and the contractor, and to be expressed by crediting such saving in barrels of "basic crude oil" on account of the "proposal sum."
The lease of June 5, 1922, was incidental to and in pursuance of the April 25, 1922, contract. It was granted at the request of the defendants and to enable the contractor to more speedily perform the said contract. It was given without competitive bidding and solely to effectuate the preferential right of article XI of the April 25 contract. The parties were the United States of America, acting through the Secretary of the Interior, and the Pan-American Petroleum & Transport Company, a corporation. It recites, inter alia, that it is made pursuant to authority of an act of Congress approved June 4, 1920 (41 Stat.whereas, the furnishing of such additional amounts of fuel oil and other products in storage on the basis of exchange for the government royalty crude oils cannot be accomplished from the present leases in the California naval reserves." Mention is then made of the preferential right of the Pan-American Petroleum & Transport Company to leases in naval reserve No. 1, as provided in the April 25, 1922, contract, the agreement reciting that the contractor "is planning to provide refinery facilities at Los Angeles, Cal., for 10,000 barrels per day, to be increased to 20,000 per day as soon as the situation justifies, together with pipe lines connecting the leases in the field and the refinery and docks, and to erect storage to the amount of 2,000,000 barrels or


discharged, and in any event for a period of 15 years from the date of the expiration of said contract of April 25, 1922, the government to be given credit by contractor for such crude oil delivered by the government at the published field price thereof on date of delivery and for such gas and casing-head gasoline at the prices and under the conditions fixed in the various leases, any surplus of government credits thus accruing are to be satisfied by delivery of fuel oil or other petroleum products, by construction of additional storage facilities, or to be payable in cash, as the government may at that time elect."
B. To lease, and does lease, pursuant to the formal written lease dated December 11, 1922, to the Pan-American PetroleumCompany, a corporation, lands in naval petroleum reserve No. 1, described in the accompanying lease of said date, and consisting of approximately 32,000 acres.
Article III  Provides for the gauging of the oils, and further that any difference in debits and credits between the parties on account of crude oil received by the contractor, on the one hand, and expenditures made by contractor for storage facilities and crude oil products delivered by him, on the other, shall bear interest at the rate of 5 per cent. per annum, determined on monthly balances, and also provides that the interest provisions contained in the contract of April 25, 1922, shall cover fuel oil as well as construction.
The lease of December 11, 1922, is practically a lease to exhaustion of production


upon said lands as upon all other lands covered by the lease lying east of the range line dividing ranges 22 and 23, as aforesaid.
The amended bill of complaint avers material matters that are either admitted by the parties to this suit or have been so thoroughly proven by the evidence that there can be no question concerning them. Among these are the following: That from March 5, 1921, until March 4, 1923, Albert B. Fall was the duly appointed, acting, and qualified Secretary of the Interior of the United States of America; that during all times material to this controversy Edwin Denby was the duly appointed, qualified, and acting Secretary of the Navy of the United States of America; that during all times concerned in this controversy,and during all of the negotiations between officers of the government and the defendant corporations, Edward L. Doheny was the dominant and managing executive officer of the defendant corporations, and during such times was either the owner of or in control of a majority of the stock of said defendant corporations; that the Pan-American Petroleum Company is a wholly owned subsidiary corporation of Pan-American Petroleum & Transport Company.
The amended bill alleges that prior to May 31, 1921. Albert B. Fall obtained from the President of the United States, who acted pursuant to representations made by said Fall, but in good faith, a certain executive order, as follows:

"Executive Order.
"Under the provisions of the act of Congress approved February 25, 1920 (41 Stat. 437), authorizing the Secretary of the Interior


to lease producing oil wells within any naval petroleum reserve, authorizing the President to permit the drilling of additional wells or to lease the remainder or any part of a claim upon which such wells have been drilled, and under authority of the act of Congress approved June 4, 1920 (41 Stat. 812), directing the Secretary of the Navy to conserve, develop, use, and operate, directly or by contract, lease, or otherwise, unappropriated lands in naval reserves, the administration, and conservation, of all oil and gas bearing lands in naval petroleum reserves Nos. 1 and 2, in California, and naval petroleum reserve No. 3, in Wyoming, and naval shale reserves, in Colorado and Utah, are hereby committed to the Secretary of the Interior, subject to the supervision ofthe President; but no general policy as to drilling or reserving lands located in a naval reserve shall be changed or adopted, except upon consultation and in co-operation with the Secretary or Acting Secretary of the Navy. The Secretary of the Interior is authorized and directed to perform any and all acts necessary for the protection, conservation, and administration of the said reserves, subject to the conditions and limitations contained in this order and the existing laws, or such laws as may hereafter be enacted by Congress pertaining thereto.
                   "Warren C. Harding.
"The White House, May 31, 1921."
Plaintiff avers that such order was void and of no force or virtue, and


original text of the executive order was prepared in the Interior Department. As early as the first part of May, 1921, and probably some time in the preceding month, Secretary Fall had spoken to Assistant Secretary of the Interior Finney of a plan he had in mind by which the Interior Department would undertake to administer some of the lands in the naval oil reserves, and at such time had asked Finney to give him a brief statement as to the applicable law. Mr. Finney prepared such a statement and expressed the opinion therein that under section 18 of the Oil Leasing Act of February 25, 1920 (41 Stat. 437 [Comp. St. Ann. Supp. 1923, § 4640¼i]), and the Act of June 4, 1920 (41 Stat. 812), "thePresident may commit to the Secretary of the Interior the matter of authorizing additional wells or leases under section 18 of the Leasing Act, and the Secretary of the Navy may, under authority of the Naval Appropriation Act cited (Act June 4, 1920), request the Secretary of the Interior to handle for the Navy the conservation, development, and operation of other lands in naval reserves. The royalties from existing leases and such other royalties as may be derived from future leases in naval reserves may be turned over to the Navy Department directly, or may be exchanged by the Secretary of the Interior, to the end that the Navy may have its equivalent in fuel oil."
After submitting this statement to Secretary Fall there was prepared in the Interior


part of any claim in such reserves, with preference right to the claimant or his successor. A clause in the appropriation act for the year ending June 30, 1921 (41 Stat. 812), authorizes the Secretary of the Navy to take possession of unappropriated lands within naval reserves, and to conserve, develop, use, and operate the same `directly or by contract, lease, or otherwise.' To avoid conflict, delay, and duplication, it occurs to me that the matter may be best administered through one agency, and I have suggested that the Secretary of the Interior be directed, under your supervision, to administer all of the various provisions of law cited relating to naval petroleum reserves heretofore created by Executive order, the oil and gas accruing to the United States fromFebruary 25, 1920 (41 Stat. 437), authorizing the Secretary of the Interior to lease producing oil wells within any naval petroleum reserve, authorizing the President to permit the drilling of additional wells or to lease the remainder or any part of a claim upon which such wells have been drilled, and under authority of the act of Congress approved June 4, 1920 (41 Stat. 812), authorizing the Secretary of the Navy to conserve, develop, use, and operate, directly or by contract, lease, or otherwise, unappropriated lands in naval reserves the conservation, development, use, and operation of oil and gas bearing lands in naval reserves Nos. 1 and 2, California, naval reserve No. 3, Wyoming, and naval oil shale reserves in Colorado and Utah, is hereby committed to the


Secretary of the Interior, under supervision of the President, and he is authorized and directed to perform any and all acts necessary for the protection, administration, and development of the resources of said reserves, subject to the conditions and limitations of existing laws or such laws as may be hereafter enacted by Congress pertaining
thereto.                      ________.
"The White House, May ___, 1921."
The inclosed proposed letter from the Secretary of the Navy to the President was never signed by Denby and was never transmitted to the President. The Interior and Navy Departments later conferred and agreed upon the text of an executive order, and the revised form was personally takenand presented to President Harding by Theodore Roosevelt, Assistant Secretary of the Navy, and upon Roosevelt's statement to the President that the order in its then form was satisfactory to the Interior and Navy Departments it was signed by the President. There is no evidence in this case as to any further conversation or representation by Secretary Fall to President Harding relative to this executive order. Mr. Denby, although present throughout the trial, was not called as a witness.
While the plaintiff failed to substantiate the allegations in the bill of false representations by Secretary Fall to President Harding, there can be no doubt from the evidence that Secretary Fall was very active in the movement which eventuated in the transfer of the administration and control of the naval


oil reserves from the Navy to the Interior Department, and he appears to have at all times dominated the situation relative thereto; the record in this case indicating that Secretary Denby was passive, and even complacent, in the matter. In one of his early conferences with the Navy Council, Mr. Denby stated that he was going to transfer control of the reserves to Secretary Fall because he considered the reserves "dynamite." This was his attitude throughout all of the transactions involved in this case. His participation in the making and executing of the agreements in suit was perfunctory, passive, and formal. Secretary Fall and Admiral Robison were the real, active, and efficient agents of the government in the negotiations which resulted in the contracts and leases in controversy.I am persuaded by an impartial consideration of the evidence to believe that Secretary Fall effectuated the idea of transferring the control of the naval oil reserves from that branch of the government to which they had been committed by Congress into his own hands.
The executive order, as prepared by Finney and as sent to the Navy Department, did bodily and wholly transfer the reserves to Secretary Fall for administration, protection, and development. When the draft was submitted to the Navy Department, it was objected to by Assistant Secretary Roosevelt, Admiral Griffen, and Commander Stuart, who felt very strongly that the transfer would be a mistake. Roosevelt communicated his and the naval officers' objections to Secretary Denby, and urged that the land be not transferred to the Interior


