Court Opinion

ID: 8806222
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:48:18.887714+00
Date Added: 2024-06-11T17:04:05.308344
License: Public Domain

STONE, Circuit Judge
(concurring in part, dissenting in part). A painstaking examination and consideration of the entire record and all of the evidence compels me to differ in some respects with the result reached by the majority of the court.
The evidence is very convincing to me that all except one of these entrymen (William Johnson) had at the time of the entry or selection of the tract patented by him or her but one feature of the land, its coal value, in mind. Nor is there any doubt in my mind that they were correct in their estimation of the character of the land. In judging the knowledge of these entrymen, I do not at all consider the expert testimony of those witnesses who1 testified as to tire geological formations of the district. It is hardly to be supposed that those who made the entries had any such information, though it is very probable that the officials of the Porter Fuel Company did. But consideration should be *775given to those facts which would be evident to the layman and to such matters of common neighborhood knowledge as to which one living in the community could not well be ignorant. These lands were rough, rugged, and mountainous—seamed with canons which in many places cut through and exposed the coal veins. There were numerous crop-pings or blossoms of this exposed coal occurring on or near practically every one of these tracts. Several mines were being operated in the immediate vicinity. Other openings into coal had been made in various places by prospectors and residents, who used the coal for household purposes. The Porter Fuel Company was operating two mines five miles apart. Ten oí these tracts lie in a body touching the larger of these mines in the direction of the vein being worked on at the time. Two of the tracts were about three-fourths of a mile south of the. other mine, while four were on a direct line about, half way between the two mines. The remaining tract (Johnson) had at the time of entry, on or very near its southern boundary, an exposure of coal.
Fourteen of these tracts were entered as timber and stone land; the other 3 being forest lieu selections. Only one tract (Johnson) ever had on it sufficient timber to pay the government price of the land. The only stone having any value was a sandstone which underlaid the entire country for miles, and for which there was then and lias since been no market or prospect of market which could induce any one to enter the land for that purpose. I do not believe that these people, some of small means would buy this land from the government for its timber and stone value, when they must have seen and known there was little or no value of that character. While all of the tracts were not so extreme, yet some light may be thrown by noting the entries of A. C. Bagby and Nettie V. Coppinger. The Bagby entry of 160 acres actually had only 14 pine trees, which scaled 3,700 feet of lumber, and pinon trees which would cut about 57 cords of wood: yet lie swore before the land office receiver in making proo f that he estimated the timber at 250,000 to 300,000 feet, worth $250 to $300, and lie paid the government therefor $400. Mrs. Coppinger’s tract had no pine trees, but pinons which would cut 5 cords of wood and 5 feet of mine prop, and scrub oak which would cut 2,500 sprag (a small miñe timber); the stone was the same as on the A. C. Bagby tract. In her examination before the register she described the land as “j ust a mass of rocks and hillsides,” and guessed the timber worth $500 to $600. She paid $400 for the tract.
My conclusion is that all of these entries were fraudulent, except that of William Johnson.
The Porter Fuel Company claims to he a bona fide purchaser and untainted by this fraud. 1 am convinced that it acted with these entry-men, if in fact it did not procure the entries. At the time of making these entries twelve of the remaining sixteen tracts (now omitting the Johnson tract above disposed of) were entered or selected by persons employed by the Fuel Company, having business relations with it, or closely related or employed by such, or by persons directly solicited to do so by John A. Porter, president of the Fuel Company. Excluding the Sandford entries, which by his own admission in the evidence had been *776directly procured by John A. Porter, of the remaining fourteen entries eight were pointed out by William R. Mason, who was then foreman of the_ Fuel Company and in charge of its lands. Ten of these entries were in a block adjoining the principal mine of the Fuel Company, which was then operating upon a profitable vein of coal in the direction of these tracts and only about a fourth of a mile away from the nearest of them. Both prior to and at that time that company was unlawfully endeavoring to acquire surrounding government lands. Jethro Sand-ford, who acted as attorney in fact in two of the forest lieu entries here involved, at the solicitation of and as the agent of Porter, testified:
“I laid about 900 acres of scrip on lands in tbe vicinity of tbe lands in suit prior to 1906, for John A. Porter, the title of which lands afterwards went to the Porter Fuel Company.”
None of these entrymen ever made any use of his tract, except in one instance to utilize some fence posts to build a fence for the Porter Fuel Company. In most instances the «transfer to the company closely followed the issue of the patent by a day or two, and in several seems to have taken place even before that time.
No attempt has been made to* sum up the entire evidence, with its innumerable details and circumstances pointing, in my opinion, to a deliberate plan of the Fuel Company to unlawfully acquire tírese government lands, but the above are cited as indications of the general trend of the evidence. I am therefore convinced that the entries were fraudulent and that the fraud was actively participated in by the Porter Fuel Company.
