1. A bill in the nature of a supplemental bill is appropriate
for securing the benefits of a former decree when further relief to
that end is made necessary by subsequent events. P. 274 U. S.
2. In determining the scope of such a bill and the relief that
may be given upon it, the pleadings and proceedings of the earlier
suit may be considered when their nature is disclosed by the former
decree and opinion set up in the supplementary bill. P.
274 U. S.
3. One who, by fraudulent misrepresentation, induced a state to
select, and the government to convey to it, public lands of a kind
not subject to such selection, and obtained the equitable title
from the state; who was perpetually enjoined, in a suit by the
United States to which the state was not a party, from setting up
or making any claim to the lands, by decree establishing the
Page 274 U. S. 641
and declaring the United States the owner, and who subsequently,
by a conveyance from the state, acquired the legal title, holds
that title as a constructive trustee for the United States, even
assuming that it was unassailable in the hands of the state because
of the statute of limitations. P. 274 U. S.
4. Unless bona fide,
a purchaser under a title which
has been acquired by fraud takes subject to the equities of the
defrauded owner. P. 274 U. S.
6. Bona fide
purchase is an affirmative defense. P.
274 U. S.
6. Statutes of limitation against the Unite States are strictly
construed. P. 274 U. S.
7. Whether a certification of public land is within the statute
limiting suits by the United States to vacate or annul patents --
not decided. P. 274 U. S.
8. Where land has been certified to and sold by a state, a suit
by the United States to regain the title from the purchaser because
of fraud in procuring the certification is not a suit to cancel it.
9 F.2d 517 affirmed.
Certiorari (270 U.S. 639) to a decree of the circuit court of
appeals which reversed a decree of the district court dismissing a
bill brought by the United States to impress a constructive trust
on the legal title to coal lands which had been certified to the
State of Utah as agricultural and sold. It was in aid of a former
suit (228 Fed. 431) in which the United States was decreed to be
the owner of the equitable title upon the ground that the
certification had been procured by fraud.
Page 274 U. S. 642
MR. JUSTICE STONE delivered the opinion of the Court.
This is a second suit by the United States, and is in aid of the
first, for the restoration to the government of some 5,500 acres of
public lands located in Utah, title to which was procured by a
fraud perpetrated upon the land officers of the United States. The
first suit, which resulted in a judgment for the government
(affirmed 238 F. 431), was predicated upon the following
The United States, in 1894, made a grant of public lands to the
State of Utah to aid in the establishment of an agricultural
college, certain schools and asylums, and for other purposes.
Sections 8 and 10, Act of July 16, 1894, c. 138, 28 Stat. 107, 109,
110. Mineral lands were not included. See Milner v. United
228 F. 431, 439; United States v. Sweet,
245 U. S. 563
Mullan v. United States, 118 U. S. 271
118 U. S. 276
The grant was not of lands in place. Selections were to be made by
the state, with the approval of the Secretary of the Interior, from
unappropriated public lands in such manner as the legislature
should provide. The legislature (Laws Utah 1896, c. 80) later
created a board of land commissioners, with general supervisory
powers over the disposition of the lands, and with authority to
select particular lands under the grants.
During the period from December 10, 1900, to September 14, 1903,
Milner and others, the predecessors in interest of the Carbon
County Land Company, one of the petitioners, made several
applications to the state commission to select and obtain in the
name of the state the lands now in question, and at the same time
Page 274 U. S. 643
into agreements with the commission to purchase the lands from
the state. In aid of the applications and agreements, Milner and
his associates filed affidavits with the commission stating that
they were acquainted with the character of these lands, which they
affirmed were nonmineral and did not contain deposits of coal. They
also deposed that the applications were not made for the purpose of
fraudulently obtaining mineral holdings, but to acquire the land
for agricultural use. The applicants were obviously aware that the
affidavits or the information contained in them would in due course
be submitted to the Land Office of the United States with the state
commission's selections, as they were in fact. On the faith of
these and other documents, the selections were approved by the
Secretary of the Interior and the tracts in question were certified
to the state on various dates, the last being in December, 1904.
Certification was the mode of passing title from the United States
to the state.
