Case Name: BOOTH-KELLY LUMBER CO. v. OREGON & CALIFORNIA R. CO.
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1920-11-09
Citations: 98 Or. 21
Docket Number: 
Parties: BOOTH-KELLY LUMBER CO. v. OREGON & CALIFORNIA R. CO.
Judges: Mr. Justice Harris did not sit in this case.
Reporter: Oregon Reports
Volume: 98
Pages: 21–43

Head Matter:
Argued June 29,
reversed November 9, 1920.
BOOTH-KELLY LUMBER CO. v. OREGON & CALIFORNIA R. CO.
(193 Pac. 463.)
Public Lands — Railroad Liable for Price Per Acre Paid to United States to Perfect Title — “Void.”
1. In view of the Chamberlain-Ferris Aet of June 9, 1916, a lumber company, which in good faith purchased some 19,000 acres of land from a railroad company, in violation of the grant of the land to the road from the United States, providing that it should be sold only to actual settlers in quantities not greater than quarter-sections, and for not more than $2.50 an aere, held entitled to recover from the railroad, whose title was defeated by the United States, the amount of $2.50 an acre paid by it to the United States to perfect its title, but not the total illegal price paid by it to the road, the contract between'it and the road not having been “void”; that is, a mere nullity.
For the meaning of the word “void,” see note in 5 A. L. R. 1518.
From Multnomah:
John P. Kavanaugh, ^ George W. Stapleton and > Robert Tucker, J
Judges Sitting in Banc.
This is an action to recover money paid by plaintiff to defendant for land which by statute defendant was prohibited from selling. A demurrer to the complaint was sustained, and, the plaintiff declining to amend or plead further, judgment that plaintiff take nothing by its action was entered. Plaintiff appeals. Error is assigned in sustaining the demurrer and entering the judgment.
The complaint contains substantially the following allegations: By two instruments in writing, dated December 21, 1901, and January 2, 1903, respectively, the defendant agreed to sell and convey, and the plaintiff’s assignor agreed to purchase, 19,283.71 acres of land at $10 per acre, the defendant agreeing that when the purchase money was paid, it would “cause to be made and executed * * a deed, assigning, transferring and setting over * * all the land” therein described. The purchase money was paid to the defendant, and all was done by the plaintiff and its assignors as agreed, but the defendant never performed its stipulations, and refuses to do so. The land described in the written instruments was a part of a grant, of over two million acres by the United States to the defendant, by an act of Congress of July 25, 1866 (14 Stat. 239) as amended April 10, 1869 (16 Stat. 47). The act of-Congress of April 10, 1869, required the defendant to sell the land “to actual settlers only, in quantities not greater than one-quarter section to one purchaser, and for a price not exceeding two dollars and fifty cents per acre.” Prior to the date of the transaction between the parties hereto, patents were issued by the United States to the defendant for the land described in the instruments mentioned and over two million acres besides. These patents contained nothing to indicate that any such statutory prohibition existed, and did not mention the act of 1869 in which it was contained. Beginning many years prior to the date of the written instruments, the defendant had made a large number of sales of land granted by the acts of Congress, to purchasers who were not actual settlers, in quantities much greater than one-quarter section to one purchaser, and for prices greatly exceeding $2.50 per acre. This was a matter of general knowledge in the’ vicinity of these lands, where the title of the defendant to its granted lands was generally regarded as a perfect title in fee simple, without encumbrance or restriction, and customarily accepted as such, without question or examination. The plaintiff and its assignors knew and relied upon these facts, and had no knowledge of the statute prohibiting the defendant from making such a sale. The defendant knew of that statute, knew that the plaintiff and its assignors had no knowledge thereof, and knew that they relied upon the facts, knowledge, and custom above mentioned. The defendant represented to the plaintiff and its assignors that it was the owner of an unencumbered and unrestricted fee-simple estate in the lands described in the instruments. The plaintiff and its assignors relied thereon, and understood that such an estate in the land was to be conveyed to them. This and other like transactions of the defendant, violative of the requirements of the provisos of the granting act as to the sale of the land, came to the attention of the United States. By subsequent legis lation and judicial proceedings, the United States took from defendant, not only this land which defendant had undertaken to convey to plaintiff, hut all the rest of the two million acres of land granted to it, and provided for the payment, by the United States to the defendant, of $2.50 an acre for the entire land grant, including the land which was the subject of the present transaction. Such forfeiture of the grant has been upheld by the Supreme Court of the United States.