Department. But Denby informed him that their protest was too late, as the transfer had been agreed to by the President, Secretary Fall, and himself. Roosevelt, after consultations with Admiral Griffen, who at that time was in charge of the naval oil reserves as Chief of the Bureau of Engineering of the Navy Department, suggested to Secretary Denby a modification of the proposed order. Secretary Denby told Roosevelt that, if he could obtain Secretary Fall's approval to the change, it would be satisfactory to him. Roosevelt personally took the matter up with *53 Secretary Fall, and Fall immediately assented to his suggestion. This action by Secretary Fall seems to negative bad faith, but I believe that Secretary Fall considered Secretary Denby's passivity tantamount to relinquishment. The concurrent andsubsequent events in this matter confirm this belief.
The change suggested by Roosevelt was the insertion in the order of the following language: "But no general policy as to drilling or reserving lands located in a naval reserve shall be changed or adopted, except upon consultation and in co-operation with the Secretary or Acting Secretary of the Navy." Although Roosevelt was at first entirely opposed to the transfer, he was convinced later that, on account of the Interior Department being better equipped and organized to undertake the contemplated development of the naval oil reserves, it was proper and advisable to effect the transfer, subject to the vital reservation which was inserted in the executive order at his suggestion. It is clear that it was not the intention of the


Navy to relinquish the control of its reserves to the Interior Department, and it is apparent that Secretary Fall's original intention contemplated unrestricted and unqualified transfer of the reserves from the Navy to the Interior Department.
The foregoing and other circumstances and events concurrent with and relative to the promulgation of the executive order cast doubt upon the motives of Secretary Fall in furthering this transfer, and, when viewed in the light of subsequent events and transactions with Mr. Doheny and others, irresistibly lead me to conclude that Secretary Fall had conceived plans at the time the executive order was obtained to carry on negotiations relative to the naval oil reserves at least partially for his personal gain and benefit. That he did later personally profit financially by thetransfer is in my opinion clearly shown by the evidence and circumstances in proof in this case.
The essential allegations of the amended bill of complaint relative to the first ground of attack may be summarized as follows: That subsequent to May 31, 1921, Fall and Doheny agreed to bring about and to make oil leases on the naval oil reserves of the United States fraudulently, not in the public interests or in the nation's welfare, but secretly, by noncompetitive methods, and for the unlawful purpose of personal gain and profit to themselves; that in order to accomplish such unlawful purpose they also agreed to arrange and execute the contract of April 25, 1922, the lease of June 5, 1922, and the agreements of December 11, 1922, by secret,


fraudulent, and discriminatory methods; that in furtherance of such purposes, and during the course of the negotiations concerning the said contracts and leases in controversy, Doheny secretly delivered to Fall $100,000 in lawful money of the United States; that the delivery of this said money was not only for the purpose of influencing Fall respecting the said contracts and leases in suit, and in furtherance of the alleged conspiracy, but that Fall's official action in the premises was influenced by such payment; and further that, regardless of such alleged conspiracy, such payment of money was of and in itself an act of such flagrancy and wrongfulness by Fall and Doheny as to vitiate and annul all of the contracts and leases in suit upon the ground of soundrequires the surrender by the defendants of the governmental property so wrongfully obtained.
In many of the cases cited by defendants the real party in interest was not the United States. Private parties were seeking to enforce essentially private rights in the name of the United States. The United States as a suitor, either in its governmental or proprietary capacity, was not interested in so far as its property right was concerned in the result of the suits, and hence in such cases was held to have suffered no injury. But all of these decisions establish the rule, which is peculiarly applicable in the case at bar, that the right to the remedy sought by the amended bill in this case exists when the government has an interest in


laws of the United States, all of which were designed for the primary purpose of seeing that the lands which were open to settlement might be distributed among individuals, and might be availed of primarily for the benefit of individuals, and incidentally, of course, for the benefit of the United States by distributing the population and by offering inducements for citizens to go to various localities where but scant population existed. The naval reserves were never intended to be administered or controlled in the same manner or for the same purposes as other public lands. They were intended primarily and solely for the use and benefit of the United States Navy, and the law which guides the administration of the naval reserves stands alone, without any other statutes,base the right of the United States to cancellation and rescission of the contracts in suit as much upon the pecuniary *55 or money nature of the injury shown as upon the right of the United States to be restored to the use and possession of its naval oil reserves, where it has relinquished them to private enterprise because of fraud, undue favoritism, and misconduct of its officers.
The charge in this case does not concern so much pecuniary loss to the United States as it does the right of the United States to annul contracts by which the nation's naval oil reserves, set apart by Congress exclusively for governmental and national purposes, have been fraudulently and wrongfully obtained by private persons or bodies, through wrongful acts of government


the highest order in his transactions relative to the naval oil reserves. If a trustee is prompted to act, and does in fact act, because of personal and clandestine motives, and if by so acting he acquires private financial benefit, his beneficiary has sustained pecuniary loss; for it is only because of his fiduciary relationship that he is enabled to deal with the public property at all and his sole emolument for doing so is his salary. Whatever the $100,000 that was transferred to Secretary Fall by Mr. Doheny, the principal officer of the defendant corporations, may be called, and regardless of the question whether Mr. Fall would have obtained it if he had not been Secretary of the Interior of the United States, and at the timetransacting public business as such with Mr. Doheny, the fact is that Secretary Fall did obtain it when he was Secretary of the Interior of the United States, and a trustee of the public lands of the United States, and when, as such, he was negotiating with Mr. Doheny concerning such lands; and the effect of such transaction, in and of itself, constitutes a serious injury and damage to the beneficiary, the United States of America.
Moreover, assuming that the right to cancellation and rescission does not ordinarily exist in a suit in equity upon the mere proof of conspiracy, or moral wrong, or breach of ethics, without further showing resultant pecuniary loss, it is questionable whether such doctrine applies in this particular suit. This action is sui generis.


and that the contracts and leases in suit were and are the result of such secret understanding and agreement.
Before Mr. Fall became Secretary of the Interior, the naval oil reserves had been controlled by the Navy Department under the authority of the Act of Congress of June 4, 1920 (41 Stat. 812). It was only in compromise and settlement of claims concerning rights to public lands under preexisting laws that the Interior Department had any powers or concern with such reserves. *56 Under the Leasing Act of February 25, 1920 (41 Stat. 437), the Secretary of the Interior did exercise certain rights with respect to royalty oils coming to the government from leases in the naval oil reserves; but neither that act nor any other law gave theSecretary of the Interior any power whatever to lease or otherwise develop naval reserve lands, except in cases of compromise of pre-existing placer mining claims.
The President of the United States, under the Leasing Act, supra, had a limited further power over naval reserve lands, but no general power. There was no general power or discretion vested by Congress in any officer or department to make such disposition or use of naval reserve lands, or of royalty oil accruing under leases of these lands, as might be best for the interests of either the Navy or of the United States, except under the authority of the Act of June 4, 1920, supra. Congress by this law intrusted to the Secretary of the Navy the conservation, development, use, and operation


immediate control of the Secretary of the Navy, and continued to be so throughout the administration of Secretary Daniels, being carried over and continued under Secretary Denby until he, by an order dated October 18, 1921, transferred it to the Bureau of Engineering of the Navy Department, and made it immediately subordinate to and under the direct supervision of that bureau.
Friction and discord was manifested between Secretary Fall and the naval officers in charge of the reserves shortly after Secretary Fall assumed charge of the Interior Department, and this condition prevailed until, as I have stated, the Oil Fuel Office in the Navy was abolished and all matters pertaining to the reserves were assigned by Secretary Denby to the Engineering Bureau of the Navy. The Chief of thisBureau at the time was Admiral J. K. Robison, who had been detailed as such about October 1, 1921. Admiral Robison was a friend of Edward L. Doheny, and during the World War his son, Edward L. Doheny, Jr., had been a naval officer on a ship commanded by Admiral Robison, and a friendship and attachment thus formed had grown and increased between the Admiral and the Dohenys, until their relations at the time of Admiral Robison's detail as Chief of the Engineering Bureau of the Navy are best shown by the following letter, written by the Admiral when he assumed his new command:
                        "October


had discussed casually the naval oil reserves, and Mr. Doheny had told Admiral Robison that, on account of drilling near the reserves by outside private parties, the oil was being drained off the reserve, and that it would not be long until there would be no oil left in the reserves. This was the only conversation or dealing between Admiral Robison and Mr. Doheny until after Admiral Robison was placed in charge of the reserves by Secretary Denby in October, 1921.
*57 On October 9, 1921, Admiral Robison had a conference with Secretary Fall regarding the naval petroleum reserves. At this conference he learned of a letter concerning the reserves that Secretary Fall had written to Secretary Denby in July, which will presently be referred to. This was hisfirst connection with the reserves. He had not at that time discussed the reserves with his chief, Secretary Denby. As the result of his conferences with Secretary Fall and others in the Interior Department, he found the opinion that the reserves were being rapidly depleted by drainage, and he then remembered the talk he had with Mr. Doheny in 1917. In conjunction with Secretary Fall he then set out to formulate and to execute some plan to exchange the crude oil in the reserves for fuel oil to be stored at different points.
Admiral Robison, when acting as aide to Secretary Denby in March, 1921, and later upon being detailed to the Engineering Bureau, manifested an ardent and patriotic desire to construct and supply a reserve oil fuel station


