Petition — Morris v. United States

Supreme Court brief1979

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Supreme Court of TEE ROOK, JR, CLERK |

Che United States

October Term, 1979

No. @ 9 5 4

G. PATRICK MORRIS, JOAN E. ROTH, ELISE L.

NEELEY, LYLE D. ROTH, VERA M. BALTZOR

(formerly Vera M. Noble), CHARLENE S.

BALTZOR, GEORGE R. BALTZOR, JUANITA

M. MORRIS, NELLIE MAE MORRIS, MILO

AXELSEN, PEGGY M. AXELSEN, and FARM

DEVELOPMENT CORPORATION, an Idaho

Corporation,

An the

Petitioners,

UNITED STATES OF AMERICA and CECIL v.

ANDRUS, SECRETARY OF THE INTERIOR OF

-THE UNITED STATES OF AMERICA, Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF

APPEALS

FOR THE NINTH CIRCUIT

WILLIAM F. RINGERT

Anderson, Kaufman, Anderson

& Ringert

Attorney for Petitioners:

503 Idaho Building

Boise, Idaho 83702

In the

Supreme Court of

Che United States

October Term, 1979

No.

G. PATRICK MORRIS, JOAN E. ROTH, ELISE L.

NEELEY, LYLE D. ROTH, VERA M. BALTZOR

(formerly Vera M. Noble), CHARLENE S.

BALTZOR, GEORGE R. BALTZOR, JUANITA

M. MORRIS, NELLIE MAE MORRIS, MILO

AXELSEN, PEGGY M. AXELSEN, and FARM

DEVELOPMENT CORPORATION, an Idaho

Corporation,

Petitioners,

Vv.

UNITED STATES OF AMERICA and CECIL D.

ANDRUS, SECRETARY OF THE INTERIOR OF

THE UNITED STATES OF AMERICA, Respondents.

_ PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF

APPEALS

FOR THE NINTH CIRCUIT

WILLIAM F. RINGERT

Anderson, Kaufman, Anderson

& Ringert

Attorney for Petitioners

503 Idaho Building

Boise, Idaho 83702

: ;

eT nr nnmy

PAGE

Coren TROIOME eo ia a Ses hs bees 1

PUPAIIRINE ka as a2 ek RS Oe ee 1

ucstionn FROnenees oi. cla i ek oe eee 2

Constitutional and Statutory Provisions and

Pepetaliones TAVOINOG i kas -'ns so kaw ecen wel 5

statem@nt Of the LGG0 «so iis chads ayscekwnee eles 6

Reasons for Allowance of the Writ .............. 15

A. Dnbroretiote sok cer oer eee eee 15

B. The Holding Proviso of 43 USC § 329 isa Lim-

itation On The Quantity of Land to

Which Title Can be Acquired, and Was

Not Intended to Include Mortgages and

COOOON: ys og och CRE Oe eee 18

C. The Assignment of a Desert Land Entry is a

Transfer of the entire Interest of the

Entryman, and 43 USC § 324 Was Not

Intended to Include Mortgages and

TMROES oc cs See Rea es ete 39

D. Applying the IBLA’s Interpretation of 43 USC

§ 329 to These Entries Without Pub-

lishing an Appropriate Regulation Was

an Abuse of Discretion and Was in Ex-

cess of Statutory Limitations on the

Secretary's Authority; the IBLA Inter-

pretation Does Not Have the Force and

Effect of Law and the Courts are rt

Required to Defer to That Interpreta-

I ICE RPS a WA ay UL Re EES Ot Rae BT re Ee 46

E. If the Transactions Amounted to Holdings

by Sailor Creek in Excess of 320 Acres,

That Was Not Sufficient to Warrant Can-

cellation of the Entries and Forfeiture of

the Lands and Moneys; the IBLA Decision

was Inconsistent with Long-established

Policies of the Department ................. 55

F. The IBLA Violated the Administrative Proce-

dure Act and the Regulations of the De-

partment by Disregarding Uncontra-

_ dicted Evidence; the IBLA Wrongly

concluded that the Government was

not Estopped from Cancelling’ the

NE Se TUNG eo Aceh eae he [esses 60

G. Upon Filing Applications for Entry the En-

trymen Became Vested with the Right

to Have the Entries Processed in Ac-

cordance with the Policies and Regula-

tions in Effect at That Time ............... 65

H. The Issues of Denial of Due Process, Applica-

tion of Contract Law and Dismissal for

Inadequate Pleadings Should Have

Been Decided in Favor of the Petition-

ae ae CCAR ra Saath ered en EY Lae eae 74

ill

APPENDICES

Appendix A: Decision of the Administrative Law

EER ORAM LOM rae tele WE i ee A-1

Appendix B: Decision of the Interior Board of Land

pL) ek ane Or renrenee eatery Pere phy thes Ls: B-1

Appendix C: Findings, Conclusions and Order of

the District Court and Judgment of the District

Cee oa iA iiact os eee da sees core C-1

Appendix D: Opinion of the Court of Appeals and

Order of the Court of Appeals ............... D-1

Appendix E: Constitutional and Statutory Provi-

sions and Regulations Involved .............. E-1

Appendix F: H. R. No. 8102 (1886), and 1. R. No.

TOO? TRO i oe cds sc ee eee Nake eae F-1

CITATIONS

CASES Page

Abbotsford, The, 98 U.S. 440, 25 L. Ed. 168 ..... 24

Adolph Coors Company v. F.T.C., 497 F. 2d 1178

Re i eich ides kes cnaereceees 17, 63, 64

Aiken v. Obledo, 442 F. Supp. 628 (1977) ....... 53

Anderson, Clayton & Co. v. U.S., 562 F. 2d 972

0. APRESS Ors a aE nn, 2 eee ge aR pee 48

Andrus v. Charlestone Stone Prod. Co., Inc., 436

U.S. 604, 56 L. Ed. 2d 570 (1978) ......... 14, 63

Appalachian Power Co. v. Train, 566 F. 2d 451

(1977)

Arizona Grocery Co. v. Atchinson, T. & S. F. R. Co.,

284 U.S. 370, 76 L. Ed. 348 (1932) ............ 48

Atchison, T. & S. F. R. Co. v. Board of Trade, 412

U.S. 800, 37 L. Ed. 350 (1973) ......... 49, 58, 68

Bandy, Albert A., 41 Land Dec. 82 (1912) ....... 43

Barlow v. Collins, 397 U.S. 159, 25 L. Ed. 2d 192

oe cacy ESTERS Tey rea SERENE LAER cra Se a en ee 54

Bartine, Fred, 59 Land Dec. 110 (1945) .........33

Batterton v. Francis, 432 U.S. 416, 53 L. Ed. 2d 448

Co By § TONE NET ce NC aay 0 aA Canna os Re So 27, 53, 54

Benson Mining & Smelting Co. v. Alta Mining &

Smelting Co., 145 U.S. 428, 36 L. Ed. 762

OSES Pie OF ci RN aR meta ane aR AR at 69

Bingham, Wallace S., 82 Int. Dec. 377 (1975). 43. 49

Blake v. McKim, 103 U.S. 336, 26 L. Ed. 563

CRED sie sain dees 4 os ov a ee a en 42

Bond’s Heirs v. Deming Townsite, 13 Land Dec.

BAR (ISOR icc es eas Ee eee 33, 37

Bone v. Rockwood, 38 Land Dec. 253 (1909) ..... 60

Braniff Airways, Inc. v. C.A.B., 379 F. 2d 453

(OBT) beck ey eee ee kes eee ea oe 17

Bright, James F., 6 Land Dec. 602 (1888) ....... 25

Briscoe v. Kusper, 435 F. 2d 1046 (1970) ........ 48

Cameron v. United States, 252 U.S. 450, 64 L. Ed.

Ghd (1G19) oie cs i a ae 37

Campbell v. Glover, 35 Land Dec. 474 (1907) .... 42

Case v. Larkin, February 3, 1876, 2 Copp’s Public

Land Lawes 2330 (1862) ° 5. icc ci Sac Bene tien cue’ 38

Cass v. United States, 417 U.S. 72, 40 L. Ed. 2d 668

(FOTO). ohh ees ho eel 20

Catholic Bishop v. Gibbon, 158 U.S. 155, 39 L. Ed.

O81 (90RD iia. oe keen tes wae sae eas 38

Central Illinois Pub. Serv. Co. v. United States, 435

U.S. 21, 56 L. Ed. 2d 62 (1978) .....00..60 60: 49,50

Chapman v. Sheridan- Wyoming Coal Co., 338 U.S.

621, 94 L. Ed. 393 (1960) 2... ec ccsac ews 58, 71

Charlestone Stone Products Co., Inc. v. Andrus,

SES FF. Ol FRG CIOTT) aks eins ok erkt eee 63

Church of The Holy Trinity v. United States, 143

U.S. 457, 36 L. Ed. 226 (1602) ... 000. sce cseee 19

Cox v. Hart, 260 U.S. 427, 67 L. Ed. 332

NAD ona ati S ae ades dvds 8as 5 ones 25, 32, 38

Danford v. Ellsworth, 10 Land Dec. 341 (1890) ..26

Davies v. Killgore, 11 Land Dec. 161 (1890) ..... 26

Davis v. Manry, 266 U.S. 401, 69 L. Ed. 350

Poe Ceara evn ian cth Week bebeek eo Bee 29, 30

Day v. Weinberger, 522 F. 2d 1154 (1975) ....... 63

Diamond Ring Ranch, Inc. v. Morton, 531 F. 2d

SE AG OCS oc aay Sees Ls 5 dose sek wih 17

Dole, David B., 3 Land Dec. 214-(1884) ..49, 59, 67

Downey, S. W., 7 C.L.O. 26 (1880) .............. 18

El Paso Brick Co. v. McKnight, 233 U.S. 250, 58

Re Os ie wee cele awe wal cavers 20

Emert, Adolph, 14 Land Dec. 101 (1892) ........ 41

Emmerson v. Cent. Pacific Railroad Co., 3 Land

Ee TID Fcc aso c Vide sou ce aah ae Pea eke 25

Ernst & Ernst v. Hochfelder, 425, U.S. 185, 47 L.

Lk gs Sa ey er pas

Espinoza v. Farah Mfg. Co., 414 U.S. 86, 38 L. Ed.

MEE <cci wees tuber i Cotdescveds. cee

Fallon, Michael H., 36 Land Dec. 187 (1907) .... 43

Fleming v. Bowe, 13 Land Dec. 78 (1891) ....... 25

Flemington v. Eddy, 3 Land Dec. 482 (1884) .... 26

Fraser v. Ringgold, 3 Land Dec. 69 (1884) ....... 25

Freeman v. Laxton, 48 Land Dec. 519

I te Re oe ha eke OP cs 13, 56, 58, 60, 71

Vil

Gahan v. Garrett, 1 Land Dec. 137 (1882) ....... 26

General Electric Co. v. Gilbert, 429 U.S. 125, 50 L.

a: ee Ge Ce a ee how te Feet eS oaee aes 27, 28

Gonzales v. Freeman, 334 F. 2d 570 (1964) ...... 17

Graves, Alonzo W., 11 Land Dec. 283 (1890) ..... 40

Great Northern R. Co. v. Reed, 270 U.S. 539, 70 L.

Se, Ch LR kc wares ad ackaeach cd estewobeee 24

Grover & B.S.M. Co. v. Florence S.M, Co., 85 U.S.

ER, a Es. es ee RI nk veh one eeecnret. 24 42

Gunderson, Raymond L., 71 Int. Dec. 477

§) | Bree ree ree 49, 65, 66, 67, 68

Ham v. Missouri, 59 U.S. 126, 15 L. Ed. 334 (1855) 34

Hansen & Rowland v. C. F. Lytle Co., Inc., 167 F.

DRS MED 6k. eo MOC ARa Raat a eee 74

Heinzman v. LeTroadec’s Heirs, 28 Land Dec. 497

CRIT. oecks tudes katske ete ee eae eee ee 59

Helvering v. Griffiths, 318 U.S. 371, 87 L. Ed. 843

CEE) Soo ccs aie. od eo cer is a en eerotaat hk baa es 48

Helvering v. R. J. Reynolds Tobacco Co., 306 U.S.

ROG, Ba Ea: Te: Re CRO: soak cee as rieeh er ses 48

Hemstreet v. Greenup, 4 Land Dec. 493 (1886) .. 26

Hepworth, Wells, Idaho 07289 (1972) ............ 10

Hoffeld v. United States, 186 U.S. 273, 46 L. Ed.

DIGS CU aac a Foca Rik oa teeta eee 40, 41, 42

Investment Co. Institute v. Camp, 401 U.S. 617, 28

i Gs Oe ee MEMES cc carb ov he chinvawascetse 12

Vill

Jacob Switzer Company, 33 Land Dec. 383 (1905). 39

James v. Germania Iron Co., 107 F. 597 (1901). 17, 66

Jeremy, Thomas E., 24 Land Dec. 418 (1897). 33, 44

Jensen, Glenn W. and Margie R., A-29867

(ERO) seeds se NS ph er repay aoe Er 8, 28, 50

Jetes, Elnora C., 33 Land Dec. 41 (1904) ...... 7, 33

Johnson, Frank, 28 Land Dec. 537 (1898) ....... 38

Kelly v. United States Department of the Interior,

eee rs OE CROPPED 6 visa c ocdecaeevuuvea 53

Kepner v. United States, 195 U.S. 100, 49 L. Ed.

ee Re ee ivy as ck cus ee dGau wees ce sbeee's « 24

Klock v. Husted, 2 Land Dec. 329 (1884) ........ 27

Lemon v. Kurtzman, 411 U.S. 192, 36 L. Ed. 2d 151

Rs riba nee ieee Seo dp Sas cba ''e bb 0 ae 74, 7a

Leo Sheep Co. v. United States, _-U.S. __.,

eas Ss We OE ROA sons oeach ede eae eces 20

Leonard, Mary R., 9 Land Dec. 189 (1889) ...... 49

Linkletter v. Walker, 381 U.S. 618, 14 L. Ed. 2d 601

Rete rewire re ree ee pro ue sap ae derns 72

Logan v. Davis, 233 U.S. 613, 58 L. Ed. 1121

2 ESSE Se on tte Ma eae ORES A CREE, |

Lucas v. Ellsworth, 4 Land Dec. 205 (1885) ..... 29

Madison Oils, Inc., 62 Int. Dec. 478 ............. 74

Manhattan General Equip. Co. v. Commissioner,

297 U.S. 129, 80 L. Ed. 528 (1936) ............ 52

McDonald, Roy, 36 Land Dec. 205 (1907) ........ 32

McFeely v. Commissioner of Internal Revenue, 296

US. 102, 60 L. Bd. 6S. (1GSS) cnc ccs Ne ee

McLaren v. Fleischer, 256 U.S. 477, 65 L. Ed. 1052. 29

Michener, Raymond, et al, Idaho 012234 et al

CSR ac Sark Ore ek 40a Deen 8, 9, 28, 50

Miner v. Mariott, 2 Land Dec. 709 (1884; .......59

Morton v. Ruiz, 415 U.S. 199, 39 L. Ed. 2d 270

PRR ei iuicle as Raced hace ale 15, 46, 47, 52, 58, 71

Nevada Southern Ry. Co., 22 Land Dec. 1 (1895). 39

New York Tel. Co. v. New York Labor Dept.,

J .S....., 59 L. Ed. 2d 563 (1979) ..........39

N.L.R.B. v. Bell Aerospace Co., 416 U.S. 267, 40 L.

ee OR GS CAR. eksinks Feb cdaraee eee 48, 51

N.L.R.3. v. Cleveland Trust Co., 214 F. 2d 95

CRG cca 5 taal Satie REED se es 18, 63

N.L.R.B. v. Highland Park Mfg. Co., 341 U.S. 322,

OF Si: es CRE cs ci isd-e uber asx vote hee Lee

N.L.R.B. v. Wyman-Gordon Co., 394 U.S. 759, 22

oe Ee eh. ere re ry

Northern Pac. Ry. Co. v. Smith, 171 U.S. 260, 43

Re RAPE REED > Sn artha thasw'ei coh kere eaewe OF «ee

Oakley, Herbert C., 34 Land Dec. 383 (1906) .... 29

Olsen v. Warford, 11 Land Dec. 289 (1890) ...... 26

Payne v. Central Pacific Railway Co., 255 U.S.

ee a Oe TO CRUE his oc epee eda wake ape 67

Payne v. State of New Mexico, 255 U.S. 360,

aha, A ee SAE ewes cis teen ceeken 67

Pennell v. Philadelphia & Reading Ry. Co., 231

Cy. a OB Te. a Oe a sk ee Sa ees 28

Perrine, Charles, 3 Land Dec. 331 (1883) ........ 38

Pfaff v. Williams, 4 Land Dec. 455 (1886) ....... 25

Rector v. Gibbon, 111 U.S. 276, 28 L. Ed. 427

Reiche v. Smythe, 80 U.S. 162, 20 L. Ed. 566

ea Ne So NEN EE OMEN LT ERS ER

Safarik v. Udall, 304 F. 2d 944 (1962) ....... 49, 59

Saylor v. Wilson, 7 Land Dec. 493 (1888) ........ 26

Schetka v. Northern Pacific Railroad Co., 5 Land

Se MEE CRISES: a's Cos yy Ohne onde cin ae ta ake wee 25

Securities and Exchange Commission v. Chenery

Corp., 332 U.S. 194, 91 L. Ed. 1995 (1946) ....46

Shaffer, A. M., 73 Int. Dec. 293 (1966) .......... 73

Silsbee Town Company, 34 Land Dec. 430

Ce ern ya reais rary eas 5 4 a ras, a ae Rate 29

Smith v. United States, 170 U.S. 372, 42 L. Ed.

