienation in 1884. Pursuant to statute and regulations, Mr. Dickens, Superintendent of the Reservation, on November 10, 1925, executed a memorandum of sale of these lands to the Hoods, as Indian heirship property after the decease of the original patentee. At the same time, Dickens, as guardian of minor Indian heirs and the adult Indian heirs, executed a deed to the Hoods upon payment to Dickens, as Superintendent, of $2,515 on the purchase price of $10,100. The agreement provided that "upon payment in full * * * then and in such case a deed duly executed by said heirs * * * and approved by the Secretary of the Interior, shall be delivered to said Percy Hood and Grace H. Hood, his wife, conveying said land to them and their heirs pursuant to law." The other provisions gave the Secretary the option of forfeiture in the event of nonpayment and provided that the deed should be retained in escrow by the Commissioner of Indian Affairs and delivered to the purchaser upon payment in full. The deed deposited in escrow was executed by all twenty-three of the adult heirs before January 16, 1926.
On March 18, 1926, an Act was passed by Congress authorizing an appropriation for the construction of dikes to reclaim some 4,000 acres of land in and adjacent to the Lummi Indian Reservation.4 Some of the land was Indian land and some was owned by private individuals. The Act provided that the cost of the project would be distributed equitably among the lands in Indian ownership and those in private ownership which might be benefited by the project. A lien was imposed upon all Indian land for the pro rata share, and the existence of the lien was to be recited in any patent issued therefor. It was provided that no money should be expended for construction on account of any lands in private ownership until repayment contracts were executed by the owners of the private lands benefited, by which liens would be imposed thereon also.
The deed in accordance with the land sale contract was executed by the twenty-three heirs of Mary Yah-Him-A-Loo and by the Superintendent, Walter F. Dickens, as legal guardian for four named minors, on November 10, 1925, and was approved by the Secretary of the Interior, by his Assistant, on or about August 10, 1926. Two deeds covering the individual interests of the minors were also executed by the Superintendent and also approved by the Secretary. Hood then was given a copy of the contract signed by the Superintendent and bearing the approval of the Secretary, but all the deeds were retained in escrow. After the Hoods had paid the notes for the balance of the purchase price, the deeds above described were delivered out of escrow to the Hoods on or about the month of April, 1928.
As to a great deal of acreage, the Department of the Interior did not obey the specific injunction of Congress that no money should be expended until repayment contracts were executed by the owners of private lands benefited.5 Instead, the construction was completed and on August 19, 1930, the Secretary of the Interior promulgated, pursuant to Section 4 of the Act of March 18, 1926, his "public notice" reciting that he was distributing the total cost of the project among the lands benefited, in accordance with a schedule made a part of the notice by reference. 25 C.F.R. § 144 (1949). In this schedule there were included lands of a number of white owners who had not signed the "repayment contract" provided by law. It is notable that the Secretary of the Interior listed the Hoods as white owners. Thereafter, the agents of the Secretary of the Interior attempted to obtain contracts from all who had not signed. The Hoods, among others, have never signed a "repayment contract."
Because of the confusion caused by the publication of the public notice and the schedule of charges, the Hoods and others holding land in white ownership, against whom a lien was apparently imposed under its terms, commenced suit to clear title against the United States. The cause was removed to the federal District Court. After trial, the court found all the plaintiffs other than the Hoods entitled to have titles to their several lands quieted against the asserted lien of the government. Foreclosure against the lands of the Hoods on the counterclaim of the government was decreed. This appeal followed.
It is first urged that the Indian predecessors of the Hoods held fee simple title to these lands, subject to a restraint upon alienation, in that the approval of the Secretary of the Interior upon a conveyance was required. It is further contended by the Hoods that a restricted fee patent11 had already issued to such Indians, and that, if the allotment act contemplated that a reservation of liens would be included in the patent, a special clause would be required therein. Thus the contention is made that the trustee is bound not to impose additional burdens upon the estate. Upon the other hand, the government claims that there is no substantial difference between restricted property and trust property and that Congress has a right to legislate for the purpose of protecting those who are unable yet to assume a fully independent status as to their property, even though individual property rights may be impaired. We do not examine the merits of, or pass upon, these questions.
