The Land Grant Adjustment Acts of 1887 and 1896 did not provide
for any recovery of interest on amounts for which the railroad
companies were required to account for lands erroneously patented
to them and sold by them to
bona fide settlers, and there
was no liability for such interest until the determination of the
amounts for which the companies were liable to account.
In view of the whole situation, and all the circumstances
involved in the determination of the amounts for which the Southern
Pacific Railroad Company was liable to account under the Land Grant
Adjustment Acts,
held that such company was not liable for
interest until after the amount due from it to the government had
been liquidated, and should be computed only from the date of the
commencement of the suit brought by the government to recover the
same.
187 F. 737 modified and affirmed.
The facts, which involve the construction of the Land Grant
Adjustment Acts and the liability of the Southern Pacific Railroad
Company thereunder for interest on amounts received by it for land
erroneously patented to it and the date from which such interest
should be computed, are stated in the opinion.
Page 228 U. S. 622
MR. CHIEF JUSTICE WHITE delivered the opinion of the Court.
The grant made to the Southern Pacific Railroad Company by § 23
of the Act of Congress approved March 3, 1871, 16 Stat. 573, c.
122, overlapped a prior grant made to the Atlantic & Pacific
Railroad Company by the Act of July 27, 1866, 14 Stat. 292, c. 278.
A forfeiture of the latter grant by the Act of July 6, 1886, 24
Stat. 123, c. 637, was construed by the Land Department as causing
the lands within the overlap to inure to the benefit of the
Southern Pacific Company under its grant of 1871. In consequence,
patents for a large quantity of land in California within the
overlap were issued to the Southern Pacific Company.
The act of March 3, 1887, 24 Stat. 556, c. 376, entitled
"An Act to Provide for the Adjustment of Land Grants Made by
Congress to Aid in the Construction of Railroads, and for the
Forfeiture of Unearned Lands, and for Other Purposes"
among other things, provided for the immediate adjustment of all
railroad land grants made by Congress, and, upon the completion of
such adjustment, if it should appear that lands had been, from any
cause, erroneously
Page 228 U. S. 623
certified or patented by the United States to or for the use or
benefit of any company claiming by, through, or under grant from
the United States to aid in the construction of a railroad, it was
made the duty of the Secretary of the Interior to demand from such
company a relinquishment or reconveyance to the United States of
all such lands, whether within granted or indemnity limits, and, if
such company should neglect or fail to so reconvey such lands to
the United States within ninety days after such demand, it should
thereupon be the duty of the Attorney General to commence and
prosecute in the proper courts the necessary proceedings to cancel
all patents, certificates, or other evidences of title theretofore
issued for such lands, and to restore the title thereof to the
United States. By § 4, citizens, or persons who had declared their
intention to become citizens, and who had purchased lands from the
railroad company in good faith were authorized, on proof of the
fact after the adjustment of the grant, to acquire patents from the
United States. And it was, among other things, further provided
that, after the issue of patent, demand should be made for payment
by the company which had disposed of such lands of an amount equal
to the government price of similar lands, and in case of neglect or
refusal to make payment within ninety days thereafter, the Attorney
General was directed to cause a suit or suits to be brought
therefor.
Referring to suits brought under this Act of 1887, in an opinion
delivered in
United States v. Southern Pacific R. Co., 39
F. 132, the district court said (p. 137):
"While in these cases but a comparatively small amount of land
is involved, the suits, it seems from a decision of the Secretary
of the Interior rendered June 23, 1888, and reported in volume 6 of
the decisions of the Department of the Interior, page 816, were
instituted by the government to test its right to a large amount of
land similarly situated. That decision was made upon an
application
Page 228 U. S. 624
on the part of the Southern Pacific Railroad Company that it be
called on, under the Act of Congress of March 3, 1887, for a
reconveyance of the lands which were held by the Land Department to
have been improperly patented to said company, so that, upon a
refusal to reconvey, suits might be brought by the government to
set aside such patents, and that no further patents should be
issued to said company for lands in the limits of the forfeited
grant to the Atlantic & Pacific Railroad Company, and also that
the then-subsisting withdrawal of lands within the primary grant
limit of the Southern Pacific Railroad (branch line), which are
also within the granted and indemnity limits of the Atlantic &
Pacific Railroad, should remain undisturbed until the rights of the
Southern Pacific Company could be determined by suits before the
courts."