Pe SAME Fo a cca as weees eek dee a ee el 20, 52

Solicitor’s Opinion Idaho Desert Land Entries —

Indian Hill Group, 72 Int. Dec. 181 (1965) ....51

Sprague v. Ticonic National Bank, 307 U.S. 161,

SES Se. Se A) Pick < een eee das 74

State of Wisconsin et al, 65 Int. Dec. 265,

CRUE ih cuk Motes Se awe sec 69, 70, 71

Stone & Webster Engineering Corp. v. N.L.R.B.,

ee ee CRON cos Wien cara cb eens 18, 62

Xx!

Teamsters v. Daniel, ___U.S.__, 58 L. Ed. 2d 808

REE ears ee ORT Rak UWE Tree U Ae Ra 27

Thomason v. Patterson, 18 Land Dec. 241 (1894). 7,33

Thompson, William, 8 Land Dec. 104 (1889). . 49, 59

Tibergheim v. Spellner, 6 Land Dec. 483 (1888) .63

Train v. Colorado Public Int. Research Group, 426

US.1, 46 b, Gd. 28 4364 (2076)... 20

Trans Alaska Pipeline Rate Cases, 436 U.S. 631,

Oe dey NOT ee kee daccds ev aeeeaces 29

Udall v. Tallman, 380 U.S. 1, 13 L. Ed. 2d 616. 29,58

Union Pacific R. Co. v. Johnson, 249 F. 2d 674

LER. wera eoosins Oe eink eet at eee an 74

United Housing Federation, Inc. v. Forman, 421

U.S. 837, 44 L. Ed. 2d 621 (1975) ...... 19, 27, 54

United States v. Alabama Great Southern Rail-

road Co., 142 U.S. 615, 35 L. Ed. 1134 ........ 32

United States v. Bank of the Metropolis, 15 Peters

OE 2 ae ROAD Ce inv ac cae haee ta oes 65

United States v. Buchanan, 232 U.S. 72, 58 L. Ed.

United States v. Chicago, St. P., M., & O., Ry. Co.,

BSF Ue re AS 5 a eae 29

United States v. Christopher, 71 F. 2d 746

REE PR iw scroll eae Sk Ce Wek Sean A IE a wea 17,63

United States v. Clarke, 529 F. 2d 984 (1976) ...37

United States v. Colorado Anthracite Co., 225 U.S.

210, 20 t.; Be. 1063 (B12) oes a ck EEA

X11

United States v. Commonwealth Title Ins. & Trust

Co., 193 U.S. 651, 48 L. Ed. 830 (1904). 40, 41, 42

United States v. Denver and Rio Grande R. Co.,

160 US. 1, 37 L. Bd. FIG (1808) .... co. cc ssvanss 20

United States v. George, 228 U.S. 14, 57 L. Ed. 712

CSTD oo Cae eee ov ea bee ee ee

United States v. Grigg, 82 Int. Dec. 123 (1975) .. 28

United States v. Healey, 160 U.S. 136, 40 L. Ed. 369

(RODE) koeccccevnccaccksas Deen ee eee 35

United States v. Larionoff, 431 U.S. 864, 53 L. Ed.

BO BAIT TY o's ccinvion teas een uses oe tee 52

United States v. McDaniel, 7 Peters 1, 8 L. Ed. 587

CRO 6k Sek ckeeeee scr cane Clee Ea 32, 59

United States v. Shearman, 73 Int. Dec. 386

Se ss era 10, 11, 13, 14, 28, 51, 66

United States v. Sheldon, 15 U.S. 119, 4 L. Ed. 199

(BOUT). woe odxeed bh al ele oe 34

United States v. Townsley, 323 U.S. 557, 89 L. Ed.

GS (IDOG) oe ckck vn 008s bs ae ee ee ee 26

United States v. Union Pac. R. Co., 91 U.S. 72 ..19

Universal Camera Corp. v. N.L.R.B., 340 U.S. 474,

O68 t. Bd. 468 (RGGI © oven ee oe 62, 63, 64

Webster v. Luther, 163 U.S. 331, 41 L. Ed. 179

(EOE) 6 nda coker cee ace ean eile. | eee 26

XI11

White Glove Building Maintenance, Inc., v. Bren-

ee a REO R SEU o.oo x0 seh b owe eweecs 64

Wilde, Julius M., 3 Land Dec. 325 (1885) .......33

Williams v. Kirk, 38 Land Dec. 429 (1910) ....., 37

Wisconsin Central R. Co. v. Forsythe, 159 U.S. 46

tn oO RROD sees vs Lua Secuenaes 54-55

Wyoming v. United States, 255 U.S. 489, 65 L. Ed.

SOE YSERA 68, 69

Yarbrough, Waymon D., Idaho 07212 (1972) ..... 10

Young v. Trumble, 35 Land Dec. 515 (1907) ..... 42

Zemel v. Rusk, 381 U.S. 1, 14 L. Ed. 2d 179

Ys MU ares ae oie a Wve de 4G ws a nea 58

Zenith Radio Corp. v. United States, U.S.__, 57

Se MEE CUNO on ck odd locas baw 27

Zuber v. Allen, 396 U.S. 168, 24 L. Ed. 2d 345

MSG SoG cian ee eae cCKA an vee veo 28, 31, 45

X1V

CONSTITUTION:

United States Constitution, Amendment 5 (Due

Process Clause) ...... POET er ree ee 5, E-1

Statutes:

I NN iia Cab Siva Wis we Wen eno 5, 52, E-1

5 USC § 552 (a) (1) ....... 5, 18, 15, 17, 46, 47, E-1

Baler SOE CR) oo se a evinces acewene ces 5, E-2

RP Se AU pak Ceres di emniewn tances sp 5, 9, E-2

Oe eg ere cee err ee 5, E-2

2) ot 2 |g | Ie eran ay ee foe 5, 62, E-2

S50 oe 2 2 a nicer: Ot

eS PR a eek pees Ranh eae he 5, 52, E-3

5 USC § 706 (2) A, C and D ............. 5, 55, E-3

A Re CR i oi 0a Sac tars Le ies 1, 5, E-4

ee OPN SE OST 16) ooo cha cecea ven See

es 1001 Bo rk. an ents ee 5, E-4

inn Cees vip tae ore ee

a a aS i oe Oe cd en Se

SO Be eileen ti een eee

ht ig St. Seem ve ener rgers 05

Re WE os coe ec aeea hee eee 5, 6, 18, 31, E-7

OP Re Se ees eae ee 2, 5, 9, 18, 15, 16, 29, 30,

39, 40, 41, 44, 49, 51

Piet. oe & - Ree areas 2,3, 4; 3, 3; 9 11; 22, 83,

14, 15, 16, 17, 18, 20, 24, 25, 26, 28, 29, 30,

31, 34, 35, 38, 39, 41, 45, 46, 47, 48, 49, 50,

51, 55, 56, 65, 66, 68, 72, 73, E-8

45 UBL 8 Se iti Sa ie eee 5, 36, E-9

GS Us “Ss Vea eecra rete 5, 40, 41, 42, E-10

BS Are SEIS as vc cwdesscuewei een 5, 9, E-10

AS UM 0 EBOE nce cus ahene ec eae 5, 53, 55, E-11

idaho Code § 46-200. iss. es ivasere ees 5, 7, E-11

Idaho Code § 45-901) ..... kee eee eee 5, 7, E-11

sano Come: § 45-0068 iis des keaceaeaes 5, 7, E-11

Regulations and Instructions:

Instructions, 4 Land Dec. 51 (1885) ........... 19

Instructions, 34 Land Dec. 29 (1905) ...... 36, 43

Regulations, 37 Land Dec. 312, 315-316

CRS 6 his eee we Ree 43, 44, E-16

43 CFR § 4.478 (a) (1975 Revision) ..... 6, 62, E-11

43 CFR § 21/.39 (1963 Revision) ....... 6, 41, E-12

43 CFR § 217.42 (1963 Revision) ........... 6, E-12

43 CFR § 232.1 (b) (1963 Revision) ..... 6, 19, E-13

43 CFR § 232.9 (a) (1963 Revision) ..... 6,:30, E-13

43 CFR § 232.17 (c) (1963 Revision) 6, 56, 57, 58, E-13

43 CFR § 232.18 (d) (1963 Revision) 6, 7, 51, 53, E-14

43 CFR § 1822.3-5 (a) (1974 Revision) ..6, 41, E-15

43 CFR § 1822.3-6 (a) (1974 Revision) ..6, 41, E-15

43 CFR § 1852.1-4 (a) (4) (1966 Revision) 6, 9, E-15

43 CFR § 2226.1-2 (c) (3) (1964 Supplement) .. 6, 13

XVi

43 CFR § 2226.1-3 (a) (1964 Supplement) 6, 71, E-15

43 CFR § 2226.1-3 (d) (1964 Supplement) 6, 33, E-15

43 CFR § 2521.3 (b) (1) (1974 Revision) 6, 43, E-15

43 CFR § 2521.3 (c) (1978 Revision) ....6, 44, E-16

Other:

Acreage Limitation Policy, United States Depart-

ment of the Interior (1964) ..............se0.: 31

Be RN, GUN. UP BOE Nokes ec vscne ase eeenawes 22

SOON chee ccersbake ccs vaaneeeneuns 22

19 Cong. Rec. 5601-5602 (1888) ................. 23

BC, EERE nck sabe dsobuebabup eh eudweeses 23

ee OAS oak b.0.6 need beeen eke pad vagau 24

i re ARAM LOR 21, 22, 23, 36, F-1

6s e's aN sia bie pd ov 5 PRED LARD AMD 25, F-1

House Rep. No. 1888, 49th Cong., Ist Sess. (1886) 21

House Rep. No. 4896, 59th Cong., Ist Sess. (1906) 43

House Rep. No. 626, 84th Cong., Ist Sess. (1955) 31

House Rep. No. 2737, 84th Cong., 2nd Sess. (1956) 37

Senate Rep. No. 341, 60th Cong., Ist Sess. (1908) 42

Senate Rep. No. 2405, 84th Cong., 2nd Sess. (1956) 37

In the

Supreme Court of

Che United States

October Term, 1979

No.

G. PATRICK MORRIS, JOAN E. ROTH, ELISE L.

NEELEY, LYLE D. ROTH, VERA M. BALTZOR

(formerly Vera M. Noble), CHARLENE S.

BALTZOR, GEORGE R. BALTZOR, JUANITA

M. MORRIS, NELLIE MAE MORRIS, MILO

AXELSEN, PEGGY M. AXELSEN, and FARM

DEVELOPMENT CORPORATION, an Idaho

Corporation,

Petitioners,

Vv.

UNITED STATES OF AMERICA and CECIL D.

ANDRUS, SECRETARY OF THE INTERIOR OF

THE UNITED STATES OF AMERICA, Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF

APPEALS

FOR THE NINTH CIRCUIT

Petitioners pray that a writ of certiorai issue to re-

view the judgment and decision of the United States

Court of Appeals for the Ninth Circuit entered herein

on November 16, 1978, as amended on April 9, 1979.

OPINIONS BELOW

The Findings, Conclusions and Order of the United

States District Court for the District of Idaho, entered

December 17, 1976, affirming, in part, and reversing,

in part, the decision of the Interior Board of Land

Appeals dated April 7, 1975, and the Judgment en-

tered by the District Court on December 20, 1976, are

set out in Appendix C., pp. C-1 through C-18, infra. The

Findings, Conclusions and Order, and the Judgment,

are not reported. The Opinion of the United States

Court of Appeals for the Ninth Circuit, filed November

16, 1978, and the Order of the Court of Appeals filed

April 9, 1979, are set out in Appendix D, pp. D-1

through D-11, infra. The Opinion of the Court of Appe-

als, as amended, is reported at 593 F. 2d 851.

JURISDICTION

The Judgment and Opinion of the United States

Court of Appeals for the Ninth Circuit was made and

entered on November 16, 1978. Timely Petition for

Rehearing was filed by these Petitioners. The Order

denying the Petition for Rehearing and rejecting the

Suggestion for Rehearing en Banc was made and en-

tered April 9, 1979. This Court has jurisdiction to re-

view the Judgment herein by writ of certiorari pur-

suant to 28 USC § 1254 (1).

QUESTIONS PRESENTED

1. Do a mortgage and a sublease (or a lease) consti-

tute the holding of the lands in a desert land entry

within the meaning of 43 USC § 329?

2. Do a mortgage and a sublease (or a lease) consti-

tute the assignment of a desert land entry within the

meaning of 43 USC § 324?

3. Does the holding by a single entity, by assignment

or otherwise, of more than 320 acres of desert entry

land, warrant or require forfeiture of all land thus

held, and all moneys paid for that land, where the

transactions were voluntarily submitted to the Bureau

of Land Management nearly 22 months before the en-

tries were challenged?

4.Can the administrative decision cancelling the

desert land entries be upheld, on judicial review, on a

finding by the District Court and by the Court of Appe-

als that the entries had been assigned, where the In-

terior Board of Land Appeals made no such finding and

did not reverse the Administrative Law Judge's find-

ing that the entries had not been assigned?

5. Did the Interior Board of Land Appeals abuse its

discretion or exceed its powers and authority by can-

celling the desert land entries on the basis of a new and

different interpretation of 43 USC § 329 adopted by the

Secretary of the Interior 22 months or more after the

entrymen made final proof and final payment for the

land?

6. Does the Secretary of the Interior’s failure to pub-

lish a regulation stating a new interpretation of 43

USC § 329 preclude the Interior Board of Land Appeals

from applying that interpretation to these desert land

entries?

7. Is the Interior Board of Land Appeals’ finding that

the Bureau of Land Management was not aware that

the entrymen intended to lease their entries to a single

farming entity supported by substantial evidence?

8. Is the Government estopped from applying its new

interpretation of 43 USC § 329 to these desert land

entries because it allowed the entries with knowledge

of the mortgages and that the entrymen intended to

lease to a single entity, failed to assert the new in-

terpretation before contesting the entries, meanwhile

permitting Sailor Creek to receive whatever benefits

were available to it under the sublease, with no com-

ment or indication that the transactions violated 43

USC § 329, and issued a contrary interpretation in

August, 1964, less than a month after copies of the

leases and sublease had been furnished voluntarily as

requested?

9. Did the IBLA act arbitrarily and capriciously or

abuse its discretion or exceed its powers and authority

by failing to observe and follow procedure and policy

established by Department of the Interior regulations

and decisions to the effect that desert land entries are

controlled by the interpretations in effect when they

are initiated and that excess holdings resulting from

transactions entered into in good faith and voluntarily

made known to the Bureau of Land Management are

regarded as ineffective and as leaving all rights in the

entryman?

10. Did the entrymen have such vested interests

upon filing their applications and payment of the

downpayment of twenty-five cents per acre as would

preclude the Department of the Interior from imposing

limitations, requirements or procedures not stated in

regulations or decisions in effect when the applications

were filed?

11. Did the right to patent vest in the entrymen

upon making final proof and final payment under 43

USC § 329, so as to preclude the Department of the

Interior from thereafter cancelling the entries on the

basis of limitations, requirements or procedures not

stated in regulations or decisions which were in effect

when final proof and final payment were made?

12. Did the Court of Appeals improperly limit the

scope of review to the determination of whether the

Secretary's (IBLA’s) decision is arbitrary or capricious

or unsupportable by substantial evidence, considering

the record as a whole?

13. Did the cancellation of the desert land entries on

the basis of an interpretation of 48 USC § 329 which

had not been adopted, or even proposed, at the time

that final proof and final payment were made on these

entries, without giving the entrymen any opportunity

to comply with the requirements of the new interpreta-

tion, deprive the Petitioners of their property without

due process of law, in violation of Amendment 5 of the

Constitution of the United States of America?

14. Are desert land entries contracts between the

United States and the entrymen, which should be in-

terpreted according to the regulations and decisions tn

effect at the time the entry is made?

15. Should the administrative contests have been

dismissed because of the BLM’s failure to state in the

administrative complaints the matters of fact and law

asserted?

CONSTITUTIONAL PROVISIONS, STATUTES

AND REGULATIONS INVOLVED

The pertinent portion of the Due Process Clause of

the United States Constitution — Amendment 5, is set

forth in Appendix E., p. E-1.

The pertinent portions of the statutes involved in

this case are set forth in Appendix E, pp. E-1, et seq.,

infra. The citations of those statutes are as follows,

with volume and page citations to U.S.C., 1976

edition except 43 USC § 689, cited to the 1970 edition.

5 USC § 301, Vol. 1, p. 303; 5 USC § 552 (a) (1), Vol. 1,

p. 809; 5 USC § 554, Vol. 1, p. 324; 5 USC § 556 (a), Vol.

1 p. $25; 5 USC § 556 (d), Vol. 1, p. 326, 5 USC’§ 558,

Vol. 1, p. 328; 5 USC § 706 (2) A, C and D, Vol. 1 p. 334:

28 USC § 1254 (1), Vol. 8, p. 157; 28 USC § 1331 (a),

Vol. 8, p. 164; 28 USC § 1361, Vol. 8, p. 178; 43 USC §

2, Vol. 11, p. 2; 43 USC § 162, Vol. 11, p. 28; 43 USC §

263, Vol. 11, pp. 52-53; 43 USC § 315f, Vol. 11, p. 71; 43

USC § 321, Vol. 11, pp. 79-80; 43 USC § 324, Vol 11, p.

81; 43 USC § 329, Vol. 11, p. 82; 43 USC § 336a, Vol.