In January, 1907, the United States brought the first suit,
against Milner and his associates and the Carbon County Land
Company, which had been organized by Milner to take over the land,
and was controlled by him. The suit was founded on the charge that
the certifications were procured by the fraudulent
misrepresentations of Milner and the others, since they knew at the
time of the applications that the lands contained coal deposits.
Although the bill in the present case states that the relief asked
was the cancellation of the contracts between the state and Milner
and his associates, this allegation is apparently inadvertent, for
the record elsewhere indicates that the bill in fact sought the
quieting of the government's title. It affirmatively appears that,
on June 8, 1914, the district court entered a decree declaring that
the United States "is the owner" and "entitled to the possession"
of the lands in question, and that the defendants
Page 274 U. S. 644
"have no right, title, or interest, or right of possession," and
perpetually enjoining them "from setting up or making any claim to
or upon said premises." The circuit court of appeals, in affirming
the decree, held that "the whole transaction was a scheme or
conspiracy on the part of Milner to fraudulently obtain the
ownership of these lands from the United States."
In bringing suit in this form, without making the State of Utah
a party, it is evident that the government relied on the principles
announced in Williams v. United States, 138 U.
. In that case, it was held, on a similar state of
facts, that the State of Nevada was not a necessary party to the
suit, and that the contract between it and its purchaser operated
to vest the equitable interest in the lands in him, the legal
interest being retained as security for the purchase price. This
"The State of Nevada might have intervened. It did not,
doubtless because it felt it had no real interest. It was no
intentional party to any wrong upon the general government. If its
agency had been used by the wrongdoer to obtain title from the
general government; if, conscious of no wrong on its part, it had
obtained from the general government the legal title and conveyed
it away to the alleged wrongdoer, it might justly say that it had
no interest in the controversy, and that it would leave to the
determination of the courts the question of right between the
government and the alleged wrongdoer, and conform its subsequent
action to that determination. That certainly is the dignified and
proper course to be pursued by a state, which is charged to have
been the innocent instrumentality and agent by which a title to
real estate has been wrongfully obtained from the general
Pp. 138 U. S.
The present suit is founded on the allegation that the State of
Utah, not conforming its action to the decision in the first suit,
despite the decree and the findings of
Page 274 U. S. 645
fraud upon which it was based, has conveyed the legal title to
the fraudulent purchasers. The bill was filed in May, 1924, against
the Carbon County Land Company and the Independent Coal & Coke
Company, petitioners here, and others whose interests are not now
material. It sets up the equitable title or interest of the United
States in the land, based upon the decree in the first suit, a copy
of which, with the opinion of the circuit court of appeals in that
case, it incorporated, the conveyance by patent of the state's
legal interest to petitioner, the Carbon County Land Company, and
explains that the Independent Coal & Coke Company was made a
party as it claims an interest in a part of the lands, the full
nature and extent of which is unknown to plaintiff. The relief
asked is that a trust be impressed in favor of plaintiff, that
defendants be ordered to convey whatever title they have, subject
only to any mortgages the state may have retained in conveying the
legal title, and that they be enjoined from mining coal.
The defendants separately moved to dismiss the bill on the
ground that it failed to state a cause of action against any of
them and that the action was barred by the statute of limitations,
§ 8, Act of March 3, 1891, c. 561, 26 Stat. 1095, 1099, limiting
suits by the United States to vacate and annul patents to six years
from the date of issue. The judgment of the district court
dismissing the bill as barred by the statute was reversed by
Circuit Court of Appeals for the Eighth Circuit. 9 F.2d 517. This
Court granted certiorari. 270 U.S. 639.
Petitioners maintain that the bill fails to allege any facts
showing that the Carbon County Land Company is a trustee of the
lands, or bound in equity to surrender them to the government.
Conceding the full force and effect of the decree in the first
suit, they assert that the State of Utah was not a party to it or
bound by its decree, that the title of the state, if ever open to
Page 274 U. S. 646
the United States, ripened into an indefeasible title by lapse
of time under the six-year statute of limitations, and that
petitioner may clothe themselves with the protection of that title
despite the decree in the earlier suit.