The Union Pacific Coal Company has brought its cross-appeal, claiming-that it was at the time of suit herein a bona fide purchaser of these lands. This claim is based upon no purchase from the Porter Fuel Company of the lands in question, but upon a purchase of all of the capital stock of the Porter Fuel Company. Its theory is that the court should look through the Porter Fuel Company corporate entity to the stockholders and regard the property of that company as being held in trust for them, and, since their personnel has completely changed, should declare the holding innocent. The entire title to these lands, legal and equitable, is in the corporation as a legal entity. The rights of shareholders, generally speaking, and within certain bounds, are a proper conduct of corporate affairs by their officials, protection of the corporate property, and sharing in dividends, and, if the corporation be dissolved, in the surplus assets after payment of all debts. No trust relation, in the sense and for the purpose here urged, is sustainable. A change in personnel of part or all of the shareholders cannot alter or affect the title of the corporation to corporate property.
The Continental Trust Company has also, a cross-appeal. It claims, as to four of the tracts, application of the statute of limitations governing suits to avoid land patents for fraud. It also claims as to all of them that it is a bona fide purchaser, being trustee in a deed of trust given by the Porter Fuel Company upon all of its property to secure $250,000 in bonds, of which $100,000 have been issued and are outstanding.
*777As to the claim for limitation: This applies to the Annetta Herr, William Johnson, George W. Shields, and Emily Mason tracts. As the Johnson tract has already been disposed of by the finding that it was not fraudulent, only the other three will be considered in respect to this point. The Statute (Act March 3, 1891, c. 561, § 8, 26 Stat. 1095, 1099 [Comp. St. 1916, § 5114]), provides that:
•‘Suits to vacate and annul patents hereafter issued shall only bo brought within six years after the date of, the issuance of such patents.”
The latest of the above patents was issued January 19, 1905. The complaint to annul these patents was filed January 21, 1908, but did not include the Trust Company as a party until it was made so by amendment April 18, 1911, and subpoena issued and served the following day. Clearly the statute had run as to it covering these tracts. The Trust Company is an indispensable party to this litigation. Minn. v. Nor. Sec. Co., 184 U. S. 199, 235, 22 Sup. Ct. 308. 46 L. Ed. 499; Cal. v. S. P. Co., 157 U. S. 229, 248, 15 Sup. Ct. 191, 39 L. Ed. 683; Shields v. Barrow, 17 How. 130, 139, 15 L. Ed. 158; United States v. W. & St. P. R. R. Co., 67 Fed. 950, 15 C. C. A. 96; Chadbaurne v. Coe, 51 Fed. 479, 2 C. C. A. 327; Allen-West Co. v. Brashear (C. C.) 176 Fed. 119. Therefore the. complaint must fail as to these four tracts.
As to the remaining twelve tracts there remains the contention of the Trust Company that it is an innocent purchaser. The deed of trust was executed August 1, 1905. By it the Porter Fuel Company, in order to secure the payment of $250,000 of bonds, conveyed to the Trust Company 9,763 acres of land, particularly described, including by description the William Johnson, J. D. C. Rumsey (one of the Sandford tracts), Emily M ason, and Annetta Herr tracts. A further part of the conveying clause was:
•‘Any and all real estate and all rights and interest therein and all franchises which the said Fuel Company now owns or may hereafter acquire. * * * ”
Of the four described tracts, three (Johnson, Mason, and Herr) have been disposed of above favorably to the Trust Company. All of those not particularly described were acquired by the Fuel Company after the execution of the deed of trust. The controversy remains, therefore, as to the Rumsey or Sandford tract, and as to those acquired by the Fuel Company and coming within the general clause above quoted.
The Rumsey tract was a forest lieu selection, made by Jethro Sand-ford as attorney in fact for Rumsey. It had been approved for patent before the execution of the deed of trust, but the patent was not issued to Rumsey until afterwards, and the conveyance by the patentee to the Fuel Company was more than three years after. At the date of the deed of trust the Porter Fuel Company held no title, legal or equitable, to this land. It had nothing it could pass by present conveyance, and nothing did pass thereby. This tract, if protected by the deed of trust, must find safety in the after-acquired property clause.
Does this clause protect this entry and those others coming within its terms ? In my opinion it does not. Even if the Fuel Company had *778had at the date of the deed of trust an equitable title to. these tracts, the Trust Company could not claim to be a bona fide purchaser. Hawley v. Diller, 178 U. S. 476, 20 Sup. Ct. 986, 44 L. Ed. 1157. But the Fuel Company never had any character of title until the patentees or their grantees executed deeds to it. While the deed of trust would then attach, to supersede all subsequent conveyances, incumbrances, liens, or equities, it could not supersede such as came with the title to the Fuel Company. To hold that trustees under deeds of trust could claim the benefits of bqna fide purchasers as to after-acquired’land in cases of this character would mean that the grantors therein could engage in defrauding the government of its lands, and, if they could escape detection until the patent were issued and an immediate subsequent deed made to them, the government would be barred of all opportunity to recover its domain. After-acquired property clauses derive all of their vitality from equity. It would indeed be an anomaly to employ an equitable rule to protect and in fact to encourage fraud.
My conclusion is that the patents to William Johnson, Emily Mason, Annetta Herr, and George W. Shields should be sustained by a dismissal of the complaint as to them, but that there should be an order annulling and canceling the other patents as having been fraudulently and unlawfully secured.