11, p. 84; 48 USC § 689, Vol. 10, p. 10929; 43 USC §

1165, Vol. 11, p. 270; 43 USC § 1201, Vol. 11, p. 279;

Idaho Code (1.C.) § 45-109, Vol. 8A, p. 73; LC. § 45-901,

Vol. 8A, p. 131; LC. § 45-903, Vol. 8A, p. 135.

The pertinent portions of the regulations involved in

this case are set out in Appendix E, pp. E-11, et seq.,

infra.

The citations of those regulations are as follows: 43

CFR § 4.478, 1975 Revision, p. 84; 43 CFR § 217.39,

1963 Revision, p. 510; 43 CFR § 217.42, 1963 Revision,

p. 510; 43 CFR § 232.1 (a), 1963 Revision, p. 561; 43

CFR § 232.1 (b), 1963 Revision, p. 561; 43 CFR § 232.9

(a), 1963 Revision, p. 563; 43 CFR § 232.17 (c), 1963

Revision, p. 566; 43 CFR § 232.18 (d), 1963 Revision, p.

567: 43 CFR § 1822.3-5 (a), 1974 Revision, p. 24; 43

CFR § 1822.3-6 (a), 1974 Revision, p. 25; 43 CFR §

1852.1-4 (a) (4), 1966 Revision, p. 141; 43 CFR §

2226.1-2 (c) (3), 1964 Supp., p. 204;43 CFR § 2226.1-3

(a), 1964 Supp., p. 204; 43 CFR § 2226.1-3 (d), 1964

Supp., p. 204; 43 CFR § 2521.3 (b) (1), 1974 Revision, p.

127; 43 CFR § 2521.3 (c) (1), 1978 Revision, pp. 153-

154.

STATEMENT OF THE CASE

This case involves twelve entries in Idaho made

under the Desert Land Act, 43 USC § 321 et seq, Act of

March 3, 1877, 19 Stat. 377, as amended.

The individual Petitioners filed applications for

entry with the Bureau of Land Management (BLM) in

early 1963. While the applications were being proces-

sed by the BLM, G. Patrick Morris, one of the appli-

cants, advised BLM representatives that the entrymen

intended to obtain “100% financing” for the project

and, in response to concern expressed by BLM rep-

resentatives regarding farming capacilities, Morris

advised them that several of the entries would be

leased to a single operator.

The regulations of the Department of the Interior

(Department) in effect in 1963 recognized the right to

mortgage a desert land entry where, under state law,

the mortgage is regarded as merely creating a lien.!

Under Idaho law a mortgage creates only a lien.2 The

regulations contained no reference to leases on desert

land entries. Several decisions of the Department had

approved leases on other types of entries. See, e.g.,

Thomason v. Patterson, 18 Land Dec. 241 (1894): El-

nora C. Jetes, 33 Land Dec. 41 (1904).

Negotiations by Morris with several irrigation sup-

ply companies led to “water right contracts” with

Sailor Creek Water Company (Sailor Creek)? under

which Sailor Creek agreed to construct the irrigation

system to reclaim the entries and to sell perpetual

water rights to the entrymen, with the purchase price

secured by a mortgage on the entry. The water right

contracts were approved by the BLM. A copy of the

applicable mortgage was attached to each water right

contract as an exhibit. On August 30, 1963, the BLM

issued a decision recognizing Sailor Creek as source of

water for the entries, based on the contracts, and

Sailor Creek started construction of the irrigation sys-

tem, which was completed early in 1964 at a cost of

approximately $700,000.00. The applications were “al-

lowed” between November 1, 1963 and March 13,

1964. As each entry was allowed, the lease for that

entry was recorded in the county records.

In late September, 1963, eleven entrymen made

' 43 CFR § 232.18 (d)

* Idaho Code §§ 45-109, 901 and 903.

* Since September, 1964, a division of Farm Development Corporation,

one of the Petitioners.

leases to Morris and Allen T. Noble, for two years with

two five-year renewals. Noble discussed the leases

with a BLM field representative and the BLM District

Manager before they were made. The rent agreed upon

was comparable to that paid for privately owned land

of similar quality in the same general area. Early in

1964 Morris and Noble subleased for 1964 to Sailor

Creek and Morris leased the land in his own entry to

Sailor Creek for 1964.

On February 17, 1964, the Secretary of the Interior

(the Secretary), through his delegate, issued a deci-

sion? which impliedly approved the development and

farming provisions of a development contract which

gave the developers the use of 640 acres covered by

applications for two desert land entries for farming for

four years.

By May of 1964 the reclamation, irrigation and cul-

tivation requirements of 43 USC § 329 had been com-

pleted for all twelve entries, and on June 8 and 9, 1964,

final proof was submitted and final payment was made.

The BLM field report on final proof noted that the

entries were being farmed by Sailor Creek under con-

tract with the entrymen.

On July 7, 1964, the BLM requested the entrymen to

furnish copies of their contractual arrangements, not-

ing that “There is nothing of record with this office

that shows such contractual arrangements.” The re-

quested copies were furnished July 24, 1964.

On August 14, 1964, the Director of the BLM issued

a decision’ in which he held that the holding limitation

§ Glenn W. and Margie R. Jensen, A-29867.

5 Raymond T. Michener, et al., Idaho 012234, et al.

of 43 USC § 329 applied only to entrymen and not to

mortgagees or lessees, and that 20-year leases, coupled

with mortgages, were not assignments under 43 USC §

324.

In September of 1964 Morris assigned his interest in

the eleven leases to Sailor Creek, and leased his entry

to Sailor Creek for 1965 with two five-year renewals.

Noble assigned his interest in the leases to Sailor

Creek in February of 1965.

On April 9, 1965, the Secretary issued an order®

setting aside the BLM Director’s 1964 decision in.

Michener, based on an opinion made April 5, 1965, by

the Solicitor of the Department.’ The BLM did not

notify the Petitioners that the interpretation of 43

USC § 329 stated in the Solicitor’s Opinion would be

applied to their entries and did not order them to

cancel the leases and mortgages.

On May 13, 1966, the BLM filed administrative con-

test complaints against the twelve entries. Contrary to

the requirement of the Department’s regulations (43

CFR 1852.1-4 (a) (4) (1966 Revision)) and the statutory

requirement that the entrymen be furnished timely

notice of the matters of fact and law asserted (Act of

June 11, 1946, c. 324, § 5, now 5 USC § 554 (b) (3)), the

charges in the complaints did not state any of the facts

relied upon and did not specify that the mortgages and

leases violated 43 USC § 324 or 43 USC § 329. The

statute of limitations for contesting the desert land

entries, 43 USC § 1165 (Act of March 3, 1891, c. 561, §

nt. Dec. 182-183.

nt. Dec. 156.

7, 26 Stat. 1098), expired on June 8, and June 9, 1966.

On December 30, 1966, the Secretary issued a deci-

sion in United States v. Shearman, 73 Int. Dec. 386,

which involved mortgages and 20-year leases on

3,688.6 acres of desert entry land, in which he held

that the right to possess, reclaim, farm, retain the

farming proceeds and pledge the entries gave the

mortgagee-lessee complete dominion over the entries

for a period of 20 years and constituted a prohibited

assignment and holding in excess of 320 acres of desert

land.*

After 38 days of hearings, followed by extensive

briefing, the Administrative Law Judge issued a deci-

sion” on these entries, in which he made extensive and

comprehensive findings of fact and conclusions of law

and ruled in favor of the entrymen on all charges, and

he directed issuance of patents. He also found that the

entrymen had acted in good faith.

The Government appealed to the Interior Board of

Land Appeals (IBLA).

In 1972, while the appeals to the IBLA were pend-

ing, the Secretary caused patents to be issued on two

desert land entries aggregating 593.38 acres, which

had been developed by third parties under leases

which permitted the lessees “to have and hold” the

entries for five farming seasons.'® The lessees con-

structed and paid for the irrigation system and con-

* 73 Int. Dec. at 428.

" App. A, p. A-1, Decision dated January 29, 1971.

February 15, 1972

ducted and paid for all farming operations, and re-

ceived all crop income from the land. The BLM filed

administrative contests, charging that the lease ar-

rangements constituted assignments of the entries and

that the lessees held more than 320 acres of desert land

prior to patent. The contests were dismissed as to all

but 40 acres of one entry by the same Administrative

Law Judge who made recommended decision in United

States v. Shearman, supra. He concluded that the en-

trymen had not surrendered sufficient control of their

entries under the five-year leases to constitute an as-

signment nor result in a holding by the lessees.

The IBLA, in April of 1975, issued its decision on

these entries, ruling that Sailor Creek held more than

320 acres of desert land and that, because it found the

BLM had no knowledge of the “totality of the ar-

rangements” until it “required” copies of the contrac-

tual arrangements, the Government was not estopped

from applying its 1966 interpretation of 43 USC § 329

to these entries. The IBLA did not explain or distin-

guish the Administrative Law Judge's finding that the

BLM knew in 1963 that the entrymen intended to

obtain 100% financing and to lease the entries to a

single farming entity. The IBLA did not reverse the

Administrative Law Judge’s determination that the

transactions did not constitute assignments of the en-

tries, nor did it disturb his finding that the entrymen

acted in good faith.

The IBLA ordered rejection of the final proofs and

cancellation of the entries, without affording the en-

trymen any opportunity to comply with the IBLA’s

interpretation of § 829, and without any explanation of

its sudden departure from the Department's

longstanding policy of giving only prospective opera-

tion to changes in interpretation of the Desert Land

Act.

The entrymen sought judicial review and on De-

cember 17, 1976, the District Court ruled in an unre-

ported decision, '' on cross-motions for summary

judgment, that the IBLA interpretation of 43 USC §

329 “cannot be said to be without any rational basis”

and because the “courts give great weight to any

reasonable construction of a regulatory statute adoped

by the agency charged with the enforcement of that

statute” (quoting from Investment co. Institute v.

Camp, 401 U.S. 617, 626-627, 91S. Ct. LOOT, L097, 28

L. Ed. 2d 367 (19710), it must be affirmed. The District

Court then found that under the circumstances of the

case the cancellation of the entries was an abuse of

discretion and the IBLA was estopped from enforcing

“an unconscionable forfeiture in favor of the govern-

ment of huge private expenditures, with substantially

increased land values and without any opportunity

provided to the entrymen, who were admittedly acting

in good faith, to equitably redeem themselves from the

change in administrative policy which occurred long

after their final proof submissions.” App. C., p. C-

10-11. The District Court allowed the entrymen until

May 1, 1977, to divest themselves of the “disqualifying

assignments” and ordered issuance of patents upon

proof of divestiture.

"App. Cop. Cl

The District Court adopted the findings of fact made

by the Administrative Law Judge. It also indicated

that the IBLA’s action violated the spirit and intent of

5 USC § 552. The District Court relied on and applied

the policy stated in the Department's decision in

Freeman vy. Laxton, 48 Land Dec. 519 (1922), to the

effect that where “assignments of desert land entries

are submitted to the BLM and it is found that the

assignment cannot be recognized on account of dis-

qualification of the assignee, the assignment is disal-

lowed and the title is considered as retained in the

assignor.”'? This provision was included in the 1964

regulations as 43 CEFR 2226.1-2 (e) (3).

On appeal and cross-appeal to the United States

Court of Appeals for the Ninth Circuit, the Court of

Appeals reversed,'* holding that (1) the interests of the

entrymen had not vested, (2) the transactions clearly

were assignments of the entries under 483 USC § 324,

(3) the IBLA decision was consistent with the Secret-

ary 's 1966 decision in Shearman, supra, (4) the IBLA

determination that the Government was not informed

of the terms of the leases until it made a specific re-

quest for the information was controlling over the Ad-

ministrative Law Judge’s several findings that the

BLM knew that the entrymen intended to lease to a

single entity, (5) because the knowledge element was

not satisfied, the IBLA was not estopped from applying

its changed interpretation of § 329, (6) the Depart-

ment’s failure to publish regulations embodying its

interpretation of § 329 might have taken on signifi-

48 Land Dee at 520

"595 Fo 2d 851 9th Cir, 1978), App. D. p. Del, at D9

cance if the knowledge element of equitable estoppel

had been met, (7) the District Court exceeded its pow-

ers in ordering the Department of the Interior to issue

patents upon divestiture by Sailor Creek of the “as-

signments”, and (8) the District Court finding that

cancellation of the entries was statutorily justified and

the absence of true grounds for estoppel required that

the IBLA decision be affirmed.

In arriving at its interpretation of § 329, the IBLA

did not analyze the legislative history of § 329 and did

not explain the absence of any regulations on leasing

desert land entries from 1877 to the date of the IBLA’s

decision: Both the lower courts approved the IBLA’s

interpretation of § 329 without discussion of the legis-

lative history or the subsequent administrative prac-

tice, except for the notation by the Court of Appeals

that the interpretation was consistent with the Secret-

ary'’s 1966 interpretation in Shearman, supra, and the

District Court’s taking of judicial notice that the BLM

permitted multi-entry development leases on desert

entries in Idaho between 1950 and 1965.

Jurisdiction in the District Court is based on 28 USC

§ 1331 (a), see Andrus v. Charlestone Stone Prod. Co.,

Inc., 436 U.S. 604, 607, 56 L. Ed. 2d 570, 574 (1978),

and on 28 USC § 1361. Jurisdiction at the time of filing

the complaints also existed under 5 USC 8§ 701, et.

seq.

REASONS FOR ALLOWANCE OF THE WRIT

A. ntroduction

Review of the decision of the Court of Appeals is

appropriate at this time because the IBLA decision

which it affirmed involved significant, unexplained

departures from several long-established policies of

the Department applicable to transactions under the

Desert Land Act and other public land laws. The pre-

cedents established by the decision of the Court of

Appeals are controlling in the Ninth Circuit, where a

substantial, if not major, portion of the public lands is

located, and those precedents will permit the BLM to

disregard established policies and guiding precedents

in its administration of the public lands, resulting in

the inherently arbitrary ad hoc determinations

criticized by this Court in Morton v. Ruiz, 415 US.

199, 232, 39 L. Ed. 2d 270, 292 (1974). Coupled with

the apparent approval of complete disregard of the

publication requirement of 5 USC § 552, these prece-

dents will detract substantially from the stability and

uniformity of administration of the public land laws in

states in the Ninth Circuit.

The precedents established could easily tend to en-

courage: all administrative agencies to seek new in-

terpretations to apply to pending transactions to ob-

tain unwarranted and unfair advantages or windfall

gains for the Government.

The questions of whether combinations of mortgages

and leases are prohibited by 43 USC §§ 324 and 329

are important questions of federal law which have not

been, but should be, settled by this Court. The BLM

has reported that in Idaho, alone, there are 69 allowed

desert entries covering 20.210 acres, and approxi

mately 1,400 applications for desert entry pending,

which could involve as many as 448,000 acres. Proper

interpretation of § 324 and § 329 is important to those

entrymen and applicants, as their planning for de-

velopment, farming and financing will depend upon

the latitude permitted by the Desert Land Act.

The Petitioners who are entrymen submitted their

final proof 15 years ago, and the possibility ts realistic

that another three to four years could be required to

obtain a decision final in all respects in the Court of

Appeals. The interests of both the Petitioners and the

judicial system would be served by a decision of this

Court, favorable to the Petitioners, by which the litiga-

tion could be terminated.

The decision of the Court of Appeals is in conflict

with applicable decisions of this Court on (1) the mean-

ings of the words “assign” and “assignment” as used in

43 USC §§ 324 and 329, and the meaning of “hold” in

43 USC § 329, (2) the requirement that the Secretary

publish regulations, (3) the vesting of rights under

public land laws, (4) the limitations of the Secretary's

authority, (5) the binding effect of usages, policies and

regulations of the Department, (6) the necessity for

using legislative history and other aids to statutory

interpretation, (7) the deference to be given adminis-

trative interpretations, (8) the possession of land in

entries under the public land laws, (9) the retroactive

application of administrative decisions, (10) the re-

quirements of due process, (11) the requirement that

administrative orders be upheld only on the basis as-

serted by the agency, and (12) the requirement that an

agency satisfactorily explain its reasons for departures

from established policies.

Also, the decision of the Court of Appeals is in con-

flict with decisions of the Courts of Appeals for the

Fourth Cireuit in Appalachian Power Co. v. Train, 566

Kk. 2d 451 (1977), and the District of Columbia Circuit

in Gonzales v. Freeman, 334 F. 2d 570 (1964), on the

question of whether the IBLA’s interpretation of 43

USC § 329 must be published in accordance with 5

USC § 552 (a), and is in conflict with the decisions of

the Courts of Appeals for the District of Columbia

Circuit in Braniff Atrways, Inc. v. CA.B., 379 F. 2d

453 (1967), and Tenth Circuit in Adolph Coors Corp. v.

F.T.C., 497 BF. 2d 1178 (1974), and Diamond Ring

Ranch, Inc. v. Morton, 531 F. 2d 1397 (1976), on the

questions of whether the IBLA decision is supported by

substantial evidence and the weight to be given the

findings of the Administrative Law Judge, and is in

conflict with the decisions with the Court: of Appeals

for the District of Columbia Circuit and Eighth Circuit

in West v. United States, 30 F. 2d 739 (1929), and

James v. Germania lron Co., 107 F. 597 (1901), on the

question of binding effect of administrative policies

and regulations, and is in conflict with the decision of

the Court of Appeals for the Tenth Circuit in United

States v. Christopher, 71 F. 2d 764 (1934), on the ques-

tion of whether recording in the county records consti-

tutes notice to the United States, and is in conflict with

the decision of the Court of Appeals for the First Cir-

cuit in Stone & Webster Engineering Corp. v. NLRB,

356 F. 2d 461 (1976), and that of the Sixth Circuit in

NLRB vy. Cleveland Trust co., 214 F. 2d 95 (1954), on

the question of disregarding uncontradicted testimony.