at Pearl Harbor, Hawaii, and in general to adopt a program for the establishment and construction of reserve oil fuel stations for the Navy, in order to strengthen the national defense. After his conferences with Secretary Fall, his desire became more intense, and he then concluded, if possible, to use the royalty oil from naval reserves to build such stations, and to supply and store them with fuel oil for future naval use. The testimony of Admiral Robison and the circumstances in proof convince me that Admiral Robison had no ulterior motive or mercenary purpose in any of the transactions involved in this case.
This was an entirely new activity, and was one of doubtful legal authority. There was a serious question at that time in the minds ofSecretary Fall, Admiral Robison, Mr. Doheny, and every other person who discussed or contemplated the subject as to whether the right to establish reserve oil fuel stations existed without further legislation. It was then doubtful in the minds of all whether the Act of June 4, 1920, was broad enough to authorize the program. Up to this time the royalty oil due the United States from leases in the reserves had been either sold outright and the money deposited in the Treasury, or this oil had supplied merely current naval needs. It was Admiral Robison's fervent purpose to carry out this new project, if possible, and to do so without going to the Congress for further legislative authorization.
Admiral Robison and the Dohenys visited socially, and discussed the naval


at cost.
That Secretary Fall conceived the plan of exchanging the royalty oil due to the United States from leases on the naval petroleum reserves for fuel oil in storage tanks, and had suggested to Secretary Denby, long before Admiral Robison became connected with the plan, that he (Fall) would undertake to effectuate the idea, if Denby was willing, is positively shown by these two letters:
  "Department of the Interior.
"690-6    Washington, July 23, 1921.
                  "13668-84:278
"Hon. Edwin Denby, Secretary of the Navy  Dear Mr. Secretary: In connection with the recent authorization to the Pan-American Petroleum Company and the United Midway Oil Company to drill 22 offset wells inpresently, and which is indicative of conferences and negotiations between Secretary Fall and Mr. Doheny, wherein plans for future drilling of the reserves were discussed between the two men. And it is a fair inference from this correspondence that they had at such times discussed the precise matter that is the central feature of the contracts and leases in suit, to wit, the leasing of the naval oil reserves and exchanging the oil therefrom for fuel oil in storage tanks.
The contention of defendants that the leasing of naval reserve No. 1, which was accomplished through the contracts and leases in suit, was not the act of the Interior Department, but was done by the Secretary of the Navy, has little merit, when viewed by the light of the


evidence. Not only is it shown that Secretary Fall initiated the idea and suggested its accomplishment to Secretary Denby, but Secretary Denby, as I have previously stated, showed early in the negotiations and throughout a disinclination and an unwillingness to participate in the negotiations in any active way. There is no doubt in my mind that he intended to and did relinquish real control of further leases in the reserves to Secretary Fall. At a meeting of the General Council of the Navy, which has been previously adverted to, held October 18, 1921, Secretary Denby stated that, unless there was objection, he would transfer all of the fuel oil activities theretofore carried on under his office over to the Bureau of Engineering, and that he wanted the InteriorSecretary: Rear Admiral Robison reported to me that as a result of his interview with you on Saturday, October 22, the following general agreement in connection with the naval petroleum reserves was reached:
"(1) That arrangements will be made by the Interior Department to have naval petroleum reserves Nos. 1 and 2 drilled with offset wells in every case where adjacent property is drilled.
"(2) That the amount of drilling, with consequent exhaustion of the reserves, shall be kept as low as practicable, without risking the depletion of the reserves by other parties.
"(3) That the equivalent of all royalty oil shall be delivered to the Navy in the form of fuel oil at such points on the Pacific Coast as may be found necessary for naval use, and that this


exchange of crude oil for fuel oil will be effected on as favorable terms as it is possible to obtain. It is presumed that under favorable circumstances and terms arrangements may be made for including points on the Atlantic Coast for the delivery of an equivalent supply of fuel oil to the Navy.
"(4) That the equivalent of so much of the royalty oil as is not used by the Navy is to be devoted to the construction of oil storage at Pearl Harbor, Hawaii, and at other points to be hereafter designated by the Navy Department, the cost of the tanks to be credited to the royalty due the Navy.
"(5) That the Interior Department will exercise its best efforts to obtain for the Navy as large royalties andadditional leases as a consideration for the Pan-American Petroleum & Transport Company taking the Pearl Harbor contract. It seems apparent that Admiral Robison was not then aware of that vital and valuable part of the understanding and arrangement that had been developed by Secretary Fall and Mr. Doheny regarding the naval oil reserves.
I am satisfied that Secretary Denby, in sending this letter, did so believing that it was necessary in order to prevent present drainage from the naval oil reserves. The tenor of the letter so indicates. And I am also convinced that there was no present or threatening danger of such drainage, because the government had made sufficient offset and defensive leases to protect the reserves from drainage at that time. In my opinion, the contracts and


leases involved in this suit were not made or intended by Secretary Fall, Admiral Robison, or Mr. Doheny as necessary imminent relief measures for the naval oil reserves.
*60 Secretary Fall answered the letter on October 30, 1921, by stating that he would carry out the suggestions and intentions of the Navy Department. The October 25 letter gives much power and wide discretion to the Interior Department regarding oil leases in the reserves, and really confers the powers on that department which Secretary Fall had intended to acquire by the executive order of May 31 before Roosevelt's amendment. The aspect of the project covered by the October 25 letter that specially interested Secretary Fall was the leasing of the naval oil reserves. The paramount interest of Admiral Robison wasthe building and equipping of the Pearl Harbor reserve fuel station. By this coalescence of interest the two men worked to attain the same end, but through entirely different motives.
Secretary Fall and Mr. Doheny had been friends for 30 years. They had been associates in mining ventures in New Mexico in early days. An attachment had grown up between them that is experienced only by men who pioneered and prospected together in quest of fortune in the fastness of the mountains and deserts of the great West. They had been separated for some time. Fall had remained in New Mexico and had entered public life. Doheny had gone to California and had engaged in the oil industry. Fall had been unsuccessful in accumulating money. He was a prominent,


but a poor, man. Doheny, on the other hand, had been prosperous and had become wealthy. While the strong friendship of the early days in New Mexico had extended over the years that had intervened, the two men had seen little of each other until Fall became Secretary of the Interior. The record in this case is silent as to any business or money transactions between these two men until Fall assumed the Cabinet office. In this official position, having much to do with oil-bearing public lands, naturally the early intimacy was revived and renewed, so that Secretary Fall and Mr. Doheny and their families saw much of one another during the summer and fall of 1921, frequently visiting at Washington, New York, and elsewhere. It is notonly unnatural and unreasonable to infer that at these meetings they had no discussions concerning the nation's oil lands, but, as previously stated, there is positive evidence in this case that they had discussed using royalty oil for tankage and also the proposed Pearl Harbor project during the months of October and November, 1921, and they probably had discussed the matter much earlier in that year.
In July, 1921, a lease to drill offset wells along the north and east lines of section 1, township 31 south, range 24 east, Mt. Diablo meridian, being part of naval oil reserve No. 1 in California, was given by the Interior Department to the Pan-American Petroleum Company. This lease was essentially defensive, being necessitated by drilling activities of private owners of adjacent


oil lands outside of the reserves, and was granted in conformity with the established policy that existed and was pursued until Secretary Fall obtained control of the naval oil reserves. I have adverted to this old policy of the Navy that its oil reserves should be kept underground, and that no leases to drill in the reserves should be given unless such were or appeared to be imperative to prevent drainage. Such was not only the policy of all previous administrations, but was also Secretary Denby's personal attitude throughout all of these transactions in which he took part. This lease of July, 1921, was awarded to the Pan-American Petroleum Company after competition, and the royalty thereof was 55½ per cent.
After the lease had been in operation some timethe conclusions reached and action which I had taken.
"In this letter to the President, among other things, I said: `Thus my position is that of a trustee for the reclamation fund and for the state in one instance, and a trustee for the Navy for the public lands, upon which there is no private claim within the naval reserve. Holding the view which I did hold as to the Midway Company having some equity, but being desirous of adjudicating the matter, if possible, to the end that the Navy might have no possible objection, I called upon Col. Doheny, head of the Pan-American Company, by telegram, stating the facts to him, and that he was entitled to his lease and would have it executed under one of his


policy.
     "Very sincerely yours, Albert B. Fall.
"Col. E. L. Doheny,
     "Suite 2805, 120 Broadway,
                        "New York City."
The contention of defendants that the leases in suit were the work of Secretary Denby, and that Secretary Fall acted merely as his agent, is utterly devoid of merit, when considered in the light of his ultimatum in this letter, and his attitude and conduct throughout all of the negotiations that resulted in the making of the contracts and leases in controversy in this case.
The formal lease effecting the compromise concerning the royalties of the July 12 lease is dated December14, 1921. It was signed by Assistant Secretary Finney, as Secretary Fall was absent from Washington at that time. As I have said, at the time the relief from the July 12 lease was ordered by Secretary Fall, he and Mr. Doheny were and had been in consultation over the exchange of royalty oil from the naval oil reserves for fuel oil and tankage. They had been discussing and negotiating specifically concerning the Pearl Harbor project and the leasing of more lands to Mr. Doheny's companies in the naval oil reserves to pay for the same. They had reached a definite understanding and agreement concerning the making of the contract, which was later formally executed on April 25, 1922, wherein there is contained the valuable preferential right to


lease practically the entire naval oil reserve.
The record also clearly established that simultaneously Secretary Fall had told Mr. Doheny of his misfortune and of his desire to secure more land near his ranch in New Mexico, but of his inability to do so on account of financial embarrassment. Mr. Doheny had told Secretary Fall during this time that he would loan him the money to make the desired purchase, and on November 30, 1921, at the very time that the contract of date April 25, 1922, and the granting of further leases in the naval oil reserves was being discussed by Secretary Fall and Mr. Doheny orally and by correspondence, Mr. Doheny advanced and caused to be delivered to Secretary Fall $100,000 pursuant to his promise.
It is claimedthat this was a personal transaction between these two old friends, and had no connection with and was entirely independent of the public business dealings that were then in progress by Mr. Doheny, as the principal officer and agent of the Pan-American Petroleum & Transport Company, with Secretary Fall, as the trustee of the naval petroleum reserves and Secretary of the Interior of the United States. It is impossible for the court to so conclude.
It is this powerful, ineffaceable, and unexplained circumstance which impels me to cancel the leases which gave to the companies controlled by Mr. Doheny a property right of immeasurable value. This incident *62 is the central, insurmountable, and decisive fact in this case. The injury that it has done the nation, as well as