The position taken by the Hoods, that there is no lien in existence upon these lands in favor of the government by virtue of the Act of Congress, may be sustained upon several grounds. The Act of Congress applied a lien to lands in Indian ownership.12 It is demonstrable that this real property was not in Indian ownership even when the act became law. Furthermore, by any standard, title to this parcel had passed to the Hoods before the prescribed procedure of the Act to establish the lien had been initiated, to say nothing of procedure to perfect it. There are three methods of establishing these facts. First, the agents charged with the administration in construing the statutes relating to trust and restricted lands of Indians had long recognized that a contract by the United States to convey title thereto, signed by the appropriate agent, removed the land from government jurisdiction except for the purpose of enforcing the promises of the vendee or of rescinding upon default.
It is universally held that the course of conduct of the officers of an agency of the United States, who are chosen to construe and enforce laws relating to a particular subject, if long continued, will be given great weight in interpreting the statutes they administer, and will have binding force of law. This is called the doctrine of administrative construction.13 The Department of the Interior has long recognized that a sale by the government, when made in pursuance of law, confers upon the purchaser equitable title to the premises to the same extent as a sale by an individual holding the fee. And, if all the conditions upon the part of the purchaser to be performed have been done and the land is conveyed without technical approval of the officer required to approve, the transaction still conveys title and any time thereafter the appropriate official will perform the clerical amendment according to the prescribed formula.
Second, because of the execution of the contract of sale, the familiar doctrine of equitable conversion came into effect.14 In virtue of that theory, if two private parties had entered into a contract for sale and purchase of land in proper form and both died, the executor of the estate of the vendor would have received the amount that had been paid in upon the purchase price and would have been possessed of the obligation against the estate of the vendee for payment of the balance. The heirs at law of the vendee, on the other hand, would have taken possession of the real property conveyed and been seized in fee as soon as legal title passed. This situation is the same, even though the remedy of specific performance might lie on either hand or where the right was given by the contract to the vendor to avoid the contract for breach of condition at a subsequent date. It was expressly stated in the contract that the Secretary of the Interior, at his option, upon default of payment of the purchase price, might rescind the transaction and take back the title of these lands for the benefit of the Indian heirs and thereupon would have been required to pay to the Hoods a certain percentage of the purchase price which had already been paid in.
Thus, in the instant case, the United States ceased to be trustee of the bare legal title to the real property for the Indian heirs and became trustee of the proceeds of sale in their behalf. The United States, by virtue of this contract, was thereafter trustee of the bare legal title of these lands for the Hoods, who were the equitable owners. The Indians had given a valid deed to their equity, which only awaited delivery after formal approval. Only after default the United States, as trustee then of both the legal and equitable titles, could avoid the transaction. The land was therefore not in Indian ownership after the signing of the contract to convey on November 25, 1925. Congress did not intend to impose an automatic lien upon lands held in private ownership on March 18, 1926, and could not impose a lien upon the title after that date.
Third, the contemporaneous construction placed upon the contract, deed and the Act of March 18, 1926, proves the passage of equitable title before the Act in question was passed and legal title vested in the Hoods on November 10, 1952.
Indeed, the agents of the government in this instance did construe the contract of sale as having passed the title. Inasmuch as they were burdened with responsibility of enforcing the laws and regulations relating to this conveyance, their acts effectively construe the contract and are quite convincing in character.
The Superintendent of the Indian agency, who is an employee of the government and who was fully empowered to do so by the laws and regulations then in force, which were followed strictly, sold this land to the Hoods. By virtue of that written contract of sale, the government promised to obtain a deed from the adult heirs and to take the proper steps to obtain a deed in proper form as to the interests of the minor heirs. It also promised to obtain a deed approved by the Secretary of the Interior.15 Upon their part, the Hoods promised to pay the full purchase price.