B. The holding proviso of 43 USC § 329 is a limitation

on the quantity of land to which title can be acquired,

and was not intended to include mortgages and leases.

The Desert Land Act'* provides for sale of as much

as 320 acres of public land to qualified citizens who

fulfill the reclamation, irrigation, cultivation and ex-

penditure requirements of the Act. Originally enacted

in 1877,'® the Desert Land Act was interpreted by the

Department of the Interior in 1880 as not authorizing

assignments of entries.'®

The Desert Land Act was amended in 1891'7 by

adding seven sections, including 43 USC § 329, which

provides, in part, that upon satisfactory proof of recla-

mation and cultivation, and final payment of $1.00 per

acre

“* * * a patent shall issue therefor to the applicant or

his assigns; but no person or association of persons

shall hold by assignment or otherwise prior to

the issue of patent, more than three hundred and

twenty acres of such arid or desert land * * *.”

In construing this statute against the background of

its purpose, the Department and the courts should be

guided by traditional canons of, and aids to, statutory

construction.

943 USC §§ 321-322, Act of March 3, 1877, C. 107, §§ 1-3, 19 Stat. 377.

'*The act authorized sale of 640 acres to each qualified person.

'"*S. W. Downey, 7 C.L.O. 26 (1880)

"43 USC §§ 323, 325-329, Act of March 3, 1891, ¢ 561, § 2, 26 Stat. 1096.

“ "A thing may be within the letter of the statute

and yet not within the statute, because not within

its spirit, nor within the intention of its makers.’

Church of the Holy Trinity v. United States, 143 US

457, 459, 36 L. Ed. 226, 12 S Ct 511 (1892).” United

Housing Federation, Inc. v. Forman, 421 U.S. 837,

849, 44 L. Ed. 2d 621, 630 (1975).

“* *« * The object desired to be reached by the Act

must limit and control the literal import of the terms

and phrases employed.” Church of the Holy Trinity

v. United States, 143 U.S. 457,460, 36 L. Ed. 226, 228

(1892).

“Again, another guide to the meaning of a statute

is found in the evil which it is designed to remedy;

and for this the court properly looks at contem-

poraneous events, the situation as it existed, and as

it was pressed upon the attention of the legislative

body.” Church of the Holy Trinity v. United States,

supra, 143 U.S. at 463, 36 L. Ed. at 229, citing

United States v. Union Pac. R. Co., 91 U.S. 72, 79, 23

L. Ed. 224, 228.

Because compliance with the Desert Land Act re-

quires substantial expenditures in order to accomplish

the reclamation desired by Congress,'* to subserve the

public interest and welfare,” the Act should receive

'* "The irrigation system for these entries was constructed in 1963-64 at a

cost in excess of $700,000.00. The Department's regulations recognize that

reclamation “is often a difficult and expensive undertaking.” See 43 CFR §

232.1(b) (1963 Revision).

i¥”* © * Inducement was therefore held out by the offer of title to a square

mile of land in consideration of the cost and labor required to be expended

upon it in order to bring it into a productive condition. That cost and labor is

a part of the price of the land — a price to be paid to the public by the

purchasers in serving a public benefit while reaping a private advantage.”

Instructions, 4 Land Dec. 51, 52 (1885).

at the hands of the courts a more liberal construction

in favor of the purposes for which it was enacted. Cf.

Leo Sheep Co. v. United States, No. 77-1686, Mar. 27,

1979, slip op. pp. 14-15, U.S. —_, 59 L. Ed. 2d 677,

688 (1979); United States v. Denver and Rio Grande R.

Co., 150 U.S. 1, 37 L. Ed. 975, 14S. Ct. 11 (1893). These

lands are offered on liberal terms to encourage the

citizen and to develop the country, and where there has

been a compliance with the.substantial requirements

of the law irregularities should be waived or permis-

sion given, even on appeal, to cure them by supplemen-

tal proofs. Cf. El Paso Brick Co. v. McKnight, 233 U.S.

250, 258, 58 L. Ed. 943, 948 (1914). Fair protection of

the entryman in his dealings with the Government

ought to be given when possible. Cf Smith v. United

States, 170 U.S. 372, 381, 42 L. Ed. 1074, 1077 (1898).

The clearly relevant history of a statute should not

be ignored in determining its meaning. See Cass v.

United States, 417 U.S. 72, 79, 40 L. Ed. 2d 668, 674

(1974). It was error for the IBLA and the lower courts

to ignore the legislative history of § 329 in arriving at

their interpretation of the holding limitation. Train v.

Colorado Public Int. Research Group, 426 U.S. 1, 9-10,

48 L. Ed. 2d 434, 441 (1976).

The reason for the holding limitation in § 329 can be

ascertained by examining debate and reports on bills

before Congress in 1886 and 1888, together with de-

bate and the report on the 1891 Amendment. In 1886

an amendment proposed by H.R. 81022” would have

App. F, p. F-1.

required annual expenditures of $1.00 per acre and

aggregate expenditures of $3.00 per acre within three

years. The committee report?! stated:

“* * “Time and experience will doubtless suggest

still further improvement, but the amendments now

proposed, if enacted into law and properly adminis-

tered, will prevent holding of land thereunder with-

out reclamation and for mere speculation. Failure to

annually expend the required sum in reclamation

when met by prompt loss of the land and forfeiture of

moneys paid will afford no opportunity for the

abuses which now exist, but will render it certain

that in the large majority of cases the object of the

law will be promptly and_ successfully ac-

complished.”

In debate in 1888 on H.R. 7901,?? Representative

Vandever of California noted that in his district, soon

after passage of the 1877 Act, nearly 400,000 acres

were ‘located upon and

“almost immediately the parties who made the

location transferred and assigned the land to other

parties. Today the land is held by a syndicate that

has never paid but 25 cents an acre for the land. The

parties who made the location were dummies. (Km-

phasis supplied)

“* * * Now, what I fear in regard to this matter is that

if we recognize in this bill the right of a man under the

desert-land act to assign his title before he has per-

fected it, it may be claimed that this is a recognition

2tHouse Report No. 1888, April 23, 1886.

22App. F, pp. F-1-4.

of the right of those locators in 1877 to assign their

title to the syndicates that claim to hold them. to-

day. This is a matter of very great importance to the

people of that country. There is a erving evil there

which they charge upon the present administration

of the Land Office and of the Interior Department.”

19 Cong. Ree. 5571-5572.

Mr. Vandever's concern was reflected in, and elimt-

nated by, an amendment offered by him and agreed to

by the House:

“Add the following proviso to the last line of the

bill:

“Provided, that nothing in this act shall be con-

strued to legalize assignments heretofore made by

Claimants under the desert-land act of the rights

acquired by them as locators on these lands.

“Mr. HOLMAN. That is right. While | do not think

there is anything in the bill which could have the

effect against which the amendment proposes to

guard, yet if there is anything of that sort the

amendment is very proper,

“Mr. VANDEVER. | modify the amendment by add-

Ing to it the words ‘prior to making improvement

thereon,

“The amendment as modified was agreed to.” 19

Cong. Rec. 5596 (1888)

The holding proviso in the 1891 Amendment is logi-

cally the successor to Representative Vandever's

amendment to H.R. 7901. No intervening reports or

debates indicate any concern about leases” or

mortgages. To the contrary, congressional debate on

H.R. 7901 indicates that the members of the House

were concerned with excesses by landowners, not ten-

ants, and the distinction between owning and leasing

was well understood.2" The entire trust of the concern

was directed to assignments of tithe under which

large acreages were held by speculators without re-

clamation. All the objections were cured by the recla-

mation and expenditure requirements and the holding

limitation.

The Committee Report on the 1891 Amendment, in

its only reference to the Desert Land Act, stated:

ery +

Section 2 provides modification of the

desert-land act, providing fully for actual reclama-

tion of the land entered, and preventing speculative

accumulation of land, with a saving of all rights

under existing entries.” 22 Cong. Ree. 3613 (1891).

In congressional debate on the 1891 Amendment,

the holding limitation was explained in the following

manner:

“Mr. STONE, of Missourt. | desire to ask the gen-

tleman from Illinois what limitation, if any, is fixed

by this conference bill on the right to assign desert-

land entries.”

“Mr. PAYSON. The provision in the bill is that

there shall not be any assignment whatever, so that

any one person sha/l aequire in any wey more than

320 acres. (Emphasis supplied)

2 Soe 19 Cong Ree S601 5602 CLSSS8

“Mr. HOLMAN. There is provision for assign-

ment, but not to an amount more than 320 acres.” 22

Cong. Rec. 3614 (1891).

"It is a well-settled rule of construction that lan-

guage used in a statute which’ has a settled and well-

known meaning, sanctioned by judicial decision, is

presumed to be used in that sense by the legislative

body. The Abbotsford, 98 U.S. 440, 25 L. ed. 168.”

Kepner v. United States, 195 U.S. 100, 124, 49 L. Ed.

114, 122 (1904).

As used in the public land laws, the word “hold” had

acquired a commonly understood meaning before Con-

gress enacted § 329. Hold meant to claim, segregate or

appropriate vacant public land, usually under a special

preference, to the exclusion of others who desired to

enter or acquire some interest in that land. By initiat-

ing a claim the entryman “hold{s] the land against

others desiring to initiate claims, * * *”. Great North-

ern R. Co. v. Reed, 270 U.S. 539, 548, 70 L. Ed. 721, 725

(1926). Before the enactment of § 329, the word was so

used in a desert entry case in 1884.

* *“ where a special preference is given to a

claimant, dependent or contingent upon the

performance of conditions which any one of a qual-

ified class may reasonably fulfill, by which he may

hold to the exclusion of others, such preference is a

pre-emption, and inures to the individual upon the

inception of his claim. Measured by these rules, a

desert-land entry is much more clearly within the

definition than many others which are so recog-

nized.” Fraser v. Ringgold, 3 Land Dec. 69, 71 (1884)

Emphasis supplied.?4

The syntax of 43 USC § 329, placing the holding

limitation immediately after the provision for issuance

of patent to the applicant or his assigns, clearly indi-

cates an intention to coordinate the limitation with the

conveyance of title by issuanee of the patent. This

proviso refers only to the substantive clause “a patent

shall issue therefor to the applicant or his assigns” and

qualifies and limits the generality of that clause. Cf.

Cox v. Hart, 260 U.S. 427, 435, 67 L. Ed. 332, 337

(1922). Comparison with a bill introduced in 1886,

H.R. 8102, Section 7 of which?> was practically identi-

cal to 43 USC § 329, except that the time allowed to

prove up was three years instead of four and the clause

containing the holding limitation was omitted in the

1886 version, shows that the insertion of the holding

limitation at that place in 43 USC § 329 was deliberate

and intended as a limitation on the issuance of patent.

The insertion of the holding limitation in the 1891

amendment also shows that Congress did not rely on

“clear Departmental policy” that the IBLA contends

had already established limitations on assignments.

See 82 Int. Dec. at 155, App. B, p. B-19. Without the

holding limitation, the 1891 Amendment could have

overridden the departmental policy and permit-

*4 Other cases using “hold” in the same sense include Schetka v. Northern

Pacific Railroad Co., 5 Land Dec. 473 (1887); Fleming v. Bowe, 13 Land Dec.

78 (1891); James F. Bright, 6 Land Dec. 602 (1888); Pfaff v. Williams, 4

Land Dec. 455 (1886); and Emmerson v. Cent. Pacific Railroad Co., 3 Land

Dec. 271 (1884).

25App. F, pp. F-1-4.

ted acquisition of unlimited quantities of land through

assignments. Assignments were beyond the restriction

of the 1890 Act cited by the IBLA?*, which applied only

to original entrymen, not to assignees.?* When it

enacted § 329, Congress had the option to restrict as-

signments or to permit unlimited assignments. That it

adopted a policy which happened to coincide with the

former administrative policy lends no strength to the

IBLA’s contention that the prior administrative policy

would have prevailed. Under somewhat similar cir-

cumstances this Court has ruled that administrative

practice prior to the adoption of a statute is of no

moment. See United States v. Townsley, 323 U.S. 557,

567, 89 L. Ed. 454, 461 (1944).

The Timber Culture Law?* required the entrymen to

state under oath that he made application for his

own exclusive use and benefit and that he intended to

hold and cultivate the land. Under those express

statutory requirements the Department consistently

ruled before 1891 that the law did not require presence

of the entryman on the entry, or even in the state

where the land was located, and that all acts necessary

to perfect the entry could be performed by an agent.?®

In Davies v. Killgore, 11 Land Dec. 161 (1890), the

non-resident entryman paid his agent $25.00 per year

2626 Stat. 391, 43 USC § 212, repealed October 21, 1976, § 702, 90 Stat.

2787. cited at 82 Int. Dec. 155, App. B, p. B-19.

27 Cf. Webster v. Luther, 163 U.S. 331, 340-341, 41 L. Ed. 179, 18211896)

28 Act of June 14. 1878, 20 Stat. 115.

29 Lucas v. Ellsworth, 4 Land Dec. 205 (1885): Davies v. Killgore, 11 Land

Dec. 161 (1890); Danford v. Ellsworth, 10 Land Dec. 341 (1890); Olsen vy.

Warford, 11 Land Dec. 289 (1890); Hemstreet v. Greenup, 4 Land Dec. 493

(1886); Gahan v. Garrett, 1 Land Dec. 137 (1882); Flemington v. Eddy, 3

Land Dec. 482 (1884); Saylor v. Wilson, 7 Land Dec. 493 (1888).

and let the agent have whatever crops he might raise

on the entry, apparently without reserving any rent,

yet the Department did not charge that the entryman

failed to “hold” the entry. In Klock v. Husted, 2 Land

Dec. 329 (1884), the entryman abandoned the land, but

was regarded by the Department as still holding the

entry, albeit for the use and benefit of another party.

Although the adminstrative agency’s consistent,

long-standing interpretation of the statute under

which it operates is entitled to considerable weight,

there are limits, “grounded in the language, purpose

and history of the particular statute, on how far an

agency properly may go in its interpretive role.”

Teamsters v. Daniel, No. 77-753, Jan. 16, 1979, slip op.

p. 14, _U.S.__, 58 L. Ed. 2d 808, 820(1979). As

stated by this Court in Zenith Radio Corp. v. United

States, 437 U.S. 443, 57 L. Ed. 2d 337, 343 (1978),

“The question is thus whether, in light of the nor-

mal aids to statutory construction, the Department's

interpretation is ‘sufficiently reasonable’ to be ac-

cepted by a reviewing court. * * *”

The general rule that contemporaneous, long-

standing and consistent administrative interpretation

of a statute is entitled to considerable weight, as reit-

erated in Zenith, supra, is not applicable to the IBLA’s

interpretation of the holding limitation, as applied in

this case. See General Electric Co. v. Gilbert, 429 U.S.

125, 141-145, 50 L. Ed. 2d 343, 358 (1976): Ratterton v.

Francis, 432 U.S. 416, 425-426, 53 L. Ed. 2d 448, 456-

457; United Housing Foundation, Inc. v. Forman,

supra, 421 U.S. at 858, 44 L. Ed. 2d at 635-636. The

interpretation was made &4 years after enactment of §

329 and was inconsistent with all but two of the deci-

sions,” instructions and regulations issued by the De-

partment during that 84-year period, and was tn-

consistent with the few decisions of this Court which

interpreted the Desert Land Act during that interven-

ing period. It was inconsistent with the policy of per-

mitting multi-entry development leases judicially

noticed by the District Court as prevailing in Idaho

from 1950 to 1965."!

The first administrative interpretation of § 329 ap-

pears to be that stated in a Circular issued by the

Commissioner of the General Land Office on April 27,

1891, 12 Land Dec. 405. Leases and mortgages of de-

sert land entries are not mentioned in the Circular.

The only reference to the holding limitation states that

“Assignments are recognized, but the amount of land

that may be held by assignment or otherwise, prior to

the issue of patent is restricted tos 320 acres by the

seventh section, which section it is provided, however,

shall not apply to entries made prior to the act.” Id. at

106. This is a “contemporaneous construction of [§ 329]

by the men charged with the responsibility of setting

“Neither the Secretary's decision in Shearmes, supra, nor the IBLA’s

decision in this case, contains any “sugyestion that some new source of

legislative history had been discovered” after the decisions in Jensen,

supra, and Michener, supra, were issued. Cf General Electric Co. v. Gilbert,

VOUS. 125, 145,50 L. Bd 2d 545, 36001976). The other decision, United

States vo Grigg. 82 Int. Dec. 125. was issued the same day as the IBLA

decision in this case

"App. C. pp. ©-11-12. A custom in which an administrative ageney

acquiesces is persuasive of the meaning of the statute, Pennell v. Philadel

phia & Reading Ry. Co, 251 US. 675, 58 L. Ed. 430. "The significance of the

legislative history emerges upon study of the subsequent administrative

practice.” Zuber vo Allen, 396 US) 168, 182, 24. L. Ed. 2d 345, 354 (1969)

its © © * machinery in motion, Norwegian Nitrogen

Products Co. v. United States, 288 U.S. 294, 315, 77 L.