The court then observed, in substance, that the Secretary of the
Interior acted favorably upon the application so far as related to
the bringing of the test suits, and, for that purpose, had
divided
"the lands covered by the grants into three classes, to-wit: (1)
lands within the common primary limits of the grant to the Atlantic
& Pacific Railroad Company and of the grant to the Southern
Pacific Railroad Company (branch line); (2) lands within the
primary limits of the grant to the Southern Pacific Railroad
Company (branch line), and within the indemnity limits of the grant
to the Atlantic & Pacific Railroad Company; (3) lands within
the indemnity limits of the grant to the Southern Pacific Railroad
Company (branch line), and within the primary limits of the grant
to the Atlantic & Pacific Railroad Company."
The suits just referred to would seem to have been the first of
the test suits. They were brought in 1889 by the United States in
the Circuit Court of the United States for the Southern District of
California for the purpose of quieting the title of the United
States to various tracts of land situate within the overlapping
limits,
Page 228 U. S. 625
aggregating about 5,342 acres, and claimed by the defendants,
viz., the Southern Pacific Company and other corporations
and individuals asserting title under that company. The first of
the cases involved lands within in the grant or place limits, and
the second lands within the indemnity limits. No money recovery was
prayed other than costs of suit. The cases were ultimately decided
in this Court on December 12, 1892.
United States v. Southern
Pacific Railroad Company,146 U.S.
570;
United States v. Colton Marble & Lime Co.,
146 U. S. 617.
A third suit was begun by the United States in 1891, also to quiet
title, cancel patents, etc., in respect to lands within the
overlap. The railroad company, and the trustees under a mortgage,
and also certain individuals and corporations, were made
defendants. The land affected by the suit aggregated about 700,000
acres -- 61,939 acres of which had theretofore been patented to the
railroad company, and applications were pending for patents as to
72,000 acres. Although this suit sought to quiet the title of the
government to lands claimed by numerous individual defendants by
purchase from or contract with the railroad company, the decree
entered in the circuit court provided that it should not
"affect any right which the defendants, or any of them, other
than the Southern Pacific Railroad Company, now have or may
hereafter acquire in, to, or respecting any of the lands
hereinbefore described, in virtue of the Act of Congress entitled,
'An Act to Provide for the Adjustment of Land Grants Made by
Congress to Aid in the Construction of Railroads, and for the
Forfeiture of Unearned Lands, and for Other Purposes,' approved
March 3, 1887."
Despite the contention of the railroad company that the
decisions in the former cases, reported in 146 U.S., settled merely
the status of the particular lands involved in that suit, it was
held that those decisions were conclusive as to all the lands
within the overlap.
168 U. S. 168 U.S.
1.
Page 228 U. S. 626
Therein also, in an opinion delivered on October 18, 1897, after
stating that the circuit court should have determined the rights of
the defendants, other than the railroad company, in the lands in
dispute, by virtue of the Act of 1887, it was said:
"The effect of the decree is to leave undetermined the question
whether the defendants who claim under the Southern Pacific
Railroad Company are protected by that act or any other act of
Congress."
And the decree of affirmance rendered by this Court was made
subject "to the right of the government to proceed in the circuit
court to a final decree as to those defendants."
While the last-mentioned suit was pending in this Court,
Congress passed an act, approved February 12, 1896, 29 Stat. 6, c.