further leasing of the reserves was also then under consideration by them. This letter is as follows:
"Pan-American Petroleum & Transport Co.
        "Office of the President.
        "New York, November 28, 1921.
"The Honorable the Secretary of the Interior, Washington, D. C.  Dear Mr. Secretary: Along the lines of your suggestion, I have made some inquiries regarding the cost of constructing tanks for the storage of 1,500,000 barrels of fuel oil at Pearl Harbor. I find that the best price obtainable for these tanks, the government to stand the cost of transporting the material from the ship's side to the tank site, and the cost of grading and otherwise preparing the tank site, is $19,960 permore; but, if it requires interpretation, it should be considered in its entirety, and construed in the light of known surrounding circumstances. Early in November, 1921, the Pan-American Petroleum & Transport Company by letters and telegrams had requested bids from the Lacy Manufacturing Company of Los Angeles, Cal., for the construction of tanks at Pearl Harbor, Hawaii, and the figures given *63 in the November 28 letter were those obtained from the Lacy Company.
After Mr. Doheny's letter of November 28, 1921, was received by Secretary Fall, it was delivered to Dr. H. Foster Bain, who at that time was Director of the Bureau of Mines of the Department of the Interior. Some time before Secretary Fall handed this letter to Dr. Bain he had told Bain either that


he had asked Mr. Doheny or Mr. Doheny had volunteered to have an estimate made of the cost of putting up storage to the extent of 1,500,000 barrels of oil. Dr. Bain testified that the first time that he heard of Secretary Fall's plan to use royalty oil from the reserves as a consideration for tankage and fuel oil was at a conference with Secretary Fall when Admiral Robison was present subsequent to October 23, 1921, and no mention whatever was made by Secretary Fall or any person at such conference that it would be necessary, or that it was contemplated, to grant further and additional leases in the naval oil reserves to Mr. Doheny. At such conference, however, Secretary Fall told Dr. Bain that he was expectinga communication from Mr. Doheny on the subject of the construction of the Pearl Harbor project of providing storage for 1,500,000 barrels of fuel oil in consideration of government royalty oil from the reserves, and that he expected Mr. Doheny to bid on the proposition. Although he said nothing to Dr. Bain on the subject of further leases to Mr. Doheny, the letter which he said he was expecting, besides containing the information he told Bain he expected, also contained language indicating that there had been an understanding and agreement to grant further leases.
This letter of November 28 Dr. Bain brought to Assistant Secretary Finney about the middle of December, 1921, and requested that Finney write to Mr. J. J. Cotter, a vice president of the Pan-American Petroleum


the General Council of the Navy on November 29, 1921, after he had seen and read the letter, he told the Council that he had with him at that time a definite proposition to supply the 1,500,000 barrels storage at Pearl Harbor and to complete it within the next calendar year. He did not at that time regard the letter as a mere tentative, incomplete, prospective suggestion, for at that time he further said to the Council: "All I have got to do is to say on this letter is we can get the tanks built." The letter of November 28, 1921, was not a mere estimate, as counsel for defendants contend.
The words in the letter, "lands within the naval reserve and to be leased to us," implyis no doubt expressed of Secretary Fall's intention to give Mr. Doheny further leases. The doubt Secretary Fall entertained was the legal right to do so, and he never sought legal advice in the matter, but later accepted and acted upon an opinion which Admiral Robison obtained from the Judge Advocate General of the Navy, which held that the right existed. This opinion was requested by Admiral Robison on November 30, 1921, and was given on December 3, 1921.
The messenger who took the above letter from Secretary Fall to Admiral Robison was Mr. J. J. Cotter, vice president of the Pan-American Petroleum & Transport Company. What Mr. Cotter was doing in Secretary Fall's office, and what conversation he had with Secretary Fall on this eventful day, has not


been disclosed in this case. Admiral Robison returned the letter of November 28 to Secretary Fall, and Secretary Fall, as before stated, handed it to Dr. Bain, with instructions that Bain work out a contract to carry out the Pearl Harbor project. This letter of November 28 was not placed in the general file of the Interior Department. It was kept in a safe in Dr. Bain's private office, with other documents of a confidential character. There is no evidence that any other individual or concern was asked by Secretary Fall to estimate on this project, although Admiral Robison testified that Secretary Fall told him that he was going to request estimates from several oil concerns.
Another notable circumstance in connection with the November 28 letter is the factthat at the time of its receipt, which was months before any invitations to bid were sent to others, the Pan-American Petroleum & Transport Company had not only been permitted by Secretary Fall to negotiate with a view of bidding, but it had actually submitted a bid to Secretary Fall on the Pearl Harbor project. This was privilege and discrimination that was unwarranted and improper, and, in view of the personal transactions between Secretary Fall and Mr. Doheny at the time, was significantly suspicious.
On November 29, 1921, whether before or after he received Mr. Doheny's letter we do not know, Secretary Fall, in Washington, D. C., telephoned to Mr. Doheny, in New York, that "he was prepared now to receive that loan  to make the loan," if


Mr. Doheny was willing to make it. Mr. Doheny immediately arranged to procure and transmit the money to Secretary Fall. He did so in a peculiar, suspicious, and irregular way. He knew that Secretary Fall wanted the money to make settlement in New Mexico for property in New Mexico. He also knew that Secretary Fall was leaving immediately for New Mexico. He did not send the money to New Mexico, and he did not transmit it by the customary commercial mediums. Although he was a man of great wealth and financial power, instead of drawing the money himself, or from his bank account, he had his son obtain it from a bank with his son's check, and he had him obtain the $100,000 in currency. He then hadhis son wrap the currency in paper, and place it in a hand satchel, and personally convey it from New York to Washington, and personally deliver it to Secretary Fall in Washington. Fall immediately left Washington, and carried the $100,000 in currency on the train across the continent, and deposited it in different banks in Texas and New Mexico, and later by checks thereon applied it on the purchase price of the lands.
There was no record of any kind made of this transaction in the personal or business books or records of Mr. Doheny, or of any of his companies or enterprises. No one but Secretary Fall, Mr. Doheny, and his son knew of the transaction until long after the contracts and leases in question were made. The


utmost secrecy concerning the event prevailed and was maintained *65 by every one, until it was revealed by Mr. Doheny in January, 1924, in an investigation of leases upon naval oil reserves by the committee on public lands and surveys of the United States Senate.
When the $100,000 was delivered to Secretary Fall on November 30, 1921, he executed, signed, and delivered his promissory note, payable on demand, after date, to Edward L. Doheny, or order, in the sum of $100,000, with interest at no specified rate. He handed this note to E. L. Doheny, Jr., who took it to New York and gave it to his father within a day or two after it was made. No security of any kind was given. No payment of principal orinterest has ever been demanded or made. The note as a complete enforceable evidence of indebtedness was never deposited or filed in any receptacle other than the pocketbook carried by Mr. Doheny on his person.
About two weeks after receiving the note, and on the eve of his departure from New York for his home in California, Mr. Doheny mutilated the note by tearing the signature therefrom. He gave the portion containing Fall's signature to his wife, and retained in his personal possession the other part of the note. He told Mrs. Doheny that he had made Mr. Fall this loan of $100,000, and that if, on their journey homeward, anything should happen that he and Mrs. Doheny should be killed in a wreck, and their executors found the


note, and would present it, and press Mr. Fall for it, Fall would then be worse off than he was before the money was loaned, and he did not wish Mr. Fall to be pressed for payment of the note.
Before the Senate committee Mr. Doheny similarly explained this peculiar act by saying that, as he was about to entrain for a long journey, he wished to avoid the possibility of the note as an enforceable obligation of Mr. Fall's coming into the hands of others. He said that, if he was killed en route, he did not wish Mr. Fall pressed for payment by his executors; for, if the note in its entirety fell into the hands of his executors, it would be their duty to enforce itspayment, and, if both he and his wife were killed in the same accident, part of the evidence of Fall's obligation would be found on his body and part thereof on Mrs. Doheny's body, and no one would know the connection of the two fragments, except his son, who was familiar with the circumstances of the delivery of the money, and who would not press Mr. Fall for payment on account of his financial condition.
If this peculiar money transaction was a pure, private, and personal affair, in which these two old friends innocently participated, if it were a pure and unadulterated loan, as defendants contend, it is peculiar and unnatural that it should have been accomplished and attended with so many suspicious circumstances. To sustain the contention of


by the money on the ground that Secretary Fall took no part in the making of the contracts and leases; "that the negotiations were carried on by men who were not under his control." Secretary Fall's activity has already been shown, and it appears throughout all of the negotiations, and until the entire naval reserve No. 1, except one small area, was leased to the Pan-American Petroleum & Transport Company and its subsidiary. He was the final and decisive factor in the transactions, and especially in settling the royalties which the defendants would be required to pay, and it is the magnitude of the leases and the amount of the royalties exacted that determines the value of the leases to Mr. Doheny and the defendants.
The plan to exchangeroyalty oil due to the United States from the naval reserves for fuel oil and storage therefor involved two main ideas  one of special and essentially naval concern, i. e., constructing and equipping reserve fuel oil stations at strategic points; and the other, leasing to private parties valuable oil lands in the naval reserves. This last element, while correlated to the other, was what made the project of commercial interest to oil producers and companies. It was this last element that was secretly arranged between Secretary Fall and Mr. Doheny. It was this element that was sedulously concealed from all other oil companies and prospective bidders.
Admiral Robison, for the Navy Department, was the dominant factor in accomplishing the first idea, while Secretary Fall exercised control of the


