A preemptor made an agreement with a party advancing money to
pay one-fourth of the expenses of making final proof to repay such
party a certain portion of the proceeds of sale provided that,
after obtaining title, he could find a purchaser and sell the land
at its proper value.
Held that there was no mortgage, deed of trust, or
agreement for specific lien, but that the agreement was only a
promise to pay in case of sale, and could not be enforced against
the land, and that it therefore was not void under § 2262,
Rev.Stat.
By the admissions in the pleadings in this case, on December 1,
1890, the defendants in error, together with one Edmund F. Gross,
as parties of the first part, entered into a contract with the
plaintiff in error which stipulated:
"That for and in consideration of the covenants hereinafter
mentioned, the parties of the first part agree to pay one-fourth of
all expenses accruing to the party of the second part in making
final proof to S.W. 1/4 of the N.W. 1/4, the N. 1/2 of the S.W.
1/4, and the S.W. 1/4 of the S.W. 1/4 of sec. 14, all in township
58, north of range 19 west, in St. Louis County, Minnesota, and
receiving title thereto, and the party of the second part agrees
and binds himself to pay to the parties of the first part $100 in
cash upon the delivery of these presents for locating him on said
land, and he further agrees to give the parties of the first part
one-fourth part of the price and proceeds that may hereafter be
obtained for the sale of said land after he has obtained title
thereto from the United States, deducting the one-fourth expense as
above provided, and can find a purchaser for and sell the same at
its proper value."
The parties of the first part fully complied with all the
stipulations of this contract. The plaintiff in error, who, at
the
Page 199 U. S. 343
time of the contract, was proceeding under the preemption law,
made his final proofs, and on December 19, 1891, received a patent.
On October 18, 1895, he sold the pine timber on the land and paid
to the parties of the first part one-fourth of the amount received
by him therefor. Edmund F. Gross subsequently assigned to Albert F.
Gross, one of the defendants in error, all of his right, title, and
interest in the contract. On July 17, 1902, the plaintiff in error
sold and conveyed the land to the Onondaga Iron Company. This
action was brought in the District Court of the County of St.
Louis, Minnesota, to recover one-fourth part of the moneys received
by him on said sale. Judgment was entered in the district court in
favor of the plaintiffs, 91 Minn. 1, 92 Minn. 367, which was
affirmed by the Supreme Court of Minnesota, and thereupon this writ
of error was sued out.
MR. JUSTICE BREWER delivered the opinion of the Court.
The case turns upon the construction of the contract and its
alleged conflict with section 2262, Rev.Stat., the pertinent part
of which is:
"Before any person claiming the benefit of this chapter is
allowed to enter lands, he shall make oath before the receiver or
register of the land district in which the land is situated . . .
that he has not settled upon and improved such land to sell the
same on speculation, but in good faith to appropriate it to his own
exclusive use, and that he has not, directly or indirectly, made
any agreement or contract, in any way or manner, with any person
whatsoever, by which the title which
Page 199 U. S. 344
he might acquire from the government of the United States should
inure in whole or in part to the benefit of any person except
himself."
The defendants in error insist that the title was to be in no
manner affected by the contract; that it was simply a promise on
the part of the preemptor to pay a certain sum of money, the amount
thereof to be determined by the proceeds of a sale which he might
subsequently make; that he was under no obligations to make any
sale, and, if he did not, they would have no claim upon him. On the
other hand, the plaintiff in error invokes the doctrine laid down
in
Anderson v. Carkins, 135 U. S. 483,
that, by the terms of the contract, the title which he acquired
from the government was in part to inure, indirectly at least, to
the other parties to the contract. He insists that the purpose of
Congress was to secure to the preemptor the full benefit of the
property patented to him, that this purpose is emphasized by the
use of the words "directly or indirectly," and that any contract by
which third parties were to acquire a portion of the property or a
share in the proceeds of any sale of the property was really a
contract which operated indirectly to transfer the title in part of
such third party. Under such construction, a contract by which the
preemptor should agree to mortgage the land after acquiring title
would be void because, on failure to pay, and by foreclosure of the
mortgage, the mortgagee might acquire title.
The question is not free from doubt. The contract did not
directly affect the title; that was to be absolutely vested in the
patentee, undisturbed by any claim of the defendants in error. He
was not bound to do anything by which any portion of the title
should pass to them, directly or indirectly. On the other hand, its
effect was to cast a limitation on the full benefit of the
property, for, while the patentee was under no obligation to sell,
he was required to divide the proceeds if and when he made a
sale.
It may be well to examine the decisions of the courts, federal
as well as state, and also the rulings of the Land Department.