Ed. 796, 53S. Ct. 350 (1933), [and] its interpretation of

how [§ 329] should be implemented is presumptively

correct. See, ibid, Udall v. Tallman, 380 U.S. 1, 16, 13

L.. Ed. 2d 616, 85 S. Ct. 792 (1965).” Trans Alaska

Pipeline Rate Cases, 436 U.S. 631, 648, 56 L. Ed. 2d

591, 604 (1978). That presumption is not overcome by

the IBLA’s after-the-fact analysis of § 329, which dis-

regards the regulations on mortgages and contains no

explanation for the absence of regulations on leases.

The absence of regulations on leasing reflects a view

that §§ 324 and 329 were not intended to cover leases.

It is a practical construction adopted “before the pre-

sent controversy arose or was thought of.” McLaren v.

Fleischer, 256 U.S. 477, 481, 65 L. Ed. 1052, 1053

(1921); Udall v. Tallman, supra, 380 U.S. at 318, 13 L.

Kd. 2d at 626 (1965).

The contemporaneous, long-standing interpretation

actually made by the Department is reflected in its

decisions’ construing the holding limitation as a limi-

tation on the amount of land to which one could ac-

quire title, and in the decision and regulations permit-

ting mortgages cited at note 42, infra, and in the ab-

sence of regulations on leasing, which amounts to a

practical construction that 43 USC §§ 324 and 329 do

not cover leases. See Davis v. Manry, 266 U.S. 401,

404-405, 69 L. Ed. 350, 352 (1925): United States v.

Chicago, St. P.. M. & O. Ry. Co., 43 F. 2d 300,

" See, eg, Herbert C. Oakley, 34 Land Dee. 383. 387 (1906), Si/sbee

Town Company 34 Land Dee, 430 (1906),

305-306 (CA-8th Cir, 1980) ef. Logan vo Davis, 233

U.S. 613, 627, 58 L. Ed. 1121, 1128 (1914). If the

statute applied to leases, the Department would have

been “solicitous to enforce it.” Davis v. Manry, supra.

But throughout the 13-year course of these proceed-

ings the Government has not cited a single pre-1965

‘ase in which an ordinary lease was held to violate 43

USC § 324 or 43 USC § 329, and the IBLA was unable

to cite any judicial or administrative decisions holding

that leases and mortgages had been included in § 529

before 1965.

Equally important is the absence of any reference to

mortgages or leases in the regulations regarding qual-

ifications for making entries and taking assignments.

The applicable regulation, 43 CFR 232.9 (a) (1963 Re-

Vision), requires an applicant to state that “he has not

previously exercised the right of entry under the

desert-land laws by filing an allowable application and

withdrawing it prior to its allowance or by making an

entry or by having taken one by assignment * °°." It

would be appropriate, if the holding limitation ex-

tended to mortgagee-lessees, to require a statement

that the applicant had never been the mortgagee-

lessee of any desert entry land, because under the

IBLA’s interpretation the area “held” under the

mortgage-lease transaction would count against the

area the applicant could hold under his own entry. If

the mortgaye-lease transaction involved 320 acres. the

applicant would be disqualified by reason of his prior

holding from making any entry at all,

It is presumed that Congress approved the limita-

tions prescribed by § 232.9 (a) when it amended 43

USC § 321 in 1958 without including any requirement

that applicants be disqualified to the extent of prior

mortgaye-lease transactions on other desert land en-

tries.“ And it cannot be presumed that Congress

would have acquiesced in these regulations for more

than 50 years, if it intended to include mortgage-lease

transactions in the holding limitation.

The lack of any evidence that Congress intended to

include mortgages and leases in the holding limitation

of § 329, the absence of regulations on leasing, and

expressions by Congress, as late as 1955" and by the

Department, as late as 1964," that the 1891 Amend-

ment reduced to 320 acres the amount that could be

entered, bring this case within the rule that “Courts

need not defer to an administrative construction of a

statute where there are ‘compelling indications that it

is wrong. Red Lion Broadcasting Co. v. FOC, 395 U.S.

367, 381, 23 L. Ed. 2d 371, 89S. Ct. 1794 (1969), see

also Zuber v. Allen, 396 U.S. 168, 193, 24 L. Ed. 2d 345,

90 S. Ct. 314 (1969); Volkswagenwerk Ak-

tiengesellschaft v. FMC, 390 U.S. 261, 272, 19 L. Ed.

Yd 1090, 88S. Ct. 929 (1968)." Espinoza v. Farah Mfx.

Co., 414 US. 86, 94-95, 38 L. Ed. 2d 287, 295 (1975).

The holding proviso of § 329 is the only place in

Section 2 of the 1891 Amendment in which a limita-

tion of 320 acres appears.

"8 S21 contains the applicable provisions stating the qualifications of

entrymen

“The act of IS77 °° ° was amended by the act of March 4, ISO1,* °° to

reduce the allowable maximum to $20 acres to any one person” House Rep

Na, p |. S4th Cong, Ist Sess, 1955

® See Acreage Limitation Poliey, po 1A Study Prepared by the Depart

ment of the Internor for the Committee on Interior and Insular Affairs,

14)

+? me

The Department's course of action also establishes a

defined usage regarding leases and mortgages of desert

land entries, which is of controlling significance under

the rule established in United States v. McDaniel, 7

Peters 1, 14-15, 8 L. Ed. 587, 592 (1833):

“* * © Hence, of necessity, usages have been estab-

lished in every department of the government,

which have become a kind of common law, and regu-

late the rights and duties of those who act within

their respective limits. And no change of such us-

ages can have a respective effect, but must be lim-

ited to the future.

“Usage cannot alter the law, but it is evidence of

the construction given to it, and must be considered

binding on past transactions.”

The Department long has recognized that the rule

stated in McDaniel, and the similar rule stated in

United States v. Alabama Great Southern Railroad

Co., 142 U.S. 615, 621, 35 L. Ed. 1134 (1892), apply to

the Department. See, e.g.. Roy McDonald, 36 Land

Dec. 205, 208-209 (1907).°

The IBLA did not explain either the significance of °

its assertion that the Desert Land Act is a settlement

law, or how a settlement feature could prevent leasing

or mortgaging of entries. Residence is not a require-

ment of the Desert Land Act,’ therefore there is no

“ “The decisions clearly show that sudden changes in the construction of

statutes, by those charged with their enforcement, are looked upon with,

disfavor, especially where a construction tavorabie to the individual has

been acted upon and the change is made in such manner as to become

retroactive” 36 Land Dee. at 209

" Cox v. Hart, supra

need to reserve the use of a residence area on the entry

as the Department sometimes has held is necessary in

leasing homestead entries.“* Where Congress has in-

tended to limit the use of the entry it always has

done so with express language such as that used in

Section 5 of the 1891 Amendment, for homesteads, and

presumably it would have employed the same lan-

guage had it desired to impose that restriction on de-

sert land entries.

The decisions” and instructions*’ of the Department

have long recognized that the Desert Land Act is not a

settlement law, and at least one member of Congress

was so advised as early as 1885.4! And the Department

has long recognized the right to mortgage a desert ]and

entry.”

These factors, together with the Department’s long

established policy of permitting leases of homestead

entries“, which were required“ to be made for the

™ See, eg. Thomason v. Patterson, 18 Land Dee, 241 (1894)

we "The claim of Bond was initiated under the act of Mareh 3, 1877

(19 Stats. 377), which is entitled “An act to provide for the sale of desert

lands in certain states and territories” This act provided for the disposal of

a certain portion of the public domain by sale, instead of by settlement, as

provided by the homestead and pre-emption laws. The entries possess none

of the characteristics of settlement entries, as to residence and settlement, and

all the acts of improvement may be done by an agent, instead of by the

claimant in person. Congress has been careful to note the marked distine-

tion which exists between claims initiated under the settlement laws and

those initiated under the laws providing for the sale of public domain. * °°"

(Emphasis supphed) Bond's Heirs vo Deming Townsite, 13 Land Dee. 665,

December &, 1891. See, also, Charles Perrine, 3 Land Dee. 331 (1883), Fred

Bartine, 59 Land Dee, 110 61945).

June 22, 1892, 14 Land Dec. 677, 679.

' Julius Mo Wilde, 3 Land Dee. 325.

2 Thomas E. Jeremy, 24 Land Dee. 418 (1897), 45 CFR 2226.1 sed)

" See, eg., Elnora C. Jetes, 33 Land Dec. 41 (1904)

"45 USC § 162 (repealed October 21, 1976, PLL. 94-579, § 702, 90 Stat.

2787)

entryman’s own use, remove all substance from the

IBLA’s theory that some sort of settlement aspect pre-

vents mortgaging and leasing desert land entries.

Since the settlement distinction is ineffective, the pre-

cedent established in decisions such as that in United

States v. Colorado Anthracite Co., 225 U.S. 219, 56 L.

Ed. 1063 (1912), should be applied to § 329 to support a

conclusion that the holding proviso is a limitation on

the acquisition of title.

The IBLA should have applied the rule of ejusdem

generis to the clause “hold by assignment or other-

wise’, just as this Court in Ham v. Missouri, 59 U.S.

126, 15 L. Ed. 334 (1855), applied that rule to the.

clause “sold or otherwise disposed of ” to determine

that “or otherwise disposed of ” must signify some

disposition equally efficient with a sale. As shown in

Part C, infra, an assignment always has been consi-

dered to be a transfer of the entire interest of the

entryman, and the entire clause should be interpreted

as applying to transactions which are equivalent to, or

have the same practical effect as, an assignment of the

entry.

The IBLA’s contentions regarding the meaning of

“otherwise” in the holding limitation of 43 USC § 329

(App. B, pp. B-22-23.) are directly contrary to the pre-

cedent established by this Court’s decision in United

States v. Sheldon, 15 U.S. 119, 121-122, 4 L. Ed. 199,

200 (1817). In Sheldon, the question was whether the

driving of live oxen on foot was a “transportation” of

them within the true intent and meaning of a law

which prohibited transportation “in any wagon, cart,

sleigh, boat, or otherwise,” and provided for forfeiture

of the articles transported and the vehicle in which

they were transported. In concluding that the prohi-

bited transportation must be by means of a vehicle

similar to those enumerated, the Court stated

“* * * To transport an article in a wagon, or other-

wise, would seem necessarily to mean to carry or to

convey it in that or in some other vehicle, by what-

ever name it might be distinguished.* * * ”

“But so far from this matter being left a doubt by

the law, we find, that when the punishment by way

of forfeiture is prescribed, the words ‘or otherwise’

are very plainly construed to mean the thing by

which the articles are transported; thus distinguish-

ing between the thing which transports and the

thing which is transported.”

“* * * Tf it were impossible to satisfy the words ‘or

otherwise,’ except in the way contended for on the

part of the United States, there would be some

reason for giving that interpretation to them. But it

has been shown that this is not the case.”

And see Reiche v. Smythe, 80 U.S. 162, 20 L. Ed.

566 (1872).

The same principle should be applied here, to limi‘

the scope of the phrase “by assignment or otherwise” to

transactions having the same practical effect as an

assignment.

The IBLA’s interpretation of § 329 is contrary to that

stated by this Court in United States v. Healey, 160

U.S. 136, 148-149, 40 L. Ed. 369, 373 (1895), in which

the holding limitation was referred to as

“* * * the clause or provision relating to the quan-

tity of desert lands that any person or association of

persons might appropriate. * * *”

This meaning of hold comports with the common

understanding that to hold property is to own it.* And,

although the legal title remains in the United States

until patent issues, the entryman has an inchoate,

equitable or possessory title so long as he complies

with the requirements of the Desert Lard Act.*® The

title interest of a desert entryman was recognized by

Congress in the 1888 debate on H.R. 790147 and in the

Act of June 25, 1910, c. 437, 36 Stat. 867, in which

relief was granted to “* * * any person, other than a

corporation, who has in good faith * * * acquired by

assignment a desert-land entry,* * * in the belief that

he was obtaining a valid title thereto * * *”

This meaning was confirmed by Congress in a relief

act passed in 1956*% which provided that “* * * any

person who holds a * * * desert land entry which was

allowed and subsisting on March 1, 1956 * * * is hereby

granted permission to suspend until March 1, 1959

further operations looking to the cultivation and im-

provement of the lands: Provided, That such entryman

shall forfeit no rights and shall not otherwise be ex-

cused from full compliance. with the applicable public

land laws by reason of * * * such suspension of cultiva-

tion and improvement operations * * *.” Emphasis

supplied. Congress obviously regarded the entryman

See McFeely v. Commissioner of Internal Revenue, 296 U.S. 102, 107, 80

L. Ed. 83 (1935).

See Instructions, 34 Land Dec. 29 (1905).

“Supra, at 21.

*43 USC §§ 336a, Act of July 30, 1956, c. 778 § 1, 70 Stat, 715.

as the “person who holds a desert land entry”, and the

committee reports*® indicate that the Senate and

House Committees on Interior and Insular Affairs, and

the Assistant Secretary of the Interior used the word

“entryman” and the phrase “holder of a desert-land

entry” interchangably.

It is significant that the permission to suspend oper-

ations is granted to the person who holds the desert

land entry. That could only be the entryman, because a

mortgagee or a tenant would have no need for such

permission because he would have no obligation or

responsibility for cultivation and improvement of the

lands in the entry, that being entirely the responsibil-

ity of the entryman, although it has long been held

that he may have the work done by others. See, e.g.,

Williams v. Kirk, 38 Land Dec. 429 (1910); Bond's

Heirs v. Deming Townsite, supra, at note 39.

Upon allowance of his application, the entryman

becames entitled to exclusive possession of the land. 43

USC § 315f; cf. Cameron v. United States, 252 U.S. 450,

460, 64 L. Ed. 659, 662 (1919); United States v. Bucha-

nan, 232 U.S. 72, 76-77, 58 L. Ed. 511, 514. As against

all but the United States the entryman is vested with

all incidents of fee simple title upon entry. Cf. United

States v. Clarke, 529 F. 2d 984, 986 (CA-9th Cir., 1976).

Possession may be held by exercise of such acts of

ownership over the land as are necessary to enjoy the

“ordinary use of which it is capable, and acquire the

profits it yields in its present condition, — such acts,

* House Rep. No. 2737, Senate Rep. No. 2405, 84th Cong., 2nd Sess.,

1956.

being continued and uninterrupted, will amount to

actual possession.” Cox v. Hart, 260 U.S. 427, 434, 67

L. Ed. 332, 337 (1922). A landowner may occupy his

land by tenants, and such occupancy constitutes actual

possession by the owner. Northern Pac. Ry. Co. v.

Smith, 171 U.S. 260, 275, 43 L. Ed. 157, 163 (1897).

Possession by a tenant is, in law, the possession of the

entryman. Catholic Bishop v. Gibbon, 158 U.S. 155, 39

L. Ed. 931 (1895); Rector v. Gibbon, 111 U.S. 276, 28 L.

Ed. 427 (1884); Frank Johnson, 28 L.D. 537, 539

(1898). The tenant may have actual occupation, but

the landlord would still have possession. Frank

Johnson, supra. Where a settler on public land rents

his improvements to another person, the landlord, and

not the tenant, is entitled to the pre-emption..Case v.

Larkin, February 3, 1876; see 2 Copp’s Pub. Land Laws

1330 (1882). Therefore, even under the definition

adopted by the IBLA, the entrymen had actual posses-

sion and the right of actual possession, and they held

the land. The IBLA disregarded the decisions of this

Court in arriving at a contrary conclusion.

Application of these precedents, established rules of

construction and consideration of the legislative his-

tory and the practice and policy of the Department for

more than 70 years after enactment of the 1891

Amendment, must lead to the conclusion that Con-

gress did not intend to include leases and mortgages

within the meaning of “hold”, as the word is used in §

329. If Congress had intended to preclude desert en-

trymen from employing means of financing and farm-

ing which were common practices on other types of

entries and on privately owned land, surely it would

have selected specific language to accomplish that

purpose.®*® Although the combination of mortgages and

leases conceivably is within a literal meaning of

“hold”, there is no evidence that Congress intended to

include mortgages and leases within that term as it is

used in § 329. To the contrary, the legislative history

and the contemporaneous use of “hold” indicate only

an intention to limit the quantity of land for which a

claim could be made and to which a patent could be

obtained.

C.The Assignment Of A Desert Land Entry Is A

Transfer Of The Entire Interest Of The Entryman, and

43 USC § 324 Was Not Intended To Include Mortgages

And Leases.

Decisions of the Departmentin the 1890’s*! to the

effect that desert entries could be assigned to corpora-

tions prompted the practice by natural persons who

had exhausted their desert entry rights of creating

corporations for the sole purpose of taking an assign-

ment of a desert entry, thus circumventing the holding

limitation of § 329. Although departmental decisions

such as Jacob Switzer Company, 33 Land Dec. 383

(1905), made it more difficult to accomplish this pur-

pose, Congress put an end to the practice in 1908 with

the passage of 43 USC § 324.°?

The words “assigns” and “assignees” as used in the

public land laws, had acquired a well-settled meaning

See, e.g., NLRB v. Highland Park Mfg. Co., 341 U.S. 322, 324-325, 95 L.

Ed. 969, 977 (1951); cf. New York Tei. Co. v. New York Labor Dept., No.

77-961, Mar. 21, 1979, slip op. pp. 16-17, _ U.S.__,, 59 L.. Ed. 2d 553,

567 (1979).

5'See, e.g., Nevada Southern Ry. Co., 22 Land Dec. 1 (1895).

*2Act of March 28, 1908, c. 112, § 2, 35 Stat. 52, App. E, p. E-8

through regulations, instructions and decisions issued

by the Department before § 324 was enacted. Since

March 1, 1884, if not before, assignees were regarded

as “purchasers who purchase the land after entry and

take assignments of the title after such entry.” Alonzo

W. Graves, 11 Land Dec. 283 (1890), citing General

Circular, approved March 1, 1884. Emphasis supplied.