right to further oil leases that was vested in the Pan-American Petroleum & Transport Company by the contract of April 25, 1922, and which was later by the contract of December 11, 1922, and the lease of June 5, 1922, and the lease of December 11, 1922, ripened into control of nearly all of naval reserve No. 1, that he never would have consented to that contract being made, and never would have advised Secretary Denby to sign it. This is borne out by his testimony relative to the matter. He was detailing what occurred when the December 11 contracts were finally agreed to, and when he was trying to get higher royalties for the government than Mr. Doheny would agree to pay. He testified:
"Q. You knew, though,its bid would be. It is certain that at such time he had been apprised of Mr. Doheny's early promise to bid on the construction without profit to his company.
On the train across the continent, Dr. Bain was accompanied by Mr. Cotter, whom the evidence in this case shows was an attorney at law and the officer of the Pan-American Petroleum & Transport Company, who had more to do with the negotiations and making of the contracts in question than any other agent of the defendants with the exception of Mr. Doheny. Mr. Cotter had been employed in the Department of the Interior prior to his association with the defendant companies. He and Dr. Bain were friends and had been former associates in the Interior Department. Mr. Cotter


was private secretary to Secretary of the Interior Lane and Dr. Bain, during Secretary Lane's administration, was Assistant Director of the Bureau of Mines in the Interior Department. Dr. Bain and Mr. Cotter were both westward bound on the same train and concerning the same enterprise. En route Dr. Bain stopped off at Three Rivers, N. M. He was met at the depot by Secretary Fall. Mr. Cotter merely stepped off the train to greet Secretary Fall at the station, and continued on to Los Angeles by the same train. Dr. Bain stayed overnight at Secretary Fall's ranch, and went over the entire Pearl Harbor project with Secretary Fall, informing him of the status and developments relative thereto since Secretary Fall left Washington about December 1, 1921, andof his (Dr. Bain's) mission to the Pacific Coast. He secured Secretary Fall's approval to all that had been done up to that time, and Secretary Fall authorized him to continue with the negotiations, "subject to the working out of a contract." Secretary Fall was careful throughout to restrict the authority of his subordinates, so that they could not finally conclude a contract without his personal approval.
Dr. Bain resumed his westward journey the day after his conference with Secretary Fall, and reached Los Angeles January 2, 1922. Upon arrival he was met at the depot by Mr. Cotter, and the two men were later joined by Mr. J. Crampton Anderson, another vice president of the Pan-American Petroleum & Transport Company. The three men spent the day together. On


the following morning Dr. Bain met Mr. Doheny, Mr. Cotter, Mr. Anderson, and other officers of the defendants in the offices of the company at Los Angeles. At this meeting Mr. Doheny repeated a statement he had previously made that his company would submit a bid in the matter of the Pearl Harbor project.
Before Dr. Bain left Washington, and of his own volition, he had requested Mr. Gano Dunn, of the J. G. White Engineering Company, of New York, to make an offer to do the construction work of the Pearl Harbor project; and in a letter written by Mr. Dunn to the Bureau of Mines of the Interior Department on December 29, 1921, reference is not only made to the proposal of the White Company to dothe work, but it is further stated that the White Company hope to amplify their proposal to suit any new condition which might be imposed as a result of Dr. Bain's visit to the Pacific Coast.
The proposed Pearl Harbor project was foreign to the ordinary and normal activities of a producing oil company. While the plan was to secure the construction of the Pearl Harbor project by the use of royalty oils coming to the government from the naval oil reserves it also involved services that were essentially of an engineering nature; and neither the Pan-American Petroleum & Transport Company, nor any other commercial oil-producing company, was equipped and prepared to carry out the proposed contract in its entirety. The difficulties of this situation were met by teaming


up the J. G. White Engineering Company with the Pan-American Petroleum & Transport Company. This was accomplished through the agency of Dr. Bain, who upon his return to the East arranged a meeting between Mr. Dunn and other officers of the White Company with Mr. Doheny and other officers of the Pan-American Petroleum & Transport Company, with the result that a coalition was formed which made it possible and practicable for the Pan-American Petroleum & Transport Company to obtain the contract of April 25, 1922, and the leases of the naval oil lands, which were granted by the Interior Department in order to effectuate said contract and the later one of December 11, 1922. *70 Here was a situation which in and of itself gave to the Pan-AmericanPetroleum & Transport Company a distinct advantage over any other oil company or concern that might be interested in bidding on the Pearl Harbor project. The company controlled by Mr. Doheny was not only privileged in having the friendship and confidence of the Interior Department, but it was favored to the extent of constant and intimate conferences with the officers of the Interior and Navy Departments, which according to the evidence was not extended to the same degree to any other bidders.
The activities of Dr. Bain in California are illuminating in this case. He came apparently to submit the entire project to the principal oil companies operating in California oil fields in the vicinity of the naval petroleum reserves and to invite them to bid on equal terms


on the Pearl Harbor project. After the conference with the officers of the Pan-American Petroleum & Transport Company at Los Angeles, he went to San Francisco, where he interviewed officials of the following companies in the order named: The Standard Oil Company; Ford, Bacon & Davis, an engineering firm that had much business in connection with the Standard Oil Company; the General Petroleum Company; the Associated Oil Company; and the Pacific Oil Company. The result of such conferences may be summarized as follows:
The Standard Oil Company stated that they would not be interested in the construction part of the contract, as their attorney had advised them that there was no legal power under the Act of June 4, 1920, for the government to make the contract in themanner proposed.
The General Petroleum Company went even further, and stated that they would not submit any bid in the matter, as their attorney had advised against the legality of the proposed contract. They suggested, however, that an opinion on the legality of the contract be obtained from the Attorney General, and, if he held that the Secretary of the Interior could legally enter into the arrangement, the company would then consider it.
The Associated and the Pacific Oil Companies, which are affiliated companies, also came to the conclusion that the proposed contract was unauthorized by the Act of June 4, 1920, and stated they would bid only upon condition that Congress approved the proposed contract.
The engineering firm referred to only expected to work conjointly with the Standard Oil Company,


testified that Dr. Bain reported to him that the Union Oil Company was anxious to bid, and that the government undoubtedly could get a bid from it, if one was wanted, but that he (Dr. Bain) advised against it on account of the company being foreign owned. This company, however, did not bid, but, when it learned that the contract of April 25 had been made, it protested that it had not been given an opportunity to bid on the same.
The final interview that Dr. Bain had with any oil company on the Pacific Coast was a second conference with the officers of the Pan-American Petroleum & Transport Company at Los Angeles, when Mr. Doheny reiterated his promise and intention to make a bid on the contract. Itthus appears that the first as well as the last company to be interviewed and consulted by Dr. Bain on his Western trip was the Pan-American Petroleum & Transport Company.
Upon Dr. Bain's return to Washington, he reported the result of his trip to Secretary Fall, and it must have been expected by Secretary Fall that there would be no real competition  indeed, it must have been known to him that there would be only one bidder who would unconditionally offer to do the work of the Pearl Harbor project in consideration of the royalty oil from the naval petroleum reserves, and that it was the company owned in large part and controlled by his friend and benefactor, Mr. Doheny. The only other concerns that were given plans


of the Pearl Harbor project and asked to bid thereon were the Pittsburg-Des Moines Company and the Foundation Company of New York. Being unable to make any satisfactory arrangements to dispose of the royalty oil which was to be the consideration for the *71 Pearl Harbor construction under the plan, these companies were never heard from in the matter.
I am strongly persuaded by the evidence in this case to believe that Secretary Fall never really intended that there should be competition in the plan that he had devised for leasing all of the naval oil reserves. In my opinion it was fear of opposition from naval officers, and because Assistant Secretary Finney, early in the negotiations of the April 25 contract insisted upon competitive bidding, that Secretary Fallas large royalties and as favorable terms as practicable by public competition." The suggestion was adopted by Secretary Denby on recommendation of Admiral Robison. It reveals the mind of Secretary Fall in the premises.
If there had been a sincere and real attempt to interest the leading commercial oil companies in the project, to the end that they would on common ground compete with one another in bidding on the contract, so that the government would obtain the most advantageous and best bid, there would have been a desire and an eagerness to obtain an opinion from the Attorney General as to the legal right of the government to make the contracts. Dr. Bain testified that he informed all of the companies interviewed by him that an opinion had


been obtained from the Judge Advocate General of the Navy, and it is reasonable to infer that in his conference with Secretary Fall on the way West he had told Secretary Fall of this opinion. Neither Secretary Fall nor any other officer of the Interior Department or Navy Department ever sought or obtained any opinion from the Attorney General, or any other disinterested legal adviser of the government, as to whether the contract could be legally made, but instead Secretary Fall resorted to secrecy, misrepresentation, and deception.
When Dr. Bain returned to Washington in January, 1922, he recognized the propriety and desirability of obtaining an opinion from the Solicitor of the Interior Department on the legality of the proposed Pearl Harbor contract, and he suggested by letter of Januaryand never letting anything be done which might come back on him."
So it appears that, notwithstanding Secretary Fall was told by Dr. Bain upon his return from the West of the objections of the oil companies to the making of a contract, that one of the attorneys for one of the oil companies had submitted a written opinion opposing the legal right of the government to make the contracts, and notwithstanding another counsel for another of the oil companies came to Washington and told Fall that he believed the contracts were unauthorized by law, in the face of all these circumstances and events, Secretary Fall remained adamant. This was a peculiar position *72 for him to take, if he was not trying to thwart competition and to favor