Page 199 U. S. 345
Before doing so, however, we quote the corresponding provisions
of the federal statutes respecting homesteads. Secs. 2290, 2291,
and 2295, Rev.Stat. In his application for a homestead entry, the
applicant must make affidavit that his
"application is made for his exclusive use and benefit, and that
his entry is made for the purpose of actual settlement and
cultivation, and not either directly or indirectly for the use or
benefit of any other person."
And before a certificate or patent is issued, he must make
affidavit "that no part of such land has been alienated, except as
provided in section 2288." That section refers to the transfer for
church, cemetery, or school purposes, or for the right of way of
railroads. The land shall not "in any event become liable to the
satisfaction of any debt contracted prior to the issuing of the
patent therefor."
Under these provisions, it has been held that a contract to
convey the whole or part of the land, made prior to the perfection
of his equitable right, by one seeking preemption or a homestead is
void, will not be enforced in the courts,
Anderson v. Carkins,
supra, and, if known to the Department, will prevent the
passing of the legal title. Such has been the uniform ruling of the
Land Department as well as of the courts, state and federal.
With respect to a mortgage or deed of trust executed under like
circumstances, the decisions of the Land Department have been all
to the effect that such mortgage or deed of trust is not an
alienation within the scope of the homestead statute, or forbidden
by the preemption law, especially where, in the case of a
preemption, the mortgage is given to secure money borrowed to
complete the purchase of the land.
See, in reference to
preemptors, Larson v. Weisbecker, 1 L.D. 409, Opinion of Secretary
Teller; In re Ray, 6 L.D. 340, Opinion of Acting Secretary Muldrow;
Haling v. Eddy, 9 L.D. 337, Opinion of Secretary Noble; Murdock v.
Ferguson, 13 L.D.198, Opinion of Secretary Chandler. With reference
to a homestead entryman,
see Mudgett v. Dubuque & S.
R. Co. 8 L.D. 243, Opinion of Secretary Vilas; Dawson v.
Page 199 U. S. 346
Higgins, 22 L.D. 544, Opinion of Secretary Smith; Kezar v.
Horde, 27 L.D. 148, Opinion of Secretary Bliss. In addition,
see Lawson v. Reynolds, 28 L.D. 155, in which Secretary
Hitchcock held that a
"written agreement executed by a homesteader, and operating as a
mere lease of a part of the premises and the grant of an easement,
the use of which would tend to improve and increase the value of
the land as a homestead, is not an alienation of any part of such
land, and no bar to the perfection of the entry."
See also Kingston v. Eckman, 22 L.D. 234, in respect to
an entry under the Timber and Stone Act of June 3, 1878, 20 Stat.
89, as amended by the Act of August 4, 1892, 27 Stat. 348, the
provisions of which statute in reference to the oath of the
applicant are similar to those in the preemption act.
There has been some division in the courts upon the question. In
Brewster v. Madden, 15 Kan. 249, the Supreme Court of that
state, in an opinion delivered by the writer of this, held that a
mortgage given by a preemptor prior to the entry of the lands was
void, reaching this conclusion largely on the proposition that at
the time the preemption act was passed (1841), mortgages, always in
form conveyances, were then regarded by the profession generally as
conditional alienations. To like effect were the early rulings of
the Supreme Court of Minnesota,
McCue v. Smith, 9 Minn.
252;
Woodbury v. Dorman, 15 Minn. 338, though these
rulings were subsequently distinctly overruled by the same court.
Jones v. Tainter, 15 Minn. 512;
Lang v. Morey, 40
Minn. 396.
Bass v. Buker, 6 Mont. 442, deciding the same
way, was also overruled in
Norris v. Heald, 12 Mont. 282.
The large majority of state decisions follow these later rulings.
See, in case of preemptions,
Wilcox v. John, 21
Colo. 367;
Christy v. Dana, 34 Cal. 548;
Christy v.
Dana, 42 Cal. 174;
Camp v. Grider, 62 Cal. 20, and in
reference to homesteads,
Fuller v. Hunt, 48 Ia. 163;
Dickerson v. Bridges, 147 Mo. 235;
Weber v.
Laidler, 26 Wash. 144;
Spiess v. Neuberg, 71 Wis.
279;
Kirkaldie v. Larrabee,
Page 199 U. S. 347
31 Cal. 455;
Orr v. Stewart, 67 Cal. 275;
Stark v.
Duvall, 7 Okl. 213. In
Orrell v. Bay Mfg. Co., 83
Miss. 800, the court held that the prohibition of the alienation of
public land by parties who have taken the preliminary steps to
acquire the same under the homestead laws, and who have not
perfected their entries, has reference to an absolute sale of the
land, or some part of it, and in that case the leasing of trees on
the land for turpentine purposes, and the sale of trees was held
not an alienation within the meaning of the statute.
