234 F. 34 | 8th Cir. | 1916
This is a suit brought by the United States to cancel patents for 1,280 acres of coal land situated in Lari-mer county, Colo. Title to 800 acres of the property is held by the defendant Coal Company as purchaser. The remaining 480 acres is held by the defendants Miller, Peters, and Smith under patents issued upon their individual entries. The bill asserts that the company derives its title through dummy entrymen, and further asserts that the individual defendants at the time they made their entries were stockholders of the Coal Company; and as it had already acquired coal lands in excess of the 320 acres allowed by the United States Revised Statutes, §§ 2348-2350 (Comp. St. 1913, §§ 4660-4662), they, as stockholders, were disentitled to file individual claims. The trial court entered a decree in favor of the government against the Coal Company, canceling the patents under which it claims, and dismissed the bill on the merits as against the individual defendants. Cross-appeals are brought to review the decree.
To understand the case the facts must be stated more fully. Two brothers by the name of Riach executed a bond for a deed in fqvor of a Mr. Lee, bearing date December 16, 1902, binding them to convey to_ him by perfect title 4,240 acres of land, specificallydescribed by tracts, and including the 800 acres involved in this suit. The bond was acknowledged and presumptively delivered January 9, 1903. On December 26, 1902, Mr. Lee organized the defendant corporation, and became its secretary, and a member of its board of directors. J anu-ary 15, 1903, he entered into an agreement with the company binding himself to convey to it 3,600 acres of land, including 160 acres of the 800 acres here involved, also three mining claims, and a controlling interest in the stock of a gold and copper mining company. This agreement is acknowledged and was presumptively delivered March 22, 1903. August 5, 1904, Lee released the company from all existing obligations under this contract. On the same day he assigned to it his bond with the Riachs, the company acquiring all his rights and assuming all his obligations under the bond.
Nearly two years afterwards one of the brothers, James C. Riach, employed dummy entrymen to give him the use of their names for the purpose of acquiring title to the 800 acres under the coal land statutes. These entrymen appointed Mr. Riach their attorney to make and perfect the entries. He paid all the expenses and the purchase price of the land. The first of the entries was made in April, 1905, three of them in March, 1906, and the fifth in August, 1906. Receiver’s receipts were issued on the first claim in April, 1905, and on the other claims in 1906, at about the time the entries were made.. As soon as the receiver’s receipts were issued, deeds were executed for the property by the several entrymen to James C. Riach. Patents
“The Riaelis contract did not require that Riach must pursue a dishonest course in order to comply with its terms. It was entirely possible that other persons might in their own interests lawfully acquire these lands before Riach was obliged to convey title under his contract, in which event he would have to treat with them in order to fulfil his contract.”
But is that argument based upon reasonable probability? Did the company intend that the Riachs should wait until independent entry-men should file upon these lands, and then take the chance of acquiring title from them, after they had obtained title from the government? To indulge in such an assumption would render the contract itself illusory. Whether the company would ever get title to the property would depend upon two events, indefinite in time and wholly beyond the control of the company and its vendors, viz.: First, the making of entries by independent entrymen; and, second, the willingness of such entrymen to part with their title after they had obtained it from the government. If the law is a practical science, courts must draw from circumstances and proofs the inferences which sensible and experienced men would draw from them. Acting upon that principle, it is our judgment that the bond for a deed contemplated that entries should be made for the benefit of the Riachs, and be at all times subject to their control. Upon that interpretation the bond was an illegal contract because of its natural and probable tendency to induce a violation of the law. By acquiring that bond the Coal Company became a party to its illegal purpose.
The defendants here crossed the line to which defendants in United States v. Clark, 138 Fed. 294, 70 C. C. A. 584, Id., 200 U. S. 601, 26 Sup. Ct. 340, 50 L. Ed. 613, and United States v. Barber Lumber Company, 194 Fed. 24, 114 C. C. A. 44, drew perilously near. In those cases, however, there was no contract to convey specifically described portions of the public domain. In the Clark Case the defendant loaned money to one Cobban, and knew that it was to be used by him in acquiring lands, and there was further an understanding between them that Clark would purchase timber lands of Cobban if, upon inspection, the timber and the title were found to be satisfactory; but diere never was, at any time, any agreement between them for the acquisition or conveyance of any specific tracts of public lands,
Second. The trial court found, and in our judgment, was amply justified by the evidence in finding, that the Coal Company had actual knowledge of the fraudulent practices of James C. Riach in obtaining the patents for the land. As already stated, Mr. Miller, its vice president, was on the most intimate terms with Riach during all the time down to the issuance of the patents. When examined as to whether he ever talked with Mr. Miller in regard to the character of the entries, Mr.' Riach’s testimony is evasive. Again and again he was asked whether he discussed that subject with Mr. Miller, and he evaded answering the question. Finally, when pressed, he stated that he thought there was some discussion of the subject. Mr. Miller testified at first that there was no such conversation, but, when pressed, he would do no more than say that he did not remember any such conversation. A plat of the various lands will show how important the 800 acres were to the entire coal property. It is incredible to us that the subject was not fully discussed between the Riachs and the officers of the company. The company was paying out large sums of money for the title before the entries were made and while they were pending. It would require us to depart from the ordinary inferences of life to believe that the company did not keep itself informed as to the steps which were being taken to obtain the property for which it was paying. If its officers did not acquire such knowledge, they studiously avoided doing so for the purpose of making the defense which they have interposed in this suit.
Some point is made of the fact that under the bond for the deed the consideration was double the purchase price paid to the government, and under the contract with Mr. Lee it was some four times the price fixed by the statutes for coal lands. The evidence does not support this argument. It is based upon the assumption that all the lands were of equal value. The contract, however, with Mr. Lee, covered gold and copper mining properties, and a controlling interest in a mining corporation. Both the bond and the contract also covered
In our judgment, the decree canceling the patents for the 800 acres was right, and should be affirmed.
In the briefs there is some argument of the question whether a person who becomes a stockholder in a corporation that has previously taken out an association claim under the coal land laws becomes disen-titled to file an individual claim. We do not deem it necessary to decide that question in the present case. It can properly be disposed of without such a decision, and we deem it better to defer deciding the question until its decision shall become necessary.
The decree of the trial court will be affirmed upon both its branches.