It is deemed essential that reference be made to the acts of Congress concerning this land grant and the judicial decisions interpreting the grant and determining the rights of the defendant. The land which defendant undertook to sell to plaintiff is part of over two million acres granted to defendant, known as the “East Side Grant.” This granting act, as amended, provided:
“That the lands granted * * shall be sold to actual settlers only, in quantities not greater than one-quarter section to one purchaser, and for a price not exceeding two dollars and fifty cents per acre.”
The “West Side Grant” of May 4, 1870, contained a like provision, both known as the “settler’s clause.” The defendant in its dealings with the lands granted to it by these acts had for a long time entirely disregarded these provisos. On May 28, 1908, pursuant to an act of Congress of April 30, 1908 (35 Stat. 571), authorizing and directing him to proceed to enforce any rights or remedies of the United States growing out of the above-mentioned acts of Congress, the Attorney General of the United States filed a bill in equity against the defendant and others, and in January, 1909, forty-five other bills in equity, the railroad company being a party defendant in each of them. In each of these cases there was joined as an additional party defendant some individual or corporation to whom the defendant had attempted to sell some of the land in violation of the prohibition contained in the granting acts, the plaintiff being such an additional defendant in one of those suits. The suit of May 28, 1908, called for convenience the “main case,” involved the title to granted land which the defendant had not in any way attempted to sell, and each of the forty-five later suits, known as the “Innocent Purchaser Cases,” concerned only the land which the defendant had attempted to sell to such an additional party defendant. The United States in all these suits asserted that by reason of breaches by the defendant of the so-called “settler’s clause” in the grants, the title had been forfeited to and revested in the United States. This contention of the government was sustained by Judge Wolverton in a decision of April 24, 1911, in the main case (United States v. Oregon & California R. Co. et al. (C. C.), [186 Fed. 861]).
The act of Congress of August 20, 1912, authorized the Attorney General to enter into a compromise with any purchaser of the granted lands against whom suit had been brought under the joint resolution of April 30, 1908, and it was provided that such compromise should require the entry of a decree of forfeiture against such purchaser, and that within six months of the entry of such decree the purchaser should be entitled, on payment of the sum of $2.50 per acre to the United States, to receive a patent for the lands covered by such decree. Pursuant to section 4 of this act, the Attorney General stipulated with the plaintiff, the additional party defendant in one of the forty-five suits above mentioned, and a decree of forfeiture was entered in that case. The defendant, a party to that suit, was present and offered no objection to the entry of that decree. All this was “done in February and March, 1913. Thereafter plaintiff made application to the Secretary of the Interior to purchase the lands forfeited, paid the Treasurer of the United States $2.50 per acre for all the lands so applied for, and on July 21, 1913, the Secretary of the Interior caused a patent to be issued to plaintiff, conveying the land to it. The main case, involving the rights of the defendant in the entire grant, was decided by the Supreme Court of the United States on June 21, 1915 (Oregon & California R. Co. v. United States, 238 U. S. 393 [59 L. Ed. 1360, 35 Sup. Ct. Rep. 908, see, also, Rose’s U. S. Notes]), about two years later. The Supreme Court held that the only interest the defendant ever had in this land was the right to receive not more than1 $2.50 an acre for it by selling it to actual settlers only in tracts of a quarter-section or less; that under the terms of the grant, a law as well as a grant, it was unlawful for the defendant to sell in violation of its' provisions; and that the United States might sell the lands, provided only it secured to the defendant all that the granting act§ conferred upon it, namely, $2.50 per acre. Thereafter Congress, acting on this suggestion, enacted what is known as the “ Chamberlain-Ferris Act,” of June 9,1916 (39 Stat. 218), providing for the sale of the land by the United States and the payment from the proceeds to the defendant of an amount equal to $2.50 an acre for the entire land grant. Section 7 of this act reads:
“That the Attorney-General of the United States be, and he is hereby authorized and directed to institute and prosecute any and all suits in equity and actions at law against the Oregon and California Railroad Company, and any other proper party which he may deem appropriate, to have determined the amount of moneys which have been received by the said railroad company or its predecessors from or on account of any of said granted lands, whether sold or unsold, patented or unpatented, and which should be charged against it as a part of the ‘full value’ secured to the grantees under said granting Acts as heretofore interpreted by the Supreme Court. In making this determination the court shall take into consideration and give due and proper legal effect to all receipts of money from sales of land or timber, forfeited contracts, rent, timber depredations, and interest on contracts, or from any other source relating to said lands; also to the value of timber taken from said lands and used by said grantees or their successor or successors. In making this determination in the aforementioned suit or suits the court shall also determine, on the application of the Attorney General, the amount of the taxes on said lands -paid by the United States, as provided in this Act, and which should in law have been paid by the said Oregon and California Railroad Company, and the amount thus determined shall be treated as money received by said railroad company.”