Obviously, the trend of the authorities is strongly in favor of
the proposition that a mortgage or deed of trust by one seeking an
entry under the preemption or homestead laws of the United States,
made prior to the perfection of his equitable right, is valid These
authorities would fully sustain the decision of the Supreme Court
of Minnesota in the present case.
Further, in the case at bar, there was no mortgage, deed of
trust, or agreement for a specific lien of any kind. It was simply
a promise to pay money in case of a sale by the patentee, the
amount of the payment to be determined by the sum received on the
sale. It was a promise which in no event could be enforced against
the land. It was only a personal obligation of the patentee. It
might never be enforceable against him, and could not be except
upon his sale of the land. Of course it would not be contended that
a mere promise to pay money by one seeking to acquire title under a
homestead was not binding, and if the only effect of the contract
is to measure the sum which the patentee agrees to pay by that
which he may receive when he sells the land, it cannot be held that
a contract has been made for an alienation of the title in whole or
in part, or that the land was not acquired for the sole use and
benefit of the patentee.
The judgment of the Supreme Court of Minnesota was right, and it
is
Affirmed.
Page 199 U. S. 348
MR. JUSTICE WHITE, with whom concur MR. JUSTICE McKENNA and MR.
JUSTICE HOLMES, dissenting:
The power to evade the restrictions imposed by Congress upon the
right to acquire land by preemption which it seems to me must
result from the construction now given to the act of Congress as
applied to the contract in controversy causes me to state the
reasons for my dissent.
There is no controversy as to the applicable statute, and no
question of fact as to the existence and terms of the contract. The
bald question therefore is was the contract in conflict with the
requirements of section 2262, Rev.Stat.?
By that section, the preemptor, before being allowed to enter
land, was obliged to make oath as follows:
"That he has not settled upon and improved such land to sell the
same on speculation, but in good faith to appropriate it to his own
exclusive use, and that he has not, directly or indirectly, made
any agreement or contract, in any way or manner, with any person
whatsoever, by which the title which he might acquire from the
government of the United States should inure in whole or in part to
the benefit of any person except himself."
By the contract here in question, which was entered into prior
to the making of the statutory affidavit, the defendants in error,
and one other person -- whose interest has since been acquired by
one of the defendants in error -- agreed to pay one-fourth part of
the expenses of the plaintiff in error, the proposed preemptor, to
be incurred by him in perfecting his entry, he, on the other hand,
agreeing to pay one hundred dollars in cash "for locating him on
said land," and binding himself to give to the other parties to the
agreement
"one-fourth part of the price and proceeds that may hereinafter
be obtained for the sale of said land after he has obtained title
thereto from the United States, deducting the one-fourth expense as
above provided, and can find a purchaser for and sell the same at
its proper value. "
Page 199 U. S. 349
My mind cannot perceive how this contract can be held valid,
testing its provisions by the statutory prohibitions, for it is
settled that the requirement of specific statements in the
affidavit implies a prohibition against the doing of that which the
preemptor must swear in the affidavit that he had not done.
Let me consider what the statute thus requires the preemptor to
swear in connection with the contract, in order to test the
conflict between them. The preemptor must swear "that he has not
settled upon and improved such land to sell the same on
speculation, but in good faith to appropriate it to his own
exclusive use." Could this statement have been truthfully made in
view of the agreement by which the preemptor bound himself after
his purchase, if he sold the land, to pay to the other parties to
the contract one-fourth part of the purchase price? Further, the
statute requires the preemptor to swear
"that he has not, directly or indirectly, made any agreement or
contract, in any way or manner, with any person whatsoever, by
which the title which he might acquire from the government of the
United States should inure, in whole or in part, to the benefit of
any person except himself."
Was the affidavit made by the preemptor in this case true when,
at the time it was made, he had executed a contract or agreement by
which, when the property was sold, one-fourth of the price should
go to the benefit of the other parties to this contract? Concede
that technically the contract did not purport to be an agreement on
the part of the preemptor to convey the legal title to one-fourth
part of the land to the other parties to the agreement -- can it in
reason be said that the agreement did not directly or indirectly
provide that the title, when acquired, should inure in whole or in
part to the benefit of other contracting parties? To my mind, the
statute seems so plain, and the terms of the contract to be so
clearly in violation of its provisions, that there can reasonably
be no room for construction.