We may assume for the purposes of the present case, without
deciding, that the state officials were not cognizant of the fraud
perpetrated upon the United States, and that the legal title of the
state was not affected by the decree in the first suit, although
the United States, in an appropriate proceeding, might have
procured the annulment of the certification, at least within the
period of limitations. Cf. United States v. Sweet, supra;
Mullan v. United States, supra.
But it does not follow that
the defendants in the first suit could receive from the state the
fruits of their fraud free of an equitable obligation to make
restitution to the government, or that the United States could not
avail itself of all that was adjudged in its favor by the decree in
the first suit, even if its original cause of action against the
state were barred. By the contracts of purchase, Milner and his
associates acquired an equitable interest in the land. Williams
v. United States, supra.
Their interest was transferred to the
Carbon County Land Company, created and controlled by them for that
purpose, as a part of the fraudulent conspiracy condemned in the
first suit. The decree in that suit is conclusive that the company
was a party to the fraudulent scheme or conspiracy to acquire title
to the public lands by using the state and its officials as
agencies to procure the transfer. The decree not only established
that the United States was the true and full owner of the land to
the exclusion of the defendants, but perpetually enjoined them from
setting up or making any claim to the lands. This and the issues of
fact there resolved in favor of the United States, and pleaded
here, lead to the conclusion that none of the defendants, nor any
claiming under them with notice, could by any legal
Page 274 U. S. 647
device, however ingenious, acquire title from the state free
from the taint of their fraud.
The suit is in the nature of a supplemental bill in aid of the
former decree, and is an appropriate method of securing the benefit
of the first decree when subsequent events have made necessary some
further relief in order that the plaintiff may enjoy the full
fruits of the victory in the first suit. Cf. Root v.
Woolworth, 150 U. S. 401
18 How. 253, 59 U. S. 262
Thompson v. Maxwell, 95 U. S. 391
Story, Equity Pleading (10th ed.) §§ 338, 339, 345, 351(b), 353,
429, 432; Cooper, Equity Pleading, 74, 75. In determining the scope
of the present bill and the relief which may be given upon it, we
may consider the pleadings and proceedings in the earlier suit, the
nature of which are fully disclosed in the opinion and decree in
that suit, which are pleaded here.
It is ancient and familiar learning that one who fraudulently
procures a conveyance may not defeat the defrauded grantor or
protect himself from the consequences of his fraud by having the
title conveyed to an innocent third person. Cf. Merry v.
Freem. C.C. 151; Moore v. Crawford,
130 U. S. 122
130 U. S. 128
Girard Co. v. Lamoureaux,
227 Mass. 277; McDaniel v.
297 Mo. 424. Equity may follow the property until it
reaches the hands of an innocent purchaser for value. Even then,
the wrongdoer may not reacquire it free of the obligation which
equity imposes on one who despoils another of his property by fraud
or a breach of trust. The obligation in personam
restitution persists, and may be enforced by compelling a return of
the property itself whenever and however it comes into his hands.
Bovey v. Smith,
1 Vern. 60; Kennedy v. Daly,
Sch. & L. 355, 379; Williams v. Williams,
477; Talbert v. Singleton,
42 Cal. 390; Schutt v.
6 Barb. 373, 380; Church v. Ruland,
432, 444; Troy City Bank v. Wilcox,
24 Wis. 671; Lewin,
Trusts (12th ed.) 1102.
Page 274 U. S. 648
So also a purchaser with notice of an outstanding equity,
despite a transfer to an innocent purchaser for value, may not on a
later repurchase hold free of the equity. Clark v. McNeal,
114 N.Y. 287; McDaniel v. Sprick, supra,
32 S.D. 438, 449; Yost v. Critcher,
870, 876; 2 Pomeroy, Equity, § 754. So here, the obligation, having
its inception in the fraud which was established in the first suit,
has been confirmed by the decree and persists as to every interest
acquired by petitioners under the contracts with the state or which
may be enjoyed by them as the fruit of their fraud, even though we
assume for the moment that the title acquired by them could not
have been challenged while in the hands of the state.