The validity of this act of June 9, 1916, has been sustained by the Supreme Court in an opinion of April 23, 1917 (Oregon & California R. Co. v. United States, 243 U. S. 549 [61 L. Ed. 890, 37 Sup. Ct. Rep. 443]). By this act it was provided that all claims of forfeiture asserted by the Attorney General in suits brought by him under the authority of the Fulton resolution of April 30, 1908, were declared to be of the same force and effect as declarations of forfeiture by Congress. It was provided that no suit should be instituted by the United States pursuant to the Fulton resolution of 1908, involving any land sold by the Oregon and California Railroad Company prior to the date of that resolution, unless within one year from August 20, 1912, the date of the approval of the act. The purpose of this provision was to affirm the exclusion from suits against purchasers those who had purchased, contrary to the terms of the provisos, in quantities less than 1,000 acres. Compromises were made by the United States Attorney General with all other purchasers who were defendants in suits brought under the Fulton resolution. As stated in the opinion, Oregon & California R. Co. v. United States, 238 U. S. 393 (59 L. Ed. 1360, 35 Sup. Ct. Rep. 908):
“During the year 1870 the Oregon & California Railroad Company procured, by mortgage bonds, approximately $8,000,000, and during the year 1871 the West Side Company in the same way procured about $1,000,000. With the funds thus procured the lines of railroad contemplated by the act of 1866 and the act of May 4, 1870, respectively, were prosecuted continuously until about January, 1873.”
Reversed.
For appellant there was a brief over the names of Mr. Glerm-E. Rusted and Mr. Mark Norris, with an oral argument by Mr. Rusted.
For respondent there was a brief over the names of Mr. Alfred A. Rampson and Mr. Ben C. Bey, with an oral argument by Mr. Rampson.
'■Mr. S. W. Williams, Special Assistant to U. S. Attorney General, Amicus Curiae, on brief in behalf of United States.
Mr. George M. Brown, Attorney General, and Mr. J. O. Bailey, Assistant Attorney General, as AmiciCuriae, on brief in behalf of State of Oregon.

Opinion:
BEAN, J.
Having rendered an opinion on this date in the case of Hammond v. Oregon & California R. Co., ante, p. 1 (193 Pac. 457), involving questions similar to those in the present case, but one phase of the case remains to be considered. It is the position of plaintiff that what the defendant undertook to do by its contract was prohibited by statute and null and void; that the plaintiff received nothing from defendant for the money it paid to it upon the land contract; that the transaction was not malum in se, but merely malum prohibitum; and that plaintiff is entitled to recover all the money it paid to defendant in this action for money had and received. It is suggested by plaintiff that in any event the plaintiff is entitled to recover the lesser sum of $2.50 per acre, the amount paid to the United States to perfect plaintiff's title.
There ean be no question but that plaintiff, by its contract and payment, obtained all the right and title to the lands that the defendant had or could convey. What title did the defendant get by virtue of the grant and the construction of the road in compliance therewith? This question has been answered by the federal supreme court in Oregon and California R. Co. v. United States, 238 U. S. 393 (59 L. Ed. 1360, 35 Sup. Ct. Rep. 908). We quote from page 434 of 238 U. S., page 924 of 35 Sup. Ct. Rep. (59 L. Ed. 1360), the language used in construing the grants:
"There was a complete and absolute grant to the railroad company with power to sell, limited only as prescribed. "
The lumber company, after ascertaining all of the facts, did not attempt to rescind, or treat the contract as a nullity, but held fast to whatever rights they had. It was the vendee of all the interest the rail road had in the land and conld convey, and as such vendee it established its good faith in the transaction to the satisfaction of the Department of Justice' of the United States. By virtue of being such vendee, or innocent purchaser, it obtained a confirmation of its title to the lands upon the payment of $2.50 per acre to the United States. Being such purchaser from the railroad company formed the basis of its right to obtain a confirmatory title to the lands from the United States. This status was reached by means of its contract with, and payment to, the defendant. It is now contrary to plaintiff's former conduct for it to say that it received nothing by virtue of its contract, or the. money paid defendant. It should not now be permitted to treat the foundation of its title as a nullity. As noted in the Hammond case, the title of plaintiff to the land was confirmed by the United States, and the contract in question ratified. The law applicable to the transaction and the policy of the government are both fixed by the federal acts and adjudication. In order, to perfect its title to the lands plaintiff was compelled to, and did pay the sum of $2.50 per acre. As already stated in the Hammond case, the contract of purchase should be carried out as made by the parties or disregarded. It is not the province of the court to make a new contract for the parties. The plaintiff should have title to the lands for the price fixed by the contract, and should recover the amount it was compelled to pay for the outstanding title. This amount is not claimed by defendant to be unreasonable or unfair.