18, amendatory of the Act of 1887, wherein it was further
provided:
"That where such purchasers, their heirs or assigns have paid
only a portion of the purchase price to the company which is less
than the government price of similar lands, they shall be required,
before the delivery of patent for their lands, to pay to the
government a sum equal to the difference between the portion of the
purchase price so paid and the government price, and in such case
the amount demanded from the company shall be the amount paid to it
by such purchaser."
Congress also, on March 2, 1896, 29 Stat. 42, c. 39, passed
another act relating to the same general subject as the Act of
March 3, 1887. The Act of 1896, among other things, provided for
the extension of time within which suits might be brought to vacate
and annul land patents, and provided that no patent to any lands
held by the
bona fide purchaser should be vacated or
annulled, but the right and title of such purchaser was by the act
confirmed. In this connection, it is to be borne in mind that the
Act of 1887 contemplated that the original erroneous patents or
certifications should be annulled, and that new patents
Page 228 U. S. 627
should issue to
bona fide purchasers from the railroad
company, which should relate back to the date of the original
certification of patent.
On the filing in the circuit court of the mandate of this Court
in the cause last referred to, the United States dismissed further
proceedings as to certain defendants other than the Southern
Pacific Railroad Company, and the trustees in the mortgage executed
by that company, respecting certain tracts of land, and at the same
time moved for a further decree against certain other defendants
respecting particular tracts of land claimed by them. The decree of
the circuit court (98 F. 46) determined as to various defendants
claiming lands aggregating 43,315.67 acres, for which no patents
had been issued by the United States, that they were citizens of
the United States and
bona fide purchasers of the lands
claimed by them,
"and entitled to make payments to the United States, and secure
patents from the United States therefor, upon complying with the
provisions of the Act of March 3, 1887, in that behalf."
As to other defendants claiming lands aggregating 9,284.39 acres
for which patents had been issued to the railroad company, it was
adjudged that they were
bona fide purchasers from and
under the railroad within the meaning of § 4 of the Act of 1887 and
within the meaning of the Act of March 2, 1896. The title of these
latter defendants and of their heirs, grantees, and assigns to the
lands claimed was by the decree confirmed. The government appealed
the case to the circuit court of appeals upon the contention that
the court erred in adjudging that the defendants were
bona
fide purchasers within the meaning of the Acts of Congress of
1887 and 1896, and, on the affirmance of the decree by the circuit
court of appeals, brought the case to this Court, where it was
determined on January 27, 1902, by the opinion reported in
184 U. S. 184 U.S.
49. And the record of the case so decided, introduced into the
record before us by stipulation,
Page 228 U. S. 628
shows that, in that case, the government not only prayed
confirmation of the titles of the defendants found to be
bona
fide purchasers within the meaning of the Act of March 3,
1887, but also that the United States
"may have judgment against the defendant railroad company for
the sum of $2.50 per acre for all such lands, if any, which this
honorable court may find to be held by the defendants here as such
bona fide purchasers for value."
The decree did not, however, provide for a pecuniary recovery,
and it does not appear why the government failed to seek a decree
in that respect.
On April 13, 1899, soon after the decision reported in
168 U. S. 168 U.S.
1, an additional suit was commenced by the United States against
the Southern Pacific Company in regard to lands within the overlap,
which was ultimately decided by this Court on February 19, 1906, in
an opinion reported in
200 U. S. 200 U.S.
341. The defendants, in addition to the railroad company and the
trustees under certain mortgages, were a number of individuals sued
as representatives of a class. The relief sought was the
confirmation of the titles of
bona fide purchasers, the
cancellation of the patents for other lands, and the recovery of
the value of the lands conveyed by the railroad company to
bona
fide purchasers, in accordance with the adjustment acts of
1887 and 1896. A money recovery was had at the rate of $1.25 per
acre, where the railroad company realized that amount on the sale
by it, and interest was allowed at the rate of six percent per
annum from the date of the decree.
Southern Pacific R. Co. v.
United States, 133 F. 653, 654.