Graves involved R.S. § 2362.5%

Two cases decided by this Court before the enact-

ment of § 324 involved repayments to homestead,

timber culture or desert-land entrymen or to their “as-

signs”, under the Act of June 16, 1880.54 In Hoffeld v.

United States, 186 U.S. 273, 46 L. Ed. 1160 (1902), the

Court stated that “|A] voluntary assignee takes the

property with all the rights thereto possessed by his

assignor.” Id. at 186 U.S. 276, 46 L. Ed. 1162. And in

United States v. Commonwealth Title Ins. & Trust Co.,

193 U.S. 651, 48 L. Ed. 830 (1904), the Court said “[wlJe

regard the word ‘assigns’, as used in the statute, as one

who derives from the original entryman by the volun-

tary act of the latter.” Id. at 193 U.S. 656, 48 L. Ed.

831. The context clearly indicates the Court meant

that the “assign” derived title and all rights thereto

from the original entryman, because the question in

the case was whether “a mortgagee who foreclosed his

mortgage and purchased the property mortgaged at

sheriffs sale under a decree of the court is an assignee

5343 USC § 689, Act of January 12, 1825, c. 5, 4 Stat. 80; Act of February

28, 1859, c. 64, § 1, 11 Stat. 387, repealed October 21, 1976, P.L. 94-579, §

403\a), 90 Stat. 2789.

54C, 244, § 2, 21 Stat. 287, 43 USC § 263, repealed October 21, 1976, P.L.

94-579, § 702, 90 Stat. 2787.

of the owner of the land” within the meaning of the

statute.

In United States v. Colorado Anthracite Co., 225 U.S.

219, 223, 56 L. Ed. 1063, 1065 (1912), this Court noted

that by the decisions in Hoffeld, supra, and Common-

wealth Title, supra, “it is settled that an assign, within

the meaning of the act (21 Stat. 287), is one who be-

comes invested with the entryman’s right in the land

through some voluntary act of his.***”

The Department held, in effect, in 1892 that an as-

sign within the meaning of 43 USC § 263 was “the one

in whom title was vested at the date of the cancellation

of the entry.” Adolph Emert, 14 Land Dec. 101, 102

(1892).

This interpretation of 43 USC § 263 and 43 USC §

689 was contained in the regulations in effect at the

time these entries were made (43 CFR § 217.39 (1963

Revision)), and in those in effect at the time the IBLA

decision in this case was made (43 CFR § 1822.3-5 (a)

(1974 Revision)). Those regulations stated that

“Those persons are assignees, within the meaning of

the statutes authorizing the repayment of purchase

money, who purchase the land after the entries

thereof are completed and take assignments of the

title under such entries prior to complete cancella.

tion thereof, when the entries fail of confirmation for

reasons contemplated by the law.”

Those regulations recognize the effect of this Court’s

decision in Commonwealth Title, supra. See 43 CFR §

1822.3-6(a) (1) (1974 Revision).

43 USC § 263 and 43 USC § 689 are in pari materia

with both § 324 and § 329, and the same interpretation

of assign should be applied in construing all four sta-

tutes.

It is presumed that Congress in 1908 knew of the

construction by the Court in Hoffeld, supra, and in

Commonwealth Title, supra, and the construction

therefore became a part of the law. See Grover &

B.S.M. Co. v. Forence S.M. Co., 85 U.S. 553, 21 L. Ed.

914 (1874); Blake v. McKim, 103 U.S. 336, 26 L. Ed.

563 (1881).

In Campbell v. Glover, 35 Land Dec. 474, 477 (1907),

the Department stated that

“**“(T]he assignee of a desert land entryman, who

for all purposes is the successor of the entryman,

must be held to be entitled to the same rights and

privileges with respect to the entry that the entry-

man himself might have been entitled to in the ab-

sence of an assignment.***”

And in Young v. Trumble, 35 Land Dec. 515 (1907),

the Department, after noting the precedents estab-

lished in Hoffeld and Commonwealth Title held, in

effect, that an assignee is one who by voluntary act of

the original entryman becomes entitled to make the

further annual proofs and to receive patent for the

land. 35 Land Dec. at 518.

That these rulings were known to Congress is indi-

cated by the committee report on the bill that included

$324” That report stated the purpose of the bill to be

55Senate Rep. No. 341, 60th Cong., Ist Sess. (1908)

to restrict “the right to receive an assignment to a

qualified individual, so that both the assignee and the

assignor have their rights to take and hold the land

under the desert-land law extinguished by the transac-

tion.” Senate Rep. No. 341 at 1.

A report made two years earlier®® noted that the

result of an assignment was “the transfer of the en-

tryman’s claim”, and that there was “practically no

difference between an assignment in the case of a de-

sert entry and a relinquishment with a transfer of

improvements in the case of a homestead entry.” Ibid

at 3. That report also stated that “***if there is not

some provision whereby rights acquired by an entry-

man may be transferred to another before proof, great

hardship and loss are likely to result in many cases. It

was evidently to meet just such contingencies that the

assignment clause was provided and there can be no

more valid objection to it than there is to the right of a

homesteader to sell his improvements before making

final proof. One who takes a desert entry and assigns is

held to have had the benefit of the desert-land act and

can not make another entry.”

The decisions and regulations of the Department

uniformly have interpreted an assignment as transfer-

ring the entire interest of the original entryman to the

assignee. See, e.g., Instructions, 34 Land Dec. 29

(1905); Regulations, 37 Land Dec. 316, § 8 (1908); Al-

bert A. Bandy, 41 Land Dec. 82 (1912); Wallace S.

Bingham, 82 Int. Dec. 377 (1975); 43 CFR 2521.3(b) (1)

(1975). In the case of Michael H. Fallon, 36 Land Dec.

“House Rep. No. 4896, 59th Cong., Ist Sess. (1906).

187 (1907), the Department noted that its uniform

practice had been to treat entries made under the pub-

lic land laws as entireties and that assignments of

portions of desert land entries were prohibited, al-

though the assignment of the whole was authorized. It

further noted that the practice was well settled, and

good administration demanded, that but one certifi-

cate should be issued upon a single entry. Ibid at 188.

The first regulations issued under § 324 stated that

“The language of the act indicates that the taking of

an entry by assignment is equivalent to the making

of an entry, and this being so, no person is allowed to

take more than one entry by assignment. The

desert-land right is exhausted either by making an

entry or by taking one by assignment.” 37 Land Dec.

312, 316, § 15 (1908).

Those same regulations required, as do the current

regulations, that as evidence of the assignment there

should be transmitted to the BLM the original deed of

assignment or a certified copy thereof, thus indicating

an understanding that an assignment conveys the en-

tryman’s entire interest in the entry. See Regulations,

37 Land Dec. 312, 316, § 1611908): 43 CFR 2521.3 (c)(1)

(1978 Revision).

The decisions of the Department have long recog-

nized that a mortgage does not constitute an assign-

ment of an entry unless it is foreclosed and sold at

sheriffs sale under the decree of the court, and then

the purchaser can be recognized only if he has the

qualifications required of an original entryman. See,

e.g., Thomas E. Jeremy, 24 Land Dec. 418 (1897).

Thus, it is obvious that Congress understood and

intended assignments to constitute the transfer of an

entryman’s entire interest in the land and the deci-

sions of the lower courts to the effect that the

mortgages and leases constituted assignments are con-

trary to the statute and cannot be affirmed. There is

nothing in the committee reports or in the limited

congressional debate to indicate that Congress in-

tended mortgagees before foreclosure sale or lessees to

be included within the term “assigns” or that

mortgages and leases were intended to be included in

the term “assignments.” The committee reports repre-

sent the considered and collective understanding of

those congressmen invoived in drafting and studying

the proposed legislation. Zuber v. Allen, 396 U.S. 168,

186, 24 L. Ed. 2d 345, 356 (1969).

Our purpose in analyzing the meanings of assign

and assignment is to show the type of transaction

which Congress intended to include in the holding

limitation of § 329, as revealed by application of the rule

of ejusdem generis.*?

Since the IBLA did not overrule the Administrative

Law Judge’s ruling that the transactions did not con-

stitute assignments, the lower courts had no power or

authority to confirm cancellation of the entries on the

*’The IBLA asserts that application of the rule of ejusdem generis would

eliminate the word “otherwise” from the clause. On the contrary, applica-

tion of that rule would include such transactions as executory contracts to

convey after patent, which are not technically the same as assignments, but

produce the same ultimate result, while the IBLA’s interpretation would

completely eliminate the necessity for the phrase “by assignment or other-

wise.” If every conceivable type of holding was intended, use of the word

“hold” by itself would have accomplished that purpose. Congress obviously

had some purpose in using the phrase “by assignment or otherwise.”

basis of their findings that the transactions did consti-

tute assignments. The reviewing courts must judge the

propriety of administrative action solely on the

grounds invoked by the agency. “If those grounds are

inadequate or improper, the court is powerless to af-

firm the adminisirative action by substituting what it

considers to be a more adequate or proper basis.” Sec-

urities and Exchange Commission v. Chenery Corp.,

332 U.S. 194, 196, 91 L. Ed. 199. 1999 (1946).

D. Applying the IBLA’s interpretation of 43 USC § 329

to these entries without publishing an appropriate regu-

lation was an abuse of discretion and was in excess of

statutory limitations on the Secretary's authority; the

IBLA interpretation does not have the force and effect of

law and the courts are not required to defer to that

interpretation.

The determination of what transactions fall within

the holding limitation of § 329 cannot be accomplished .

on an ad hoc basis, but must be accomplished through

the publication of substantive rules of general applica-

bility and interpretations of general applicability for-

mulated and adopted by the Department, and pub-

lished in the Federal Register in accordance with the

requirements of the Administrative Procedure Act. 5

USC § 552 (a)(1). Morton v. Ruiz, 415 U.S. 199, 232-236,

39 L. Ed. 2d 270, 292-2955*. The IBLA presented

* 5 USC § 552 (a) (1) states in pertinent part: “Each Agency shall

separately state and currently publish in the Federal Register for the

guidance of the public —

(D) substantive rules of general applicability adopted as authorized by

law, and statements of general policy or interpretations of general applica-

bility formulated and adopted by the agency.”

no reason why the requirements of the Administrative

Procedure Act could not or should not have been met,

by publication of an appropriate regulation. Cf. Morton

v. Ruiz, supra, 415 U.S. at 235, 39 L. Ed. 2d at 294.

Failure to publish regulations on mortgages and leas-

ing embodying the IBLA’s current interpretation of §

329 renders cancellation of the entries on the basis of

that interpretation beyond the IBLA’s statutory pow-

ers. Morton v. Ruiz, supra, 415 U.S. at 236, 39 L. Ed. 2d

at 294-295.

The Court of Appeals recognized the violation of 5

USC § 552 (a) (1) in its original decision, but tempered

that recognition when it amended the opinion in the

order denying the petition for rehearing. The Court of

Appeals declined to apply the publication requirement

of 5 USC § 552, apparently because it felt that the

publication requirement had effect only as part of the

Petitioners’ claim that the Government was equitably

estopped from enforcing its interpretation of 43 USC §

329. See 593 F. 2d at 855; App. D, p. D-8. The Court of

Appeals seems to be imposing a knowledge requirement

on the Department’s duty to publish regulations em-

bodying its interpretation of the statute, but nothing in

the Administrative Procedure Act seems to support

such a position, and the Court of Appeals offered no

explanation of its position. The Court of Appeals com-

mitted error by declining to require the Department to

comply with the publication requirement of 5 USC § 552

(a) (1), and its ruling to that effect is in conflict with this

Court’s decision in Morton v. Ruiz, supra, and that of

the Fourth Circuit in Appalachian Power Co. v. Train,

566 F. 2d 451 (1977).

The abuse of discretion which the District Court

recognized, but the Court of Appeals did not, lies in the

retroactive application of a new interpretation to past

transactions against persons who did not know and

had no reason to know that the holding limitation

applied to mortgages and leases, without affording any

opportunity to comply with the new interpretation.

That abuse is aggravated by the unexplained failure to

adhere to the long-established policy of the Depart-

ment not to give retroactive effect to new interpreta-

tions, and by the fact that none of the statutes which

create the Secretary’s authority with regard to desert

land entries confer upon him authority to give re-

troactive effect to his interpretations of the Desert

Land Act.

The Court of Appeals committed error when it up-

held retroactive application of the new interpretation

of § 329 to enforce the harsh penalty of forfeiture

against the entrymen. That aspect of the lower court’s

decision appears to be in conflict with decisions of this

Court such as Arizona Grocery Co. v. Atchison T. & S.

F. R. Co., 284 U.S. 370 at 390, 76 L. Ed. 348 at 356

(1932), NLRB v. Bell Aerospace Corporation, 416 U.S.

267, 295, 40 L. Ed. 2d 134, 154 (1974), and Helvering v.

Griffiths, 318 U.S. 371, 397-403, 87 L. Ed. 843, 860-864

(1943), and with the decision of the Seventh Circuit in

Briscoe v. Kusper, 435 F. 2d 1046 (1970), and with the

decision of the Fifth Circuit in Anderson, Clayton &

Co. v. United States, 562 F. 2d 972 (1977). See, also,

Helvering v. R. J. Reynolds Tobacco Co., 306 U.S. 110,

116, 83 L. Ed. 536, 541-542 (1939).

It is significant that the IBLA made no effort to

justify its departure from the long-established rule of

giving only prospective effect to changed interpreta-

tions of the Desert Land Act.5® This Court’s decision in

Atchison T. & S. F. R. Co. v. Board of Trade, 412 U.S.

800, 37 L. Ed. 350 (1973), requires that it do so.

The Petitioners were entitled to notice of the IBLA’s

interpretation of § 329 “sufficiently explicit to inform a

reasonably prudent person of the legal consequences”

of mortgages and leases of desert entry land. Cf. Central

Illinois Pub. Serv. Co. v. United States, 435 U.S. 21, 38,

55 L. Ed. 2d 82, 95 (1978), concurring opinion of Mr.

Justice Powell. This they did not receive. Instead, the

notification received in the form of the decision in

Michener, supra, told them that the arrangements did

not violate § 324 or § 329. This principle was recog-

nized and applied by the Department in Raymond L.

Gunderson, 71 Int. Dec. 477, 484 (1964), in which the

Department also acknowledged that the entryman’s

argument that his case should be governed by the

policy that was being followed at the time of his relin-

quishment was well taken, and im Wallace S. Bing-

ham, 82 Int. Dec. 377, 384 (1975). In Gunderson, supra,

the Department stated

* * * Until the Department provided by specific

regulations that the word ‘entry,’ as used in the act *

** included the filing of an allowable application for

homestead entry, the meaning of the term ‘entry’

was not so clear as to warrant holding an applicant

5® See, e.g., David B. Dole, 3 Land Dec. 214 (1884); William Thompson, 8

Land Dec. 104 (1889). Cf. Mary R. Leonard, 9 Land Dec. 189 (1889) and

Safarik v. Udall, 304 F. 2d 944, 949 (CA-D.C. Cir., No., 1962).

50 :

accountable for understanding that the mere act of

filing an allowable homestead entry application

would exhaust his rights under the homestead law

even if he should elect to withdraw the application

before it’ Was acted upon.* * *’

The absence of a regulation defining “wages” as in-

cluding lunch expense reimbursements, for tax with-

holding purposes, was an important factor in this

Court’s decision in Central Illinois Pub. Serv. Co. v.

United States, supra.

Other fators emphasized in Central Illinois are pre-

sent in this case. In view of the existing regulations on

mortgages and the Department’s failure to issue regu-

lations on leasing soon after § 329 was passed, or ever,

and the 1964 interpretations in Jensen, supra, and

Michener, supra, it is hardly reasonable to expect the

Petitioners to “fill the gap” by determining that

mortgages and leases are within the meaning of

“hold”. The IBLA’s action is retroactive because it

applies a new interpretation to past transactions, and

it is highly punitive in view of the large expenditures

on the irrigation system and on land development,

little of which could be recovered if the entries are

cancelled. The principles applied in Central Illinois

should be applied to this case to determine that the

Petitioners complied with § 329 as it was most reason-

ably interpreted in 1964 and that a more expansive

interpretation adopted after the Petitioners had re-

claimed, cultivated and irrigated the entries can not be

applied retroactively to cancel the entries.

The IBLA’s decision is based on the Secretary’s earl-

ier decision in United States v. Shearman, 73 Int. Dec.

386, 426 (1966), and the Solicitor’s Opinion, Idaho De-

sert Land Entries — Indian Hill Group, 72 Int. Dec.

181 (1965). Neither was published in the Federal Re-

gister and the principles announced did not become

“rules” which the Petitioners could be required to obey.

See NLRB v. Wyman-Gordon Co., 394 U.S. 759, 764-

766, 22 L. Ed. 2d 709, 714-715 (1969). A ruling that the

Petitioners were under no obligation to refrain from

mortgaging and leasing the land in their entries is

warranted because § 324 and § 329 did not mention or

prohibit leases and mortgages, no regulation prohibits

leases, 43 CFR 232.18 (d) auchorizes mortgages, and no

order was ever issued by the BLM requiring the

Petitioners to cancel the arrangements the IBLA held

to be unlawful. NLRB v. Wyman-Gordon Co., supra, at

394 U.S. 766, 22 L. Ed. 2d 715.

The use of adjudication rather than rule-making

constituted an abuse of discretion in this case because

it was applied to past actions taken in good faith re-

liance on the Department’s past decisions and policies

and the BLM’s approval of the mortgages and the lack

of any regulations on leasing. See NLRB v. Bell Aeros-

pace Co., 416 U.S. 267, 294-295, 40 L. Ed. 2d 134, 154

(1974).