It is probable here that there is no necessity to rely upon the doctrine of "relation back" to make the approval of the Secretary of the Interior of August 10, 1926, effective as of the date of the memorandum of sale and deed, November 10, 1925, since, according to the thesis set out above, the United States would have broken the contract if it failed to have the approval of the Secretary of the Interior upon the deed when the purchase price was paid. But the cases do refer to this doctrine under circumstances which are much more difficult than those involving the transaction in the case at bar. In Pickering v. Lomax, 145 U.S. 310, 12 S. Ct. 860, 36 L. Ed. 716, and in Lomax v. Pickering, 173 U.S. 26, 19 S. Ct. 416, 418, 43 L. Ed. 601, Indian lands were patented to one Robinson, an Indian, with a clause restricting the right to convey without the permission of the President. The heir of Robinson, by deed dated 1858, conveyed to Horton. This deed was recorded without any approval by the President. Horton died and his administrator conveyed to Baer. There were several intermediate conveyances of the title down to a deed to Aquila H. Pickering. The latter, on January 21, 1871, procured approval by the President of the original deed. However, the heir of Robinson had conveyed the same property, again by deed, to McClure on November 22, 1870, and this purported conveyance was inadvertently approved by the President on February 24, 1871. The Supreme Court of the United States held that "the approval of the president related back to the execution of the deed and validated it from that time," and that the first grantee, Horton, took title since the record of the deed in 1858 gave notice, and therefore the second vendee, McClure, was not a bona fide purchaser for value. A like result, under a very difficult situation, was reached in Lykins v. McGrath, 184 U.S. 169, 22 S. Ct. 450, 46 L. Ed. 485.18 Other cases which apply the same doctrine are set out below.19 Here there is no question of innocent third parties involved. The agents of the government could have been advised by their own records that the land had already been conveyed before Congress attempted to place a lien upon it.
We have seen equitable title passed by the contract of November 10, 1925. At the date of the passage of the Act of March 18, 1926, neither Congress nor the administrative department could impose a burden on the contract, which was binding upon the United States from date of signing. The legal title held by the United States could only have been impressed with the lien for these improvements if the statutory formula had been followed or if an express stipulation of the contract or deed reserved the right to impose future liens. There was no such reservation. The statutory formula was not followed.
It must be said that the agents of the government did not attempt to impose this lien upon this specific piece of property until the publication of the notice specifying this property as one subject to the encumbrance in August, 1930, long after the deed approved by the Secretary of the Interior had been duly delivered to the Hoods and they were in complete possession of the land. Of course, the statute itself did not impose a lien. Some definite act of the administrative agents, declaring the intention to place a charge in a specific amount on a particular parcel, is necessary.20 Since the notice was given more than two years after delivery of the deed, no lien could be created thereby.
It is abundantly clear also that the agents of the Secretary of the Interior violated the Act of Congress by failing to obtain repayment contracts from the owners of private lands benefited by the improvement before the expenditure of any money of the appropriation for the construction of these dikes.21 There was thus no lien upon any of these lands, and the Secretary of the Interior was ill advised when he included such lands in the schedule of charges allocating pro rata cost of construction. This instrument constitutes a cloud on the title of the Hoods, which they are entitled to have removed. Appropriate decree should enter therefor.
The foregoing discussion also shows that the record is devoid of any foundation whatsoever for the imposition of any charge for operation or maintenance upon the Hoods.
The decree will be modified only by including the lands of the Hoods among those in white ownership, which cannot be subjected to lien by the United States for the construction or maintenance.
Consent of the United States to such a suit is found in 28 U.S.C.A. § 2410(a), which provides that the United States "may be named a party to a civil action or suit in any district court * * * or in any State court having jurisdiction of the subject matter, to quiet title to * * * real or personal property on which the United States has or claims a mortgage or lien."
Authorization for removal was found in 28 U.S.C.A. § 1444, which provides that "any action brought under section 2410 of this title against the United States in any State court may be removed by the United States to the district court of the United States for the district and division in which the action is pending."