his friend and benefactor Mr. Doheny. If the real purpose of Secretary Fall had been to obtain for the Navy as large royalties and as favorable terms as possible, it would have contributed greatly to the accomplishment of such purpose to have stimulated interest and competition among the various oil companies, by assuring them by a legal opinion from the legal department of the government, which was in no way connected with or directly interested in the success or failure of the Pearl Harbor project, that the contemplated contract could be lawfully made. The failure to adopt such a course is another badge of fraud, and another of the many suspicious circumstances concerning Secretary Fall's activities in the matter of the making of the contracts in controversy inthis case.
An incident which illustrates Secretary Fall's eagerness to close the Pearl Harbor project contract, and another agreement by which he leased naval petroleum reserve No. 3, in Wyoming, at the same time, occurred a few days days before April 15, 1922, the day upon which the bids on the Pearl Harbor contract were to be opened. Secretary Fall was preparing to leave for a visit to his ranch in New Mexico, and he asked Dr. Bain and Assistant Secretary Finney how the Pearl Harbor contract was getting along, and when they told him that it was not possible to open the bids until April 15 he was disappointed, and became impatient at the delay in the Pearl Harbor matter, saying that he wished to close both matters


bids in the Interior Department on April 15, 1922, substantiate the opinion that there had been no real competition, and that precisely what must have been anticipated by Secretary Fall actually happened when the bids were opened. There were three bids submitted. The Standard Oil Company submitted a bid on the Pearl Harbor project which excluded the construction work. The Associated Oil Company bid conditionally on the approval of the contract by the Congress; and the only other company to bid was the Pan-American Petroleum & Transport Company, which submitted two bids, denominated "Proposal A" and "Proposal B," respectively. The former was in exact conformity to the invitation, and involved a profit to the Pan-American Company. The latter was for about $235,000 less, and contained a proffer tofurther credit the government against the proposal sum for all savings which might be accomplished in the actual construction of the Pearl Harbor project. It was a bid to do the work at cost. In this respect it carried out the promise made by Mr. Doheny to Admiral Robison. It was conditioned, however, on the grant of a preferential right to all oil leases which might be thereafter made by the government in naval petroleum reserve No. 1. In this respect it was in line with the understanding between Secretary Fall and Mr. Doheny in November, 1921, as to granting further leases to Mr. Doheny or to his companies in the reserves.
As previously stated herein, there was nothing in the written invitations that were sent out to the


naval reserves to pay for same.
None of the other companies, except possibly the White Engineering Company, that was collaborating with the Pan-American Petroleum & Transport Company, had been told of the understanding that Mr. Doheny and Secretary Fall had in October, 1921, that the Pan-American Petroleum & Transport Company would bid on the Pearl Harbor construction at cost and without profit; and why competition was invited on a construction project that one prospective bidder had stated it would build at cost is difficult to understand.
The only contract in suit as to which there was any kind of competitive bidding was the Pearl Harbor construction contract of April 25, 1922. There was no bidding of any kind for either of the leases by which the Pan-American Petroleum & TransportFinney, and recommended that the bid of the Pan-American Petroleum & Transport Company, under "Proposal B," be accepted, for the reason that it was the lowest bid submitted, and that the Pan-American Petroleum & Transport Company had drilled other leases in naval reserve No. 1 satisfactorily to the Department of the Interior, and that by granting the preferential right, as suggested in "Proposal B," the department was certain of a direct saving of over $235,000 and the possibility of further saving.
After the report was received, Assistant Secretary Finney conferred with Admiral Robison, and as a result wired to Secretary Fall, who was then at his ranch in New Mexico, recommending, on behalf of himself, Mr. Ambrose, and Admiral Robison, acceptance of the Pan-American Petroleum & Transport Company alternative


bid under "Proposal B." Secretary Fall answered by stating, if Admiral Robison and the Secretary of the Navy concurred and authorized it, to immediately award and close the contract with the Pan-American Petroleum & Transport Company, and to make public entire policy in fullest and completest manner. Thereupon Assistant Secretary Finney advised the Pan-American Petroleum & Transport Company by letter of the acceptance of their "Proposal B" and awarded the contract to them thereon.
*74 Prior to April 15, when the bids were opened, Assistant Secretary Finney had never discussed with Secretary Fall or any other person the idea of granting a preferential right to further leases in the proposed Pearl Harbor contract. He knew nothing about the intention to grant such right. Neither did Admiral Robison. Immediately afterthe letter of award was sent, the Bureau of Mines in conjunction with the Navy Department began the preparation of a contract pursuant to the award; and during the conferences relative thereto between Assistant Secretary Finney, Mr. Ambrose, Admiral Robison, and Mr. Cotter, Mr. Cotter brought up the question of the preferential right, which was the condition of the bid of the Pan-American Petroleum & Transport Company under "Proposal B." He wanted some definite assurance in writing that his company would receive an additional lease within one year to about 160 acres in one portion of reserve No. 1 and a strip of about 140 acres in another portion of the same reserve, at royalties of from 12½ per cent. to 45 per cent.
Assistant Secretary Finney, Mr. Ambrose,


and Admiral Robison had agreed to give such leases if Secretary Fall approved thereof. There was no specific mention of this lease in the Pearl Harbor contract of April 25, but on April 17 a letter was prepared by Assistant Secretary Finney, bearing date April 25, 1922, which was signed by Assistant Secretary Finney and Secretary of the Navy Denby, in which it was stated that the Department of the Interior agreed to grant to the Pan-American Petroleum & Transport Company within one year from the date of the delivery of the Pearl Harbor project contract the two leases requested by Mr. Cotter.
When this letter and the contract were drafted, and on April 20, 1922, Assistant Secretary Finney sent Mr. Ambrose to New Mexico with all of thepapers relative to the award and contract, and instructed Ambrose to acquaint Secretary Fall with all the details in the matter, and to submit the same to Secretary Fall for his approval. Mr. Ambrose arrived at Three Rivers, N. M., on April 23, and, after submitting the entire matter to Secretary Fall, Secretary Fall sent a telegram to Assistant Secretary Finney, authorizing the execution of both contracts; that is, the Pearl Harbor project contract, and the letter of agreement for further leases under the preferential right of the April 25 contract. On April 25, 1922, Assistant Secretary Finney executed and signed the contract and delivered the letter agreeing to give the leases. Immediately thereafter the two documents were sent over to Secretary Denby and he signed the same.
Concerning


the making of Secretary of the Navy Denby a party to this contract there is another significant circumstance. It was not the intention to have Secretary Denby sign the contract. Mr. Cotter, however, demanded that Secretary Denby be made a party to the contract, and stated that it would not be acceptable to him unless Secretary Denby signed the contract. Assistant Secretary Finney and Dr. Bain would not assume authority to name Secretary Denby as one of the contracting parties, but wired Secretary Fall of Mr. Cotter's demand, and Secretary Fall authorized Secretary Denby's name to be inserted in the contract. It is apparent that Secretary Fall was the dominant and deciding agency in the making of these contracts by the government. He did not personally participate inall of the negotiations, but he did retain the ultimate power that brought the contract and lease into being. He was the deciding official in making all of the contracts and leases. He and his department always fixed and determined the royalties in the leases.
The scope of the power asserted by the Secretary of the Interior and reposed in him by this contract of April 25, 1922, is forcefully shown by a letter written by Assistant Secretary Finney to Secretary Denby on May 5, 1922. After the contract was executed, there was a discussion between Mr. Cotter, Admiral Robison, Assistant Secretary Finney, Mr. Dunn, and others as to how the construction and other matters covered by the contract would be handled, especially in the event of a dispute


or disagreement between the contractors and the Navy or others. Mr. Dunn, who was to do the construction work at Pearl Harbor under subcontracts with the Pan-American Petroleum & Transport Company, insisted that the final arbiter should be the Secretary of the Interior. It was so decided. Admiral Robison consented to such decision, and thereupon the following letter was prepared and transmitted. It was received by Secretary Denby and approved by him, as will appear by his indorsement. The letter reads:
       "Department of the Interior.
            "Washington, May 5, 1922.
"The Secretary of the Navy  Dear Mr. Secretary: April 25, 1922, the Navy and Interior Departments entered into a contract *75 withthe first part of the contract mentioned above.
"The Chief of the Bureau of Yards and Docks, Navy Department, Admiral L. E. Gregory, is designated as the representative of the Secretary of the Interior in handling the second part of the contract as noted above. This involves, first, all technical matters in connection with the plans and specifications for storage, and which in its general phases can be most expeditiously handled in Washington; second, the supervision of construction work in the field at Pearl Harbor; and, third, the receiving of the oil at Pearl Harbor from the tankers and placing same in tank storage as it becomes available under this contract until such time as the completed plant shall be turned over to the government.
"The Secretary of the Interior


expressly reserves at all times the right to recall the foregoing representation and to designate a successor from the Navy Department as his representative. The right of the contractor to appeal to the Secretary of the Interior, as provided in the contract, is not affected hereby. Notice of any appeal by the contractor from the decision of the officer in charge of the work and the reasons therefor shall be forwarded promptly, being routed through the commandant and the Chief of the Bureau of Yards and Docks on their way to the Secretary of the Interior. This will in no way involve the functions at present exercised by the Chief of the Bureau of Engineering in dealing with the Secretary of the Interior in regard to oil mattersin general, since the only function of the representative of the Secretary of the Interior would be the technical work of constructing the tanks, the receiving and storing of the oil during construction, and reporting to the Secretary of the Interior the amounts received.
     "Respectfully,
   "Edward C. Finney, Acting Secretary.
   "Approved: Edwin Denby, Secretary of
the Navy."
It is very doubtful whether Secretary Denby was cognizant of the terms of the contracts. It is certain that he was induced to sign them under misapprehension. He relied entirely upon Admiral Robison for information concerning the contracts and leases, and it is shown that he signed them under the belief that they were necessary as protective measures against drainage on the reserves. Secretary Denby