In Bell Aerospace, supra, the Court noted that the

NLRB did not specify in what instances the Board

must resort to rule-making. Note 21 at 416 U.S. 290,

40 L. Ed. 2d 152. But here Congress has authorized the

Secretary, or his designee, to enforce any part of Title

43 USC, by “appropriate regulations” where not

otherwise specifically provided for. 43 USC § 1201.°

This Court held in Smith v. United States, 170 U.S.

372, 380-381, 42 L. Ed. 1074, 1077 (1898), that the

decisions of the Secretary are not in any sense regula-

tions under R.S. 161 (now 5 USC § 301). Nothing in the

Desert Land Act contains specific, independent au-

thorization for the Secretary to enforce the assignment

clause or the holding limitation. Therefore, enforce-

ment of the IBLA’s interpretation of the holding limi-

tation in the adjudicatory proceedings was beyond the

Secretary's jurisdiction and authority, and the ad-

ministrative cancellation of the entries was void and of

no effect. This analysis is in accord with the commands

of 5 USC § 558*', Act of September 6, 1966, 80 Stat. 338.

This situation by no means hampers the Secretary in

the execution and enforcement of the public land laws.

He has but to issue appropriate regulations in order to

activate the powers granted him by Congress.*? The

*° § 1201. The Secretary of the Interior, or such officer as he may

designate, is authorized to enforce and carry into execution, by appropriate

regulations, every part of the provisions of this title not otherwise specially

provided for. Act of February 19, 1874, c. 30, 18 Stat. 16.

*! § 558. Imposition of sanctions; determination ef applications for

licenses; suspension, revocation, and expiration of licenses

(a) This section applies, according to the provisions thereof, to the

exercise of a power or authority.

(b) A sanction may not be imposed or a substantive rule or order issued

except within jurisdiction delegated to the agency and as authorized by law.

62 Any such regulation would have to be consistent with § 329, otherwise

it would be a nullity. See, e.g., United States v. Larionoff, 431 U.S. 864, 873,

53 L. Ed. 2d 48, 56, (1977); Manhattan General Equip. Co. v. Commissioner,

297 U.S. 129, 134, 80 L. Ed. 528 (1936); Ernst & Ernst v. Hochfelder, 425

U.S. 185, 213-214, 47 L. Ed. 2d 668, 688 (1976). The interpretation em-

bodied in the regulation must be consistent with the congressional purpose.

Morton v. Ruiz, 415 U.S. 199, 237, 39 L. Ed. 2d 270, 295 (1974); Espinoza v.

Farah Mfg. Co., 414 U.S. 86, 38 L. Ed. 2d 287 (1973).

issuance of such regulations would in many cases, in-

cluding this one, enhance the administration of the

law.®

Nor does it limit the Secretary’s power to interpret

his own regulations in adjudicatory proceedings. The

problem here is the absence of any regulations on leas-

ing desert land entries. And to the extent the IBLA

concluded that the mortgages somehow contributed to

the “holding”, its decision is clearly contrary to the

plain language of the applicable regulation.®*

The Secretary’s authority under § 1201 is only ad-

ministrative, not legislative. United States v. George,

228 U.S. 14, 57 L. Ed. 712 (1913). Any regulation

issued by the Secretary would not, therefore, “have the

force and effect of law”, and the courts give to such

interpretive regulations only such deference as is war-

ranted by the timing and consistency of the agency’s

position, and the nature of its expertise. Batterton v.

Francis, 432 U.S. 416, 425, 53 L. Ed. 2d 448, 456

(1977). The courts below suggested no reason why any

greater deference should be accorded an administra-

tive interpretation in adjudication proceedings, and

they committed error by accepting the IBLA’s in-

terpretation without analyzing it in accordance with

these standards.

®3 Cf. Kelly v. United States Department of the Interior, 339 F. Supp. 1095,

1102 (E.D. Ca., 1972); Aiken v. Obledo. 442 F. Supp. 628 (E.D. Ca., 1977).

*443 CFR § 232.18 (d) (1963 Revision). App. E, p. E-14.

It should be noted that, although Sailor Creek filed copies of the

mortgages pursuant to this regulation, the BLM did not name Sailor Creek

as a party in the administrative proceedings and did not notify Sailor Creek

that the mortgages were regarded as part of a mechanism for “holding” the

entries.

The unexplained inconsistencies in the Depart-

ment’s recent interpretations of the holding limitation

relieve the courts of any obligation to accord special

weight to its views. Cf. United Housing Foundation,

Inc. v. Forman, supra, 421 U.S. at 858, 44 L. Ed. 2d at

635-636.

Both the District Court and the Court of Appeals

committed error in limiting the scope of review to

determination of whether “the Secretary's decision is

arbitrary or capricious or unsupportable by substan-

tial evidence, considering the record is whole.” App. d,

p. D-5. That standard applies where Congress has ex-

pressly delegated to the agency the power to

prescribe standards, and in such cases the regulations

have “legislative” effect, which a reviewing court is not

free to set aside simply because it would have inter-

preted the statute in a different manner. See Batterton

v. Francis, 432 U.S. 416, 425, 53 L. Ed. 2d 448, 456

(1977). But the IBLA’s decision in this case is not a

legislative regulation, it is not even an interpretive

regulation, it is merely an interpretive decision in an

adjudicatory proceeding. This Court noted in Batterton

v. Francis, supra, 432 U.S. at 425, 53 L. Ed. 456-457,

note 9, that “A court is not required to give effect to an

interpretive regulation.” Where the only or principal

dispute relates to the meaning of a statutory term, the

controversy presents issues on which the courts, and

not the administrators, are relatively more expert. See

Barlow vy. Collins, 397 U.S. 159, 166, 25 L. Ed 2d 192,

199 (1970). This Court has long held that a construc-

tion of law by the Land Department is not conclusive

upon the courts. See Wisconsin Central R. Co. v. For-

sythe, 159 U.S. 46, 61, 40 L. Ed. 71, 76 (1895). These

principles are in accordance with the scope of judicial

review expressed in the Administrative Procedure Act,

5 USC § 706 (2) (A), (C) and (D), which require the

reviewing court to hold unlawful and set aside agency

action, findings, and conclusions found to be “arbit-

rary, capricious, an abuse of discretion, or otherwise

not in accordance with law; * * * in excess of statutory

jurisdiction, authority, or limitations, * * * (or) without

observance of procedure required by law; * * *”. The

courts below committed error in limiting their review

to the questions of whether th: |BLA’s decision is ar-

bitrary or capricious or unsupportable by substantial

evidence.

E.1f the transactions amounted to holdings by Sailor

Creek in excess of 320 acres, that was not sufficient to

warrant cancellation of the entries and forfeiture of the

lands and moneys; the IBLA decision was inconsistent

with long-established policies of the department.

Because 43 USC § 1201 requires enforcement of the

Desert Land Act through the publication of approp-

riate regulations, and because no regulation issued by

the’ Department provides that a holding in excess of

320 acres of desert land constitutes “failure to comply

with the requirements of the law”, within the meaning

of § 329, it is beyond the statutory authority of the

IBLA to cancel these entries on the basis of its finding

that Sailor Creek held more than 320 acres of desert

land.

Regulations issued by the Department which were

in effect when these entries were made and have been

in effect continuously since that time preclude the

IBLA from cancelling these entries on the basis of its

finding that Sailor Creek held more than 320 acres. 43

CFR § 232.17 (c) (1963 Revision) states that

“* * “The assignment of a desert-land entry to one

disqualified to acquire title under the desert-land

law, and to whom, therefore, recognition of the as-

signment is refused by the manager, does not of

itself render the entry fraudulent, but leaves the

right thereto in the assignor. In such connection,

however, see 42 L.D. 90 and 48 L.D. 519.”

The reference to 48 L.D. 519 directs attention to the

case of Freeman v. Laxton (1922), which was relied on

by the District Court in allowing the entrymen to ac-

complish a divestittre of the holdings the IBLA deter-

mined to be in violation of § 329. Freeman invites the

entryman to submit his transactions to the BLM, with

the assurance that unauthorized transactions thus

submitted will not jeopardize the entry.®* The quoted

regulation clearly contemplates that when a desert

land entryman presents a transaction to the manager

of the Land Office, the manager has a duty to determine

whether the transaction constitutes an assign-

** “The regulations governing the assignment of desert land entries

contemplate that such assignments will be submitted to the General Land

Office for adjudication as to the qualifications of the assignee and for

recognition of the assignment.

“When this plan is pursued and it is found that the assignment cannot be

recognized on account of the disqualification of the assignee, the assign-

ment is disallowed and the title is considered as retained in the assignor.

But where parties fail to submit the assignment to the General Land Office,

they’ act at their own risk and if the fact of assignment is brought to the

attention of the Land Department by contest alleging disqualification of the

assignee, such charge constitutes sufficient ground for a contest and for

cancellation of the entry if proven or in case of failure to make answer. See

Watson v Barney et al. (48 LD. 308)." * *" 48 Land Dec. at 520.

ment and whether the assignee is qualified to take the

assignment. If the assignee was not qualified, the

manager simply would refuse to recognize the assign-

ment and the right to the entry would remain in the

original entryman. One common reason for refusing to

recognize assignments is that the proposed assignee

already has exhausted his right to a desert land entry.

Under the interpretation adopted by the IBLA and by

the Court of Appeals, a finding that a proposed assig-

nee of a 320-acre entry previously had held any quan-

tity of desert land under an entry of his own, would

absolutely require cancellation of the entry because by

virtue of the assignment, even though it had not been

recognized or approved by the BLM, the assignee

would be holding the entry by assignment and there-

fore in violation of the holding limitation. That would

be contrary to the regulation.

If the leases and mortgages did result in a “holding”

by Sailor Creek, that holding would not be of such an

extensive interest as would result from an assignment,

because by an assignment the entire interest of the

entryman is transferred to the assignee. It is illogical

and discriminatory that the BLM would not afford to

entrymen attempting to transfer such lesser interests

the same opportunity and procedure as is afforded to

an entryman attempting to transfer his entire interest

to another person. In other words, if the entrymen had

attempted to sell the entries to Sailor Creek, they

would have been accorded the rights and procedure

established in 43 CFR § 232.17 (c), but since they only

mortgaged and leased the entries, the IBLA has ruled

that they are not entitled to that procedure and protec-

tion.

The BLM violated its own regulation by not apply-

ing 43 CFR § 232.17 (c) to the transactions voluntarily

submitted to it by the entrymen. It should not be per-

mitted to cancel and forfeit the entries without first

resorting to its own established procedure. Morton v.

Ruiz, 415 U.S. 199, 39 L. Ed. 2d 270 (1974); Chapman

v. Sheridan-Wyoming Coal Co., 338 U.S. 621, 94 L. Ed.

393 (1950); West v. United States, 30 F. 2d 739 (CA-

D.C., 1929).

If it be argued that this regulation applies only to

absolute assignments, and not to transfers of lesser

interests, then it should be held that the absence of any

specific regulations on combinations of mortgages and

leases shows that the Department has never regarded

transactions of that type as being within the holding

limitation. As stated in The Atchison, Topeka & Santa

Fe Railway Company v. Board of Trade, 412 U.S. 800,

807, 37 L. Ed. 2d 350, 362 (1973) “A settled course of

behavior embodies the agency's informed judgment

that, by pursuing that course, it will carry out the

policies committed to it by Congress.” See, also United

States v. Midwest Oil Co., 236 U.S. 459, 472-473, 59 L.

Ed. 673, 680, 681 (1915); Zemel v. Rusk, 381 U.S. 1, 11,

14 L. Ed. 2d 179, 187 (1965); Udall v. Tallman, supra

380 U.S. at 17, 13 L. Ed. 2d, at 629.

The Court of Appeals committed error when it re-

versed the District Court’s ruling that the rationale of

the Freeman decision should be applied to these en-

tries.

rec te ee

Certain policies adopted by the Department, which

bind the IBLA under the rule established in United

States v. McDaniel, supra, also preclude the IBLA from

cancelling these entries on the basis of a finding that

the transactions enabled Sailor Creek to hold more

than 320 acres of desert entry land. Since 1884, if not

before, it has been the consistent and uniform policy of

the Department to apply changes in rulings and

policies prospectively only, and not retrospectively.

See Miner v. Mariott, 2 Land Dec. 709 (1884), in which

the Department stated that even where a construction

of ¢ statute was clearly erroneous, “such fact does not

render illegal any acts which have been performed in

accordance with and pursuant to that construction or

interpretation.” Id. at 711. The rule was applied to a

desert entry in David B. Dole, 3 Land Dec. 214 (1884),

and in other cases, including William Thompson, 8

Land Dec. 104 (1889), in which the Department also

held that a desert entry was a contract between the

Government and the entryman, controlled by the in-

terpretation of the law in effect at the time the entry

was made. The policy has received judicial recognition

and approval. See, e.g., Safarik v. Udall, 304 F 2d 944,

959 (CA-D.C. Cir., 1962).

Several decisions rendered in the 1890's, the last

apparently being Heinzman vy. LeTroadec’s Heirs, 28

Land Dec. 497 (1899), declined to cancel desert entries

on the basis of excess holdings. In Heinzman one of the

charges was that one of the parties “by his own entry

and similar assignments held lands in excess of the

amount allowed by law.” Id. at 498. The Department

held that the “assignment of a desert land entry to one

disqualified to acquire title under the Desert Land

Law, does not render the entry fraudulent, but leaves

the right thereto still in the entryman”, and that “By

the assignment * * * the integrity of the entry was not

affected, and the right thereto still remains in the

original entryman.” Id. at 500. The policy expressed in

these decisions presumably was approved by Congress

when it modified the right of assignment by enacting §

324, without requiring that attempted assignments to

disqualified persons would require cancellation of the

entries. The policy was modified in two later decisions,

but neither of those modifications apply to the facts

in this case. The effect of these policies is to bar the

IBLA from applying retroactively its new interpreta-

tion of the holding limitation and to bar the IBLA from

using the asserted excess holdings as grounds for can-

cellation of the entries.

F. The IBLA violated the Administrative Procedure Act

and the regulations of the Department by disregarding

uncontradicted evidence; the IBLA wrongly concluded

that the government was not estopped from cancelling

the entries.

From an administrative record consisting of more

than 5,000 pages of testimony and hundreds of docu-

ments, the IBLA extracted a single statement in one

Government exhibit as the sole support for its finding

that the BLM did not have knowledge that the entry-

men had leased their entries. That statement appears

in a letter sent by the Manager of the Land Office to

“Bone v. Rockwood, 38 Land Dec. 253 (1909); Freeman v. Laxton, supra.

each entryman, shortly after final proof, in which it

was observed that

“In addition to the Sailor Creek Water Company

furnishing water to your entry, this Bureau notes

that the lands in your entry are actually being de-

veloped and farmed by the same company. There is

nothing of record with this office that shows such

contractual arrangements.* * * "67

The statement itself is equivocal as to the existence

or absence of knowledge on the part of the Govern-

ment. All the statement really says is that the Land

Office did not have copies of the leases, and that is by

no means the same as saying that the BLM did not

know, from discussions by its representatives and

agents or from copies furnished to other offices, about

the terms of the leases. But when considered with

other uncontradicted evidence in the record, as must

* A copy of the letter is in evidence as Exhibit G-2 Doc. 33, which reads

in pertinent part as follows:

“This office has recently reviewed all the information, including final

proof papers, you have submitted leading toward patent of the land in

your desert land entry. The documents of record include a ‘Notice of

Mortgage’ and a ‘Water Right Document’ including ‘Exhibit A’ which is

a real estate mortgage with the Sailor Creek Water Company for con-

struction of an irrigation system. These contractural documents are to

furnish water to the land of your entry and also to provide security to the

company.

“In addition to the Sailor Creek Water Company furnishing water to

your entry, this Bureau notes that the lands in your entry are actually

being developed and farmed by the same company. There is nothing of

record with thir office that shows such contractual arrangements. In

order for us to complete action on your application for patent, it will be

necessary that you furnish this office with copies of the contractual

arrangements you have made with the party or parties actually doing

the developing and farming of the land in your entry. Please furnish this

information at the earliest possible date.

Very truly yours,

/s’ Orval G. Hadley

Acting Land Office Manager”

be done by the statutory command of 5 USC § 556 (d)

(Act of September 6, 1966, 80 Stat. 386), by this Court’s

decision in Universal Camera Corp. v. NLRB, 340 U.S.

474, 487-488, 95 L. Ed. 456, 467 (1951), and by the

Department’s own regulation, 43 CFR § 4.478 (a) ® it

becomes clear that the IBLA’s conclusion is contrary to

the “reliable, probative and substantial evidence”,

which its own regulation requires as a basis of deci-

sion. This conclusion disregarded the uncontradicted

testimony of two witnesses, Allen Noble and G. Patrick

Morris, without any explanation and without any find-

ing that there was a lack of credibility on the part of

these witnesses. The Administrative Law Judge, who

observed them on the witness stand, relied on their

testimony in making his findings. Neither was there

any indication by the IBLA that the testimony of

Noble and Morris was inherently improbable. Under

these circumstances, the IBLA’s rejection of this im-

portant, uncontradicted testimony concerning the

knowledge possessed by the agents and representa-

tives of the BLM is arbitrary and not justified. The

contrary ruling by the Court of Appeals conflicts with

this Court’s decision in Universal Camera Corp. v.