The United States filed its bill in this case on January 28,
1903 -- about one year after the decision of this Court in the case
reported in
184 U. S. 184 U.S.
49, invoking the aid of equity, as stated in the opinion below, "on
the grounds of discovery, accounting, the establishment of a trust,
and the enforcement of a lien." The ultimate relief
Page 228 U. S. 629
sought, however, was a decree against the railroad company,
under the Acts of March 3, 1887, and March 2, 1896, for the
statutory price of lands located within the overlap and described
in two exhibits, A and B, which had been erroneously patented to
the railroad company prior to the passage of the adjustment act of
March 3, 1887, and which had been sold by the company to purchasers
whose titles had been confirmed. Recovery of interest was not
prayed. Exhibit A embraced lands sold by the railroad company to
bona fide purchasers who had applied to the Secretary of
the Interior, under the provisions of the adjustment acts, for, and
had received confirmation of, their titles to the respective lands
purchased by them. The lands embraced in exhibit B were all
confirmed by the decree of the case reported in
184 U. S. 184 U.S.
49, the purchasers being parties defendants in that suit. Some
1,900 acres of the lands set out in exhibit A were the subject of
the suit reported in
146 U. S. 146 U.S.
570, although the purchasers were not joined, and the remaining
lands in that exhibit formed part of the lands which were the
subject of the suit reported in
184 U. S. 184 U.S.
49, the purchasers being parties defendants in that suit. A final
decree was entered against the company (157 F. 96) for the
principal sum of $40,124.30, together with interest thereon at the
rate of seven percent per annum from March 2, 1896. This decree was
affirmed by the circuit court of appeals (186 F. 737), whereupon
the railroad company took this appeal.
Presumably in view of the decision of this Court in the case
reported in
200 U. S. 200 U.S.
341, the only assignment of error urged at bar concerns the award
of interest, the main contention on behalf of the railroad company
being that the statutes of 1887 and 1896, correctly construed,
negative any right to interest, and, in any event, the date fixed
by the court below from which interest was to run was
erroneous.
Page 228 U. S. 630
It may not be doubted that, testing the right to recover
interest exclusively by the face of the adjustment acts, such right
would not obtain, since those acts expressly provide for the
payment of a specified amount, the minimum statutory price of the
land, without any expressions tending to support the conclusion
that liability for interest was contemplated. On this subject, it
was said in 200 U.S. at
200 U. S.
353:
"The acts of Congress really inure to the benefit of the
railroad company, and restrict the right of the government, for
they provide that the recovery shall in no case be more than the
minimum government price. In other words, the government asks only
its minimum price for public land, no matter what the value of the
tracts or the amounts received by the company may be."
But it is unnecessary to further pursue this matter, since it is
conceded by the government that the right to recover interest here
asserted depends not upon an express liability imposed by the
adjustment acts, but upon general principles of law as applied to
the facts of the case. Primarily the argument causes the liability
for interest to depend upon the fact that the railroad company
received from those to whom it had sold the lands, the price
thereof, of which moneys it has since had the possession, and
therefore it should be condemned to pay interest from the time the
money was received. As already pointed out, however, this theory
conflicts with the plain purpose of the adjustment acts, which was
simply to provide for the settlement of a situation which had
arisen by a common mistake, the government taking back the land
which had been patented and which the railroad company had not
conveyed, and confirming to
bona fide purchasers the
titles to lands which had been conveyed to them by purchase from
the railroad, the government to receive for such lands merely the
minimum statutory price, a provision which excludes the conception
that it was conceived that
Page 228 U. S. 631
a liability was created based upon an accounting between the
government and the railroads of benefits and profits. It is,
however, insisted that, upon principles of equity, interest should
be allowed for the following reasons: (a) in view of the definite
nature and liquidated character of the obligation of the railroad
company to pay, as manifested by the terms of the Acts of 1887 and
1896, and (b) as the result of the legal proceedings taken by the
United States to enforce liability under the adjustment acts and
the course of judicial decision thereon, all of which we have
previously stated. The subjects are so interblended that we
consider them together.