The memorandum of sale provided in part: "That upon the payment in full by said Percy Hood and Grace H. Hood * * * a deed duly executed by said heirs of Mary Yah-Him-A-Loo, and approved by the Secretary of the Interior, shall be delivered to said Percy Hood and Grace H. Hood * * * conveying said land to them and their heirs pursuant to law. * * * It is further understood and agreed that the deed hereinbefore provided for shall be retained in escrow by the Commissioner of Indian Affairs until all the notes and interest before mentioned shall have been paid, when it shall be delivered to Percy Hood and Grace H. Hood, his wife, as hereinbefore provided."
Not only was the government bound by the approval of the Secretary of the Interior to the deed before the notice of imposition of lien in accordance with the Act, but the administrative act of including this property, when in white ownership, was invalid because there was an attempt thereby to reverse the previous administrative interpretation and contemporaneous construction. See United States v. Leslie Salt Co., 350 U.S. 383, 396, 76 S. Ct. 416, 424: "Against the Treasury's prior longstanding and consistent administrative interpretation its more recent * * * contention as to how the statute should be construed cannot stand."
I dissent, because I am of the opinion that the Court below lacked jurisdiction over the subject-matter of the suit.
The complaint, filed in the Superior Court for Whatcom County in the State of Washington, asserts that "The action is authorized by Section 2410, Title 28, United States Code [Annotated]"
"As already noted, the act gives the United States alone the right of removal to the federal court. Unless the United States invokes the jurisdiction of that court, and it has not done so here, federal jurisdiction can not be predicated merely on the fact that the United States is a party."
The former § 903 of 28 U.S.C.A., supra, quoted in Judge Healy's opinion, provided in part that "any such suit brought against the United States in any State court may be removed by the United States to the United States district court for the district in which the suit may be pending."
The appellants, however, seem to think that there was some jurisdictional magic in the removal to the Federal Court; for they continue: "However after due service of process the appellee removed it to the District Court below, under authority given by 28 U.S.C. [A. §] 1444, which provides that `any action brought, under section 2410 may be removed [by the United States to the district court of the United States for the district and division in which the action is pending]."
For the reasons stated in Paragraph 2, supra, I do not agree with this view. In my opinion, § 1444, supra, is purely and simply a removal statute, and does not of itself independently confer jurisdiction upon the District Court regardless of the jurisdictional amount of more than $3,000, required under 28 U.S.C.A. § 1331. I do not think that it makes any difference at whose instance the case is removed to the Federal Court: the jurisdictional amount must be present.
In their complaint, the appellants allege that the land was sold to them on November 10, 1925, by means of an escrow deed, approved by John H. Edwards, Assistant Secretary of the Interior, on August 10, 1926 — long after the enactment of 44 Stat. 211, the so-called "Diking Act", of March 18, 1926.
"It is a familiar rule that when several plaintiffs assert separate and distinct demands in a single suit, the amount involved in each separate controversy must be of the requisite amount to be within the jurisdiction of the district court, and that those amounts cannot be added together to satisfy jurisdictional requirements. [Cases cited.]"
"1353. Indian allotments. The district courts shall have original jurisdiction of any civil action involving the right of any person, in whole or in part of Indian blood or descent, to any allotment of land under any Act of Congress or treaty."
The appellants here are not claiming under any Indian allotment, but by virtue of their "private ownership" of the land in question, acquired by means of a "bid" from them, accepted by the Superintendent of the Indian Agency, and by a deed approved by the Secretary of the Interior. The appellee claims that the tract was in Indian ownership, but concedes that the appellants are "holding title to [the] land in `white ownership'". There is, accordingly, no claim here by any person "in whole or in part of Indian blood to any allotment of land". Neither party here invokes § 1353.
Finally, the majority opinion asserts that "The fact that the United States did remove and affirmatively sought to foreclose these liens by counterclaim establishes conclusively the interest of the United States here."
The difficulty with this contention, however, is that the jurisdiction of a Federal court in a case of this kind is determined by the complaint, and not by subsequent pleadings.
For the above reasons, I believe that the District Court lacked jurisdiction over the subject matter of the suit. The case should be remanded to the Court below, with instructions to dismiss the action.

References: § 144
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 § 2410
 § 1444
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 § 903
 § 1444
 § 1331
 § 1353