had always taken the position that as much of the oil as possible should be kept in the ground. The contracts and leases in suit were not necessary as drainage protections, and were not so intended by either Admiral Robison or Secretary Fall. The contract of April 25 was simply a contract for the use of royalty oil in payment for a large construction job at Pearl Harbor and the filling of tanks therein with fuel oil.
At the time it was in contemplation the government was receiving royalty oil from certain leases in the reserves, and the Navy desired to use such royalty oil for the construction, instead of selling the oil and paying the proceeds into the treasury, as required by previously existing law. There was nothought at the time of making further leases on the reserves, except for the one purpose of providing additional royalty oils with which to pay for the construction at Pearl Harbor. However, whatever protection to the reserves was deemed necessary had been carried out by the strip leases that were made before the contract of April 25 had been executed; and a further protection to the reserves against drainage was established by the temporary reserve agreement with the Pacific Oil Company, which was made in February, 1922, by which that company, which owned oil lands adjacent to the reserves, agreed with the government to forego further drilling, except on six months' notice. So that neither the Navy officer in charge nor the Interior Department had any thought that


the Pearl Harbor project, or the granting of additional leases in connection therewith, had anything to do with the drainage question on the naval reserves.
The Pan-American Petroleum & Transport Company was not required to wait *76 long for an additional lease under their preferential right and under their letter of April 25, 1922. On May 19, 1922, by Mr. Cotter, the company applied for a lease, and it was granted the lease of June 5, 1922. No other person, firm, or corporation was advised of the government's intention to make this lease. It was made secretly and without competitive bidding of any kind.
There is a circumstance in connection with the letter of April 25, 1922, which granted the lease of date June 5, 1922, to the Pan-American Petroleum& Transport Company, that shows the tendency to favor the company controlled by Mr. Doheny whenever an opportunity came. This letter bears date after the award of the contract of April 25 had been made to the Pan-American Petroleum & Transport Company under their "Proposal B" bid. The award of the contract was made April 18, 1922. As far as an enforceable contract to do the Pearl Harbor work is concerned, one had therefore been accomplished on April 18 by the United States with the Pan-American Petroleum & Transport Company. The consideration had been stated and agreed to. It was unnecessary to give any specific leases to oil lands in the reserves. Mr. Cotter, however, speaking for his company, insisted that the preferential right which was given by


the April 25 contract should be immediately transformed from a contingent and inchoate right into a vested one, and his request was acceded to without delay by Secretary Fall.
This was another positive and unmistakable manifestation that the Pan-American Petroleum & Transport Company was less interested in the Pearl Harbor contract and the existing royalty oil from the reserves than with the immediate grant of further valuable leases in the reserves to themselves without competition and through favoritism and discrimination. The Pearl Harbor contract was of no value and of little interest to the Pan-American Petroleum & Transport Company without the preferential right. It was the preferential right that had real commercial value. It cannot be said with any degree of reasonable probability that Secretary Fall's approval of thisgrant of the June 5 lease and of the later lease of December 11, 1922, were not to some extent influenced by Mr. Doheny's personal benefactions to him. Favoritism, partiality, and discrimination in administering public duties and in reposing valuable public rights in private concerns are often as destructive to governmental integrity and national welfare as bribery. Public office is yet a public trust, wherein all the people are the beneficiaries.
After the contract of April 25 was made, Dr. Bain visited California in May, 1922, for the purpose of arranging for the turning over to the Pan-American Petroleum & Transport Company the accumulated oil that had been collected from the reserves during the negotiations that led up to the April 25 contract. He encountered serious opposition by the


that he had talked the matter over with Mr. Doheny, and that Mr. Doheny said that the matter was unimportant, and that he was satisfied with the authority to go ahead. Here is a clear and unmistakable manifestation on the part of Mr. Doheny that he was determined to retain this valuable and unusual leasehold right to the naval oil reserves, and that he was not willing to hazard the venture by any litigation, or by even the solicitation of an opinion from the Attorney General as to the legality of the contract. This situation alone, in my opinion, negatives the idea which counsel for defendants suggested that Mr. Doheny's interest in this matter was primarily patriotic. Mr. Doheny by this position showed that in May, 1922, atleast, he was looking forward and anticipating the valuable and extensive lease that he later obtained on December 11, 1922. The contract of April 25, 1922, meant no profit to him. The lease of June 5 was not valuable. It was small in area and was coexistent with the April 25 contract. It was the preferential right to further leases, granted by the April 25 contract, that Mr. Doheny expected would fructify into a valuable property right. He was not desirous or willing to risk what he knew the future would bring to him because of his ownership of the preferential right. If the contract which gave him that right would not stand the legal test, he would be unable to effectuate any plans for the future; and


Mr. Doheny to grant privileged leases to the defendant companies.
Shortly after the April 25 contract was made, Admiral Robison called the attention of the officers of the Navy to the desirability of increasing the Pearl Harbor reserve fuel station, and also the necessity of increasing the reserve stocks of fuel oils and lubricating oils, together with the necessary storage facilities therefor. Little attention was paid to his suggestion at that time. He, however, was determined to accomplish his incessant desire to strengthen the nation's defense by building and equipping additional fuel stations, by using naval oil therefor. And again on November 20, 1922, he wrote to the Bureaus of the Navy that had direct supervision of such matters, as follows: "The storage for 1,500,000 barrels of fuel oilat Pearl Harbor under contract with the Pan-American Petroleum & Transport Company is nearing completion, and it is desirable at this time that information be at hand as to what further disposition should be made of the royalty oil accruing from naval petroleum reserves Nos. 1 and 2."
On the following day Admiral Robison received authority to proceed with the enlargement of the Pearl Harbor project, so as to provide additional fuel oil storage facilities and also a separate unit for gasoline storage.
In the meantime the Interior Department had been solicited by the Pan-American Petroleum & Transport Company to extend some relief from their leases in the naval oil reserves on account of the flush production of crude oil occasioned by the opening up of newly discovered fields in


price could be reestablished. It is also clear that the Navy's policy of keeping the oil underground was particularly helpful to the general market condition that prevailed during the summer of 1922. These unsatisfactory market and inadequate refinery conditions afforded further opportunity to favor the Pan-American Petroleum & Transport Company, by putting *79 into operation its preferential right to oil leases in the naval reserves, so that the Pan-American Petroleum & Transport Company might carry out its plan to establish a California refinery. If additional refinery facilities could be provided, the overproduction of crude oil could be transformed into other petroleum products and the general market condition stabilized.
As it was, however, there was neither excuse nor justification for putting into operation the valuable preferential right granted by themade.
In substance his plan, as imparted to Secretary Fall and Admiral Robison, was to increase the storage facilities at Pearl Harbor and to provide for additional oil storage facilities for the Navy elsewhere of from 2,000,000 to 5,000,000 barrels, and to fill the same with fuel oil as a reserve, and in addition to furnish and sell to the Navy manufactured oil products from the refinery at 10 per cent. less than market prices at tidewater. The plan further provided that the Pan-American Petroleum & Transport Company would erect an oil refinery at San Pedro, or at some other tidewater point, in California, and construct a pipe line from the naval oil reserves in California to the refinery, and convey the oil from the reserves through the same,


and that in consideration of these undertakings the government would, under the preferential right to lease granted under the April 25 contract, immediately lease to the Pan-American Petroleum Company all of the unleased portions of naval reserve No. 1, excepting a certain area upon which no leases would be granted to any concern, and would authorize immediate extensive and general drilling thereon.
The agreement proposed was to continue for 15 years after the completion of the Pearl Harbor construction. It was in effect a complete surrender and transfer of approximately 30,000 acres of valuable proven oil land and its oil contents, estimated at from 75,000,000 to 250,000,000 barrels of oil, for 15 years at least. Some idea of the value of this concession, granted secretly, privately, and without asemblance of competition, is obtained from Mr. Doheny's testimony before the Senate committee that he expected his companies to make a profit of $100,000,000 from it.
As a result of Mr. Doheny's conversations with Admiral Robison, the plan was discussed by officers of the Navy and Interior Departments, and a contract embodying the terms of the contract of December 11, 1922, was agreed upon, and it was also agreed that a lease such as that proposed would be granted to the Pan-American Petroleum Company in accordance with the contract. This lease was made on the same day as the contract. Although this contract for additional storage facilities for nearly 1,500,000 barrels of oil at Pearl Harbor was entered into on December 11, 1922, the plans for such additional construction


the contract thoroughly. He relied entirely upon Admiral Robison. He had never met Mr. Doheny until the time that he signed the contract on December 11, 1922, when Admiral Robison introduced Mr. Doheny to him.
This lease assured the defendants a sufficient supply of oil to enable them to enter the refinery business in California. The contract and lease of December 11, 1922, were made, as far as Admiral Robison was concerned, to extend his desire to strengthen the national defense by utilizing oil from the naval reserves, and on the part of Secretary Fall and Mr. Doheny they were made to effectuate the preferential right given to the Pan-American Petroleum & Transport Company by the contract of April 25, 1922, and to enable that company to obtain controlof practically all of naval petroleum reserve No. 1. The motive and plan of Secretary Fall concerning the lease of December 11, 1922, is illuminated by his correspondence with citizens and concerns who were anxious to know whether it was his policy to grant leases in the reserves. Many of these persons wrote to him during the year 1922, and as late as the latter part of October therein, and requested information as to whether it was possible to obtain oil leases in the naval oil reserves. To all of these inquiries he stated that the policy of the Interior Department was to grant no leases in the reserves, except such as were absolutely necessary in order to protect the reserve from drainage by outside drillings. These statements