The interest, as we have already stated, was allowed below from
March 2, 1896, the date of the last adjustment act, as to which it
is insisted in argument as follows:
"Then certainly, if not before, the United States became the
equitable assignee
pro tanto of the purchasers' rights to
recover what they had paid to the company through an innocent
mistake, and then certainly, if not before, the company came under
an equitable obligation to account to the United States. If it
continued to hold the moneys beyond that time, it would be only
reasonable and equitable to require it to pay the legal rate of
interest."
But, as we have pointed out, both the adjustment acts of 1887
and 1896 provided for no recovery of interest, and in the bill in
the case before us, which is expressly based upon those acts, there
is no prayer for interest. It certainly cannot be admitted, on the
one hand, as has been done, that the act did not provide for
interest, and yet it be, on the other hand, asserted that the act,
intrinsically considered, imposed the liability for interest from
the date of its passage. Indeed, both the adjustment acts, as we
have already pointed out, were long since treated by this Court as
contemplating action by the government to ascertain and fix the
liability which arose from their enactment.
Page 228 U. S. 632
Now the history we have given of the various suits concerning
the lands within the overlap shows that the case reported in
168 U. S. 168 U.S. 1
and
184 U. S. 184 U.S.
49 involved the question of who were
bona fide purchasers
of the larger part of the lands the statutory price of which is
sought to be recovered in this suit, and that the United States
appealed the case to this Court, contesting the correctness of the
holding of the courts below, as to defendants being
bona
fide purchasers -- a question whose decision was essential to
fix a pecuniary liability upon the company, which question was not
and could not have been determined until the decision of this Court
on January 27, 1902.
The very foundation of the liability having thus been in
litigation by the action of the government, there is no reason for
holding that, until that controversy was determined, the pecuniary
liability of the railroad company was so liquidated as to justify
the awarding of interest. The question therefore is limited to
determining whether the effect of the decree in the case decided in
1902 was to so fix the liability as to justify the awarding of
interest from that date. We think not, for the following reason: in
the suit which was terminated by the decree entered in 1902, the
government asked that, in cases where the purchasers from the
railroad company were found to have acted in good faith within the
meaning of the adjustment acts, it be decreed entitled to recover
$2.50 per acre, instead of $1.25 allowed by the adjustment acts.
While the decree of 1902 determined who were
bona fide
purchasers, contrary to the contention of the government, it did
not pretend to fix the resulting pecuniary liability or embrace
affirmative language conclusively protecting against the enlarged
claim which the government made in the suit. Under these
circumstances, we think it cannot be said that such a conclusive
liquidation arose or was deemed by the government to have arisen as
to justify an award of interest. This conclusion is also fortified
by the fact that
Page 228 U. S. 633
when, subsequently, in 200 U.S., the government obtained a
decree for the price of similar land sold to
bona fide
purchasers, interest was awarded to it only from the date of the
decree, without, apparently, objection's being made on the part of
the United States. This is further fortified by the fact that, in
the bill in this suit, filed after the decision in 1902, no demand
was made for interest.
Looking comprehensively at the whole situation, especially the
decision rendered in 1902, considering the withdrawal by the United
States of the previously asserted right to greater compensation
than the minimum statutory price, which was a necessary consequence
of the filing of its bill in this case, of the averment of demand
which the bill contained, and the absence of any objection on the
part of the defendant company because of prematurity, we think it
is just to say that the liability for interest upon the statutory
price arose at the date of the commencement of the suit, and no
sooner, and therefore that error was committed both in the trial
court and in the circuit court of appeals in not confining the
commencement of the running of interest to that date.
It follows that the decree of the circuit court of appeals, to
the extent that it affirmed the judgment allowing interest prior to
January 28, 1903, be, and the same is, modified, and as so
modified, is affirmed, and the cause is remanded to the district
court, with instructions to enter a decree conformably to this
opinion.
Modified and affirmed.