It having been adjudicated that the government is the true owner
of whatever rights the land company acquired under the earlier
contracts with the state, the decree must be deemed either to have
transferred those rights to the government or to have determined
that the government is equitably entitled to have them so
transferred. If the former, the government may assert the rights
under the contract against the land company, as holder of the legal
title, as it might against any other purchaser of the land from the
state with notice. Bird v. Hall,
30 Mich. 374. If the
latter, the land company could not acquire the lands even through a
new and independent contract without a surrender of such rights as
it had under the earlier contracts, and it could not make the
surrender effective against the United States, the real owner,
without its assent, unless the state stood in the position of a
purchaser for value without notice. To these rights the government
is equitably entitled, and hence may at its election claim the
benefit of their proceeds in the hands of the land company. Cf.
United States v. Dunn, 268 U. S. 121
Taylor v. Kelly,
56 N.C. 240; Haughwout & Pomeroy
22 N.J.Eq. 531, 547.
Page 274 U. S. 649
Even if the title acquired were through a new and independent
contract, and even though it were not in a strict sense proceeds of
the earlier contracts, the relation of the land company and its
equitable obligation to the government, and its duty under the
decree in the first suit, are such as to preclude the acquisition
of any outstanding interest in the land in violation of the decree,
free of that obligation and duty. Cf. Keech v. Sandford,
Sel.Cas. 61; Lurie v. Pinanski,
215 Mass. 229;
Anderson v. Lemon,
8 N.Y. 236; Holridge v.
2 Johns.Ch. 30; Griffith v. Owen,
 1 Ch.195; Phillips v. Phillips,
L.R. 29 Ch.Div.
673. But cf. Bevan v. Webb,
L.R.  1 Ch. 620, and
see also Fair v. Brown,
40 Iowa, 209; Kezer v.
59 N.H. 208; Hall v. Westcott,
15 R.I. 373;
Middletown Savings Bank v. Bacharach,
46 Conn. 513.
We need not inquire now whether there may be defenses to the
cause of action stated in the bill. It is enough for present
purposes that, despite unskilled draftsmanship, it sets out facts
sufficient, on a motion to dismiss, to support the relief
But it is argued that there are no allegations showing that
petitioner, Independent Coal & Coke Company, is a party to the
fraud or what interest it claims in the lands, or that it acquired
any interest from or under any other party to the transaction. But
we think it fairly inferable from the bill, taken as a whole, that
the interest alleged to be claimed by the coal company was one
arising subsequent to the conveyance by the state to the land
company. The bill sets up title in the United States and its
transfer to the state alleging that the State of Utah, in making
the transfer, relied on the fact that it had not parted with the
legal title to the lands at the time of the decree. This, in
effect, is an averment that the interest claimed by the
Page 274 U. S. 650
coal company was acquired subsequent to the certification by the
United States to the state. Whatever interest it acquired after
that event it took subject to the equities of the United States,
and, if from the land company, subject also to all of the equities
against that company, unless the purchase price was bona
fide. Bona fide
purchase is an affirmative defense.
Wright-Blodgett Co. v. United States, 236 U.
, 236 U. S.
The statute of limitations relied on provides that suits by the
United States "to vacate and annul any patent . . . shall only be
brought within six years after the date of the issuance of such
patents." A point much argued here was whether a certification of
public lands is a patent within the meaning of the statute. But
that is a question which we need not decide. Statutes of limitation
against the United States are to be narrowly construed. United
States v. Whited & Wheless, 246 U.
, 246 U. S. 561
And we think it plain that the present suit, founded on equitable
grounds, to compel a conveyance of title derived from a
certification by the government is not a suit to cancel the
certification. See United States v. New Orleans Pacific
Ry., 248 U. S. 507
248 U. S. 510
248 U. S.
We hold that the acquisition of the title of the lands by the
land company as set out in the bill was in violation of equitable
principles and of the decree enjoining the defendants in the first
suit "from setting up or making any claim to the premises," and
that a proper case was stated for the imposition on both
petitioners of a constructive trust with respect to the lands
acquired by them. As the bill is not well drafted, respondent
should have leave to perfect it. This will promote an orderly and
intelligent disposition of the case.
MR. JUSTICE McREYNOLDS, MR. JUSTICE SUTHERLAND, and MR. JUSTICE