contracts and leases in suit. The allegations of the amended bill of complaint, in so far as this second ground of attack is concerned, are, generally, that the contracts of April 25, 1922, and December 11, 1922, and the leases of June 5, 1922, and December 11, 1922, respectively, were made without any legal authorization therefor; that is to say, that there was no law of the United States which authorized any officer of the United States to enter into any of such contracts or leases, so as to make them or any of them binding and enforceable obligations of the United States, and consequently that they are, and each of them is, absolutely void and of no legal force or effect whatever. In discussing this phase ofthe case it will be assumed that the official authorized by the wording of the Act of June 4, 1920 (41 Stat. 812), actually made the contracts and leases, notwithstanding this court has determined that such was not the fact. It is the legal power of the Secretary of the Navy under the Act of June 4, 1920, that is to be considered, and, in the consideration of it, it will be assumed that the Secretary of the Navy in fact exercised such power.
The precise question for decision is whether any law of the United States authorizes the officers of the government of the United States to exchange royalty crude oil and gas due to the United States from oil and gas leases on lands within the naval


and those from all royalty oil from lands in the naval reserves, for the benefit of the United States: And provided further, that the rights of any claimant under said Act of February 25, 1920, are not affected adversely thereby: And provided further, that such sums as have been or may be turned into the Treasury of the United States from royalties on lands within the naval petroleum reserves prior to July 1, 1921, not to exceed $500,000, are hereby made available for this purpose until July 1, 1922: Provided further, that this appropriation shall be reimbursed from the proper appropriations on account of the oil and gas products from said properties used by the United States at such rate, not in excess of the market value ofthe oil, as the Secretary of the Navy may direct." Section 1 (41 Stat. 812 [Comp. St. Ann. Supp. 1923, § 2804i]).
My attention has been called to no ruling or decision of any court in which this act of Congress has been considered, interpreted, or construed. In order to ascertain the intent as well as the scope of this law, consideration should be given to the legislative history relating to the naval petroleum reserves and leading up to the passage of this statute. The lands now known as the naval petroleum reserve No. 1, in which all of the oil-bearing lands involved in this suit are located, were carved out of the public domain and set apart for naval reserve purposes by an executive order of the president


of the United States promulgated September 2, 1912. In this order it is stated that these lands "shall be held for the exclusive use and benefit of the United States Navy." Prior to the promulgation of this executive order the lands had been withdrawn from public entry by another executive order of *82 the President of the United States in 1909. While the lands were segregated for the use of the Navy by these executive mandates there had been provided no legislation whereby any of the withdrawn lands could be used or occupied until the Leasing Act of February 25, 1920 (41 Stat. 437), was passed. This Leasing Act authorized leasing of lands in the naval oil reserves in settlement of pre-existing claims under the placer mining lawsof the United States.
It has been previously noted that the only provision in the Leasing Act of 1920 as to the use and disposition of royalty oils accruing to the United States from leases made under said act was that the Secretary of the Interior, "except whenever in his judgment it is desirable to retain the same for the use of the United States," shall offer the royalty oil and gas for sale at public auction. In cases where no satisfactory bid was received, he then might readvertise such royalty oil and gas for sale, or might sell the same at private sale at not less than the market price, or he might accept the value thereof from the lessee. The Leasing Act further empowered the Secretary of


the Interior, pending the making of a permanent contract for any sale of royalty oil in accordance with the provisions of such act, to sell the current product at private sale at not less than the market price. Section 36, Act Feb. 25, 1920, supra (Comp. St. Ann. Supp. 1923, § 4640¼rr).
The Secretary of the Interior was therefore given by this Leasing Act of 1920 but two alternatives as to any royalty oil and gas within or produced from the naval oil reserves. He could either retain it for the use of the United States or sell it. The power to retain the royalty oil and gas for the use of the United States was neither substantial nor practicable, because the Secretary of the Interior had no storagewithin the limits of the reserves as long as those who own or operate the contiguous areas of land extract oil and gas by drilling wells upon their lands. There had been, prior to the passage of the Act of June 4, 1920, much development of such adjacent lands. Many wells were drilled on such lands, and many of them produced oil and gas in great quantities and continuously. This condition was necessarily menacing to the naval petroleum reserves, because it had been scientifically determined that much of the oil and gas in the reserves was being drained into the private property of the adjacent lands, and there was no way by which such oil could be recovered. Even defensive measures to protect the oil and gas within


of the legislation in effect prior to the enactment of the law of June 4, 1920, and the known physical and geological conditions as shown by the evidence in this case, as well as from a consideration of the words and terms of the statute of June 4, 1920, that Congress intended by it to construct a complete *83 and comprehensive legislative scheme broad enough to cover all matters in connection with naval reserve affairs, and to supplant all previous congressional action with respect to the control of the naval petroleum reserves of the United States. The paramount intent was to preserve the reserves for the use of the agency of the government for which they had been set apart, and to invest the head of such agencysuch fuel oil, I fail to see.
The exchange power granted by the Act of June 4, 1920, is general, unrestricted, and plenary. Its only limitations are the discretion of the Secretary of the Navy and the benefit of the United States. As long as the power was exercised within these two limitations, it was unquestionable. The word implies no other meaning in the statute, and Congress could have intended nothing less. This construction is reinforced when the other provisions and verbiage of the statute are examined and considered. The act was a broad grant of power from Congress to the Secretary of the Navy to administer, control, and use these reserves in any manner that his discretion dictated, in order to make them actually petroleum reserves for the


use of the Navy and the benefit of the United States. The Congress appropriated and set aside for the use of the Navy, not only the lands and their petroleum contents, but it also additionally appropriated and set *84 aside $500,000 in money, which it gave the Secretary of the Navy the right to use until July 1, 1922, in connection with his general power of administration and control of the reserves for the benefit of the United States. The grant of power, as well as the discretion to be exercised by the Secretary of the Navy in executing this grant under the Act of June 4, 1920, extends to all points and conditions connected with the naval reserve lands, and the handling, use, and disposition of thegovernment direct and royalty products therefrom, either by selling the production, or by exchanging the products immediately on production, or afterward, for the purpose of giving and securing to the Navy a supply and reserve of fuel oil or other petroleum products necessary for the Navy and beneficial to the United States. Anything done by the Secretary of the Navy in good faith to attain these purposes is lawfully done, within the comprehensive, plenary, and exclusive Act of June 4, 1920.
If this exchange power is unlimited, then no reason can be assigned why all things entering into an exchange should be confined upon the lands of the naval petroleum reserves. The United States is more benefited by effecting an exchange of the royalty crude oil for fuel oil


can be received and utilized upon the lands of the reserve, there is no reason apparent to me why the fuel oil and its container cannot be received at some other point. This seems to me to be not only implied from the power to effect the exchange, but the law expressly authorizes it to be done, by giving the Secretary, the power to "store" the oil and its products.
But it is said that it cannot be supposed that it was within the intention of Congress to allow the Secretary of the Navy to render so large a portion of the Navy's crude oil unavailable for fuel purposes of the Navy as the amount which is required under the exchange provisions of the contracts to be delivered inan option retained by the government, effective after the completion of the Pearl Harbor project and other projects under the December 11 contract. This option had no relation to the exchange elements of the contracts. There are terms used in the contracts which imply that in arriving at the basis of the exchange agreements certain pecuniary computations are made but under the decisions of the federal courts this method of ascertaining the quantum of the things sought to be exchanged does not destroy the exchange quality of the contracts.
But the plaintiff has earnestly contended that, assuming that the Act of June 4, 1920, grants to the Secretary of the Navy the power to exchange the royalty oil in the reserves for fuel oil and storage facilities, the contracts


that the Secretary of the Navy must sign this contract. There apparently had been no intention on the part of Secretary Fall, Admiral Robison, or any other official of the government that any one but the Secretary of the Interior would be required to sign the contract on behalf of the government.
If the executive order of May 31, 1921, purports to confer upon the Secretary of the Interior the authority which Congress had lodged exclusively in the Secretary of the Navy, it is, in my opinion, void to that extent. The President in peace time could not even, under his powerful and extensive general executive authority, transfer from one member of his Cabinet to another member of his Cabinet powers and duties that had been conferred by theCongress on a specified Cabinet officer, that call for the exercise of discretion by the Cabinet officer from whom such power is attempted to be transferred. In so far as systematizing, co-ordinating, and facilitating the conduct of the executive departments of government are concerned the President could lawfully transfer duties between Cabinet officers; but the transfer attempted by the executive order of May 31, 1921, goes much further.
The office of Secretary of the Navy was created by act of Congress, and the Congress under the Constitution is given sole power to provide and maintain a Navy. The administration and conservation of the naval petroleum reserves comes within the power conferred by the people upon Congress alone, and in delegating certain and specific powers and rights to the Secretary


of the Navy with respect to the naval petroleum reserves, which all for the exercise of such officer's discretion, it must be held that Congress did not intend that some other branch of the government could transfer this power to some other officer, or divest the officer in whom Congress reposed the authority of the power which Congress has conferred upon such officer exclusively. No branch of the government but Congress can divest or transfer the power so delegated. Even the Secretary of the Navy himself cannot delegate or transfer essentially discretionary powers concerning the naval petroleum reserves, which have been reposed in him exclusively by the Congress. He may, with the approval of the President, establish regulations in execution of, or supplementary to, but not in conflictwith, the statutes defining his powers. United States v. Symonds, 120 U. S. 49, 7 S. Ct. 411, 30 L. Ed. 557.
The leases of June 5, 1922, and December 11, 1922, give the Secretary of the Interior sole authority to oversee the progress of the work upon the leased area, requiring for this purpose the submission to him of plats showing such work, and of sale contracts with respect to the disposal of the oil and gas produced under the leases. The Secretary of the Interior is *88 further expressly given the sole right to permit suspension of work under the leases, and also the sole right to authorize, sanction, or permit any assignment or subleasing, as well as full exclusive authority to terminate or surrender the lease.