But it is said the statute simply prohibits agreements on
Page 199 U. S. 350
the part of the preemptor by which the title which he might
acquire would inure in whole or in part to the benefit of any other
person than himself; therefore, to constitute a violation of the
statute, it must be found that the contract bound the preemptor,
after he had acquired the land, to convey a one-fourth interest in
the title to the land. But this disregards the fact that the
statute expressly forbids the doing of the prohibited thing, either
"directly or indirectly," and prohibits "any agreement or
contract," in any way or manner whatsoever, by which the title to
be derived from the government of the United States should inure,
in whole or in part, to the benefit of any person except the
preemptor. It is clear to my mind that the words "directly or
indirectly and in any manner" were obviously intended to embrace
evasions and subterfuges by which the policy of the statute might
be frustrated -- that is, the prohibition against giving to another
person than the preemptor the benefit, in whole or in part, of the
results of acquiring the land from the United States.
In
Anderson v. Carkins, 135 U.
S. 483, dealing with an affidavit of a homesteader,
where the requirements were less stringent than exacted in
preemption cases, it was decided that the existence of an agreement
to convey, after patent, a part of the land to another, was void as
against public policy. To me, that case is decisive of this. It is
said, however, there the obligation was to convey the land, whilst
here there was no obligation on the part of the preemptor to convey
or to sell the land after he acquired it, but only an obligation,
if he did sell, to pay the one-fourth of the proceeds. But it
cannot be meant by this to say that there was no contract, because
the agreement was so purely potestative on the part of the
preemptor as not to imply an obligation, since the contract is
enforced by the decree now rendered. Suppose, however, that the
contract could be divided, and held to imply an obligation to pay
over to another a portion of the purchase price, after the
obtaining of a patent, only in case the preemptor chose to sell --
does such construction relieve the contract from
Page 199 U. S. 351
the prohibitions of the statute? It seems to me not, because to
so hold would simply be to permit mere form, and not substance, to
control. In
Pollock v. Farmers' Loan & Trust Co.,
157 U. S. 429, the
question was whether Congress could, in levying an income tax,
include as part of the taxable income revenues derived from real
estate. It was held that it could not be done, because substance
was to control, and that to include rents in the income taxed was
to impose a direct burden on the owner of the real estate. After
quoting from Co.Lit. 45, the declaration "for what is the land but
the profits thereof," and a passage in Jarman on Wills stating that
a devise of the rents and profits or of the income of lands passes
the land itself, both at law and in equity, the Court said (p.
157 U. S.
581):
"The real question is is there any basis upon which to rest the
contention that real estate belongs to one of the two great classes
of taxes, and the rent or income which is the incident of its
ownership belongs to the other? We are unable to perceive any
ground for the alleged distinction. An annual tax upon the annual
value or annual user of real estate appears to us the same in
substance as an annual tax on the real estate, which would be paid
out of the rent or income."
This being the rule settled by this Court simply as to the right
to receive the fruits of real estate, I do not perceive why, in
view of the sweeping prohibitions of the act of Congress, the
existence of a continued obligation to pay over the price of real
estate to another person when sold does not amount to an agreement
giving to such person, at least indirectly, an interest in the land
itself.
Having said that, in my opinion, there was no ambiguity in the
statute as applied to the contract, it seems to me unnecessary to
consider the decided cases. But I refer briefly to them. True it is
that there are rulings of state courts and of the Land Department
holding that an agreement to execute a mortgage upon preempted land
is not within the prohibition of the statute. When the opinions so
holding are analyzed, it will be seen that they proceed upon the
theory
Page 199 U. S. 352
that the spirit of the statute does not embrace transactions of
that character. For the purposes of this case, however, it does not
seem to me essential to say whether or not such rulings are
correct, as an agreement to mortgage to repay a given sum advanced,
to enable the preemptor to improve the land, might well be held not
to be within the spirit of the prohibitions of the statute, and yet
such rulings would not be controlling as to an agreement like the
one here in question, especially if the contract is construed as
amounting to a perpetual obligation to transfer to a third person,
upon a sale of the land, a given portion of the price. Such a
contract at once puts the person in whose favor it is made in the
attitude not of a lender, entitled to receive back his loan with
simple interest, but in the position of a speculator, who is to
benefit from the enhancement in value of the land which may arise
in the future, without reference to the amount of any expenditure
by him made -- a character of transaction which it was the express
purpose of the act of Congress to forbid.
Myers
v. Croft, 13 Wall. 295. And, from another point of
view, such a transaction puts the preemptor making it in a position
where his plain interest is not to improve and develop the land to
its full capacity, because the labor expended for that purpose
would ultimately inure, in case of a sale of the land, to the
benefit of a third person.
Deeming that the contract in question was within the
prohibitions of the act of Congress, and void as against public
policy, I do not think the Court should lend its aid to its
enforcement, and I therefore dissent, and am authorized to state
that MR. JUSTICE McKENNA and MR. JUSTICE HOLMES concur therein.