It is suggested by the defendant that it may be required to account and pay to the United States the full amount of the contract price. As we understand the provision in regard to the accounting, it is to be adjudged in a legal manner. In the language of the Chamberlain-Ferris Act of June 9, 1916, suits are authorized—
"to have determined the amount of moneys which have been received by the said railroad company or its predecessors from or on account of any of said granted lands, whether, sold or unsold, patented or unpatented, and which should he charged against it as a part of the 'full value' secured to the grantees under said granting Acts as heretofore interpreted by the Supreme Court. In making this determination the court shall take into consideration and give due and proper legal effect to all receipts of money from sales of land or timber. " Section 7.
We see no reason for the defendant to fear that anything will be charged against it in such an accounting which should not be charged.
Confusion has resulted from the lack of precision in the use of the terms "void" and "voidable" contracts. A contract which the law denounces as void is necessarily no contract whatever, and the acts of the parties in an effort to create one in no wise bring about a change of their legal status. The parties and the subject matter of the contract remain just as they did before any act was performed in relation thereto. A void contract is a mere nullity. It is obligatory on neither party. It requires no disaffirmance to avoid it, and cannot be validated 'by ratification. It is void as to everybody whose rights would be affected by it if valid: 6 R. C. L., p. 591, § 10; Bradtfelt v. Cooke, 27 Or. 194 (40 Pac. 1, 50 Am. St. Rep. 701); Allen v. Berryhill, 27 Iowa, 534 (1 Am. Rep. 309); Blinn v. Schwartz, 177 N. Y. 252 (69 N. E. 542, 101 Am. St. Rep. 806); Tate v. Gaines, 25 Okl. 141 (105 Pac. 193, 26 L. R. A. (N. S.) 106); Jordan v. Greensboro Furnace Co., 126 N. C. 143 (35 S. E. 247, 78 Am. St. Rep. 644); Kellogg v. Howes, 81 Cal. 170 (22 Pac. 509, 6 L. R. A. 588, and note); Austin v. Davis, 128 Ind. 472 (26 N. E. 890, 25 Am. St. Rep. 456, 12 L. R. A. 120); Breckenridge v. Ormsby, 1 J. J. Marsh. (24 Ky.) 236 (19 Am. Dec. 71); McFarland v. Heim, 127 Mo. 327 (29 S. W. 1030, 48 Am. St. Rep. 629).
The land contract in question does not come within any of the descriptions of a void contract. It affected the rights of the parties and bore fruit. It is obligatory upon the defendant. The Booth-Kelly Lumber Company was not in equal fault with the Oregon and California Railroad Company in making the contract of sale in violation of the provisos of the grant, and is therefore entitled to recover the money paid to perfect its title. Upon this point, in addition to the other authorities cited in the Hammond and Winton case, see Lowell v. Boston & Lowell R., 23 Pick. (Mass.) 24 (34 Am. Dec. 33, 37); Tracy v. Talmage, 14 N. Y. 162 (67 Am. Dec. 132, 143); Schermerhorn v. Talman, 14 N. Y. 93; Bond v. Montgomery, 56 Ark. 563, 571 (20 S. W. 525, 35 Am. St. Rep. 119); Michener v. Watts, 176 Ind. 376 (96 N. E. 127, 36 L. R. A. (N. S.) 142); Manchester etc. R. Co. v. Concord R. Co., 66 N. H. 100 (20 Atl. 383, 49 Am. St. Rep. 582, 9 L. R. A. 689); Quirk v. Thomas, 6 Mich. 111.
The facts alleged in the complaint show that the plaintiff is entitled to recover the sum of $2.50 per acre, paid to the United States to perfect its title to the lands purchased of defendant. Therefore the demurrer to the complaint should be overruled.
The judgment of the lower court is reversed, and the cause will be remanded for such further proceed ings as may be deemed proper, not inconsistent herewith. Reversed and Remanded.
Mr. Justice Harris did not sit in this case.
Mr. Justice Bennett, who heard the case, having resigned, did not participate in the decision.
McBride, C. J., and Johns, J., concur.