NLRB, supra, 340 U.S. at 496-497, 95 i. Ed. at 471-

472, and with the decisions of the First Circuit in Stone

& Webster Engineering Corp. v. NLRB, 536 F. 2d 461

®* § 4.478 Conditions of decision action.

(a) Record as basis of decision; definition of record. No decision shall

be rendered except on consideration of the whole record or such portions

thereof as may be cited by any party or by the State Director and as

supported by and in accordance with the reliable, probative, and sub-

stantial evidence. The transcript of testimony and exhibits, together

with ail papers and requests filed in the proceedings, shall constitute the

exclusive record for decision.

(1976), and that of the Sixth Circuit in NLRB v. Cleve-

land Trust Co., 214 F. 2d 95 (1954), and with its own

decisions in Day v. Weinberger, 522 F. 2d 1154 (1975),

and Charlestone Stone Products Co., Inc. v. Andrus,

553 F. 2d 1201 (1977), reversed on other grounds, An-

drus v. Charlestone “tone Products Co., Inc., 436 U.S.

604, 56 L. Ed. 2d 570 (1978).

The IBLA’s finding cannot be affirmed simply by

isolating a specific quantum of supporting evidence, cf.

Universal Camera Corp. v. NLRB, supra, Day v. Wein-

berger, supra at 552 F. 2d 1156, particularly in light of

the long-standing policy of the Department of the In-

terior to the effect that in forfeiture cases the determi-

nation leading to a forfeiture must be based on a clear

preponderance of the evidence. See, e.g., Tibergheim v.

Spellner, 6 Land Dec. 483, 485 (1888).

The Court of Appeals declined to find that the record-

ing of the leases constituted constructive notice to the

BLM of the actual provisions of the leases.®? On

that point the decision of the Court of Appeals is in

direct conflict with the decision by the Tenth Circuit in

United States v. Christopher, 71 F 2d 764 (1934).

In Adolph Coors Company v. FTC, 497 F. 2d 1178,

1184 (1974), the Tenth Circuit held that the agency

must consider the initial decision of the Law Judge and

the evidence in the record on which it was based, and

that when the Law Judge and the agency reach oppo-

site results, the Law Judge’s findings should be consi-

dered on review and given such weight as they merit

within reason and the light of judicial experience, fol-

* The point was raised in Brief of Plaintiffs - Cross - Appellants at 45.

lowing this Court’s holding in Universal Camera Corp

v. NLRB, supra, 340 U.S. at 496, 95 L. Ed. at 472. The

effect of the ruling of the court of Appeals in this case is

that the findings of the IBLA are entitled to recogni-

tion over those of the Law Judge, without reviewing

the Law Judge’s findings and without giving them any

consideration on appeal. That ruling is in direct con-

flict with this Court’s ruling in Universal Camera

Corp. v. NLRB, supra, and with the Tenth Circuit’s

ruling in Adolph Coors Company, supra.

The rejection of the evidence presented by the tes-

timony of Noble and Morris without a detailed expla-

nation of the reasons for such rejection was arbitrary.

White Glove Building Maintenance, Inc. v. Brennan,

518 F. 2d 1271, 1276 (CA-9th Cir., 1975).

Proper consideration of the evidence on which the

Administrative Law Judge based his findings that the

BLM knew that the entrymen intended to have their

entries farmed by a single entity and that they in-

tended to obtain 100% financing, can only lead to the

conclusion that those findings were supported by sub-

stantial evidence and should not have been rejected or

disregarded by the IBLA and by the Court of Appeals.

The knowledge shown by that evidence is sufficient to

estop the IBLA from applying its interpretation of §

329 to these entries. And in addition to the basis of

estoppel stated by the District Court, the BLM, by

allowing the applications for these entries with know-

ledge of the plans for leasing and financing, thereby

setting in motion the machinery for expenditure of

hundreds of thousands of dollars of private funds in

construction of the irrigation system and development

of the lands in the entries, without issuing any regula-

tion, decision or direct communicaton indicating to the

entrymen or to Sailor Creek that leases and mortgages

would violate § 329, can not be permitted at this late

date to establish that new interpretation as grounds

for forfeitures which result in a tremendous windfall

gain to the Government.

Under similar circumstances this Court held in Un-

ited States v. Bank of the Metropolis, 15 Peters 377,

395-398, 10 L. Ed. 774, 781 (1841), that the Govern-

ment could not use facts which already had happened

to exempt itself from liability on the basis of a condi-

tion which it could have expressed, but did not.

G. Upon filing applications for entry the entrymen be-

came vested with the right to have the entries processed

in accordance with the policies and regulations in effect

at that time.

There are two types of vesting of rights which occur

with respect to a desert land entry. The first type

occurs when the applicant files an allowable applica-

tion and pays the downpayment of twenty-five cents

per acre. In the case of Raymond L. Gunderson, 71 Int.

Dec. 477, decided December 2, 1964, less than six

months after final proof and final payment were made

on these entries, the Department held that all the

rights of an entryman under the public land laws vest in

an applicant upon the filing of his application, if the

application subsequently is found to be allowable, and

that those vested rights include the right to have the

entry processed in accordance with the policies and

regulations in effect at the time the application was

made. Id. at 483-484. The Gunderson case involved a

homestead entry, but the decision relied heavily on

previous decisions and regulations under the Desert

Land Act, and indicated that the same rules and

policies should be applied to both types of entries. The

ultimate ruling in Gunderson was that the amended

homestead regulation at issue in that case should be

applied only to allowable homestead applications filed

after the effective date of the amendment to the regula-

tion. Id. at 484.

The same analysis of the rights of a purchaser under

the public land laws was made in James v. Germania

Tron Co., 107 F. 597, 602 (CA-8th Cir., 1901), in which

the Court stated

“* * * The rights of these parties vested on Feb-

ruary 23, 1889. They were initiated under and con-

ditioned by the laws of the land and the rules and

practice of the department on that day, and no sub-

‘equent rules, decisions, or practice could devest

them of the property they then secured, or deprive

them of their equitable or legal rights to the title to

the land which they then acquired. Cornelius v.

Kessel, 128 U.S. 456, 461, 9 Sup. Ct. 122, 32 L. Ed.

482; Shreve v. Cheesman, 69 Fed. 785, 792, 16

C.C.A. 413, 419, 32 U.S. App. 679, 689.* * *”

The decision of the Court of Appeals in this case is in

direct conflict with the decision of the Eighth Circuit in

James, supra.

Applying these rules to this case means that the

Secretary's interpretation of § 329 in Shearman, supra,

and the IBLA’s interpretation in this case, should be

applied only to desert land entries for which applica-

tion was filed after the effective date of the decision. 7°

In Gunderson the Department also reiterated and

applied the long-standing policy of the Department to

the effect that a desert land entry is governed and

controlled by the regulations and interpretations in

effect at the time the entry is made by filing the appli-

cation. Those same principles should have been

applied to these entries. The IBLA offered no explana-

tion for the failure to apply that policy to these entries,

nor did it attempt to distinguish the Gunderson deci-

sion or offer any explanation of why the rights of the

entrymen did not vest at the time their applications

were filed.

In arriving at its decision in Gunderson, supra, the

Department discussed and applied several decisions of

this Court, including Payne v. Central Pacific Railway

Co., 255 U.S. 228, 65 L. Ed. 598 (1921), and Payne v.

State of New Mexico, 255 U.S. 360, 65 L. Ed. 680.

The decision in Gunderson conformed to the policy

adopted at least 80 years earlier in connection with

cesert land cases in the case of David B. Dole, 3 Land

Dec. 214 (1884), in which the Secretary stated “I do not

understand that a party acts under a misapprehension

of the law, so as to lose any right, when he acts under

its official interpretation,” and that entrymen and

their assignees acting under such official interpreta-

tion “should not be required to forfeit any right by

7” Applications for these entries were filed two and one-half years or more

before the Shearman decision.

subsequent construction inconsistent with the first.”

Id. at 215.

This policy presumably was known to Congress

when it enacted § 329, and since Congress did not

direct otherwise, the policy should be considered as

having been adopted by Congress as an implied part of

§ 329. At the very least, it should be presumed that the

intent of Congress was being carried out by adhering

to the settled rule of giving only prospective effect to

changed rulings or to new interpretations, and the

IBLA had a duty to explain its “departure from the

prior norms.” Atchison, T. & S. F. R. Co. v. Board of

Trade, supra, 412 U.S. at 807-808, 37 L. Ed. 2d at 362.

This requirement applies with equal force to the other

changes in policy involved in this case, none of which

were explained by the IBLA.

The other type of vested interests arises when the

entryman fulfills the statutory requirements and

makes final proof and final payment.”' As recognized by

the Department in Gunderson, supra, and as stated

by this Court in Wyoming v. United States, 255 US.

489, 497-498, 65 L. Ed. 742, 746 (1921),

“When the price is paid, the right to a patent

immediately arises. If not issued at once, it is be-

cause the magnitude of the business in the Land

Department causes delay. But such delay in the

mere administration of affairs does not diminish the

rights flowing from the purchase, or cast any addi-

™!'The IBLA did not disturb the Law Judge's findings that satisfactory final

proof had been made and the final payment had been made, App. A, pp. A;17

and A-42. \

tional burdens on the purchaser, or expose him to

the assaults of third parties.” (Quoting from Benson

Mining & Smelting Co. v. Alta Mining and Smelting

Co., 145 U.S. 428, 431, 36 L. Ed. 762, 764 (1892)).

And the Court also held that when all the conditions

of entry had been performed and the price had been

paid, “the full equitable title has passed, and only the

naked legal title remains in the government, in trust

for the other party, in whom are vested all the rights

and obligations of ownership.” Id. at 255 U.S. 498, 65

L. Ed. 746. It is significant that these cases hold that

no additional burdens can be cast on the purchaser and

that there are vested in him all the rights and obliga-

tions of ownership. These decisions can only mean that

subsequent to final proof and final payment, and prob-

ably from the time of filing the application and paying

the initial twenty-five cents per acre, no additional

requirements and limitations can be imposed upon a

desert land entryman. The IBLA committed error

when it attempted to impose its interpretation of the

holding limitation on these entries nearly eleven years

after final proof was made. The Court of Appeals com-

mitted error when it ruled that the rights of the en-

trymen had not vested.

In State of Wisconsin et al, 65 Int. Dec. 265 (1958),

the Department discussed Wyoming v. United States,

supra, and other cases, in arriving at the conclusion

that after an entryman has done all that is required of

him undr- a particular statute and has earned equita-

ble title to a tract of public land, the Secretary can

vacate the disposal and refuse to issue patent only for

proper grounds existing prior to or up to the time

equitable title was earned.

It is not entirely clear from the IBLA’s decision

whether it regarded the holding by Sailor Creek as

existing as soon as the sublease was made or as exist-

ing only when the leases had been assigned to Sailor

Creek by Morris and Noble. However, since the as-

signments of the leases were discussed in some detail,

App. B, pp. B-9-10, and the IBLA noted that

“By 1965 the Sailor Creek Water Company had a

mortgage on all the entries, had leases with an ele-

ven year possible life, had absolute authority to de-

termine what would or would not be grown, oversaw

all the planting and harvesting operations, and re-

tained all profits derived from these operations’,

it should be assumed that the IBLA regarded the as-

signments of the leases as an operative part of the

“totality of the arrangements,” which would mean that

the asserted “holding” by Sailor Creek did not occur

until 1965, more than six months after final proof was

made on these entries. Therefore, the entries come

within the rule stated in State of Wisconsin, supra, and

the entrymen’s right to patent vested at the time of

final proof, if not before, and that right could not be

affected by the assignment transactions between Mor-

ris and Noble and Sailor Creek Water Company which

occurred after final proof. The IBLA ofiered no reason

why the rule in State of Wisconsin should not be

applied to these entries. That rule encourages fair de-

aling between the Government and the citizen, and it

should not be disregarded or avoided unless compelling

reasons exist.

The rule adopted in State of Wisconsin, supra, is

recognized in the regulation of the Department?? which

states that “After final proof and payment have

been made the land may be sold and conveyed to

another person without the approva! of the Bureau of

Land Management”, with the caveat that such con-

veyances are subject to the superior rights of the Un-

ited States and that the title would fall if it should be

finally determined that the entry was illegal or that

the entryman had failed to comply with the law. But

the caveat can only be intended to apply to matters

occurring before final proof and final payment, as indi-

cated by the wording of the regulation and by the fact

that the regulation clearly recognizes the right to

make the sale without regard to whether the pur-

chaser is a qualified entryman or not, so that a sale

after final proof to a disqualified person could not be

asserted as grounds for cancellation of the entry, even

though a sale-assignment before final proof could,

under certain circumstances, result in cancellation of

the entry. See Freeman v. Laxton, supra. This regula-

tion binds the IBLA. Morton v. Ruiz, supra; Chapman

v. Sheridan-Wyoming Coal Co., supra.

In Lemon v. Kurtzman, 411 U.S. 192, 199, 36 L. Ed.

2d 151, 160 (1973), this Court recognized that “statu-

tory or even judge-made rules of law are hard facts on

which people must rely in making decisions and in

shaping their conduct. This fact of legal life underpins

43 CFR 2226.1-3 (a) (1964 Supplement:

our modern doctrines recognizing a doctrine of nonret-

roactivity. Appellants offer no persuasive reason for

confining the modern approach to those constitutional

cases involving criminal procedure or municipai

bonds, and we ourselves perceive none.”

Retroactive application of the new interpretation of

§ 329 raises a serious question of due process, which

has not been decided by the Court of Appeals or by the

District Court, and Petitioners raise the question here

only to protect the issue should the decision of the

Court of Appeals be regarded as final for all purposes.

But aside from the constitutional implications of re-

troactive application of the new interpretation, the

quoted statement from Lemon, supra, and related

principles stated in Linkletter v. Walker, 381 U.S. 618,

14 L. Ed. 2d 601 (1965), and cases cited in Linkletter at

381 U.S. 624-628, 14 L. Ed. 2d 605-607, should be

applied to this case.

The IBLA should have been guided by the principles

discussed by this Court in Lemon v. Kurtzman, supra,

to look to the prior history and purpose of the rule in

question, its purpose and effect, and whether retro-

spective operation will further or retard its operation.

411 US. at 199, 36 L. Ed. 2d at 161. The determination

of whether retroactive application is necessary, or even

permissible, is an equitable consideration, and “it is

well established that reliance interests weigh heavily

in the shaping of an appropriate equitable remedy.”

Lemon, supra, at 411 U.S. 203, 36 L. Ed. 2d at 163.

Petitioners were entitled to rely on the absence of

regulations or decisions on leasing desert land entries,

and on the lack of any objection from BLM officials and

representatives when the plans for leasing were dis-

cussed prior to allowance of the entries, and on the

regulations permitting mortgages and the BLM’s ap-

proval of these mortgages, when they accepted the

Government's statutory offer and proceeded to expend

large sums of money in construction of the irrigation

system and development of the land for farming pur-

poses.

Under these principles, the IBLA abused its discre-

tion and exceeded the Secretary's statutory authority

by retroactively applying the new interpretation of §

329 to these entries.

The District Court correctly concluded that the

equities weighed heavily in favor of the entrymen, and

its findings in that regard were not disturbed by the

opinion of the Court of Appeals. If the interpretation

contended for by the Petitioners is applied, no direct

damage results to the Government. If the IBLA’s in-

terpretation is correct, it can be applied to all future

desert land entries. In A. M. Shaffer, 73 Int. Dec. 293

(1966), the Department stated that “the regulations

should be so clear that there is no basis for the appli-

cant’s noncompliance, and if there is doubt as to their

meaning and intent such doubt should be resolved

favorably to the applicants.” Id. at 298."* * * If it is felt

that the practice followed by the appellants is objec-

tionable, the regulations should be amended to make

the offerors’ obligation clear.” Id. at 301.

By failing to apply the rule stated in Shaffer, supra,

the IBLA disregarded vet another established policy of

the Department in arriving at its decision in this case.

That policy was established at least as early as 1955 in

the case of Madison Oils, Inc., 62 Int. Dec. 478, 483.

The IBLA’s failure to apply that policy to these entries

was arbitrary and capricious action, discriminating

against these entrymen, just as was its failure to apply

other long-established policies of the Department.

H. The issues on denial of due process, application of

contract law and dismissal for inadequate pleadings

should have been decided in favor of the petitioners.

Neither the District Court nor the Court of Appeals

discussed or ruled on the issues of denial of due pro-

cess, application of contract law to these entries, or

inadequacy of the contest pleadings under the Ad-

ministrative Procedure Act and the regulations and

decisions of the Department. On the authority of

Sprague v. Ticonic National Bank, 307 U.S. 161, 83 L.

Ed. 1184 (1939), and Hansen & Rowland v.C. F. Lytle

Co., Inc., 167 F. 2d 998 (CA-9th Cir., 1948), and Union

Pacific R. Co. v. Johnson, 249 F. 2d 674 (CA-9th Cir.,

1957), those issues should remain before the District

Court for determination, if this Court denies this peti-

tion or affirms the decision of the Court of Appeals.

These issues are mentioned here only to preserve them

should the decision of the Court of Appeals be regarded

as final for all purposes.

CONCLUSION

For the reasons herein stated, this Petition should be

granted, and the judgment and decision of the Court of

Appeals should be reversed, and the judgment and

decision of the District Court should be reversed in-

sofar as it affirms the decision of the IBLA.

Respectfully submitted,

WILLIAM F. RINGERT

Anderson, Kaufman, An-

derson & Ringert

503 Idaho Building

Boise, Idaho 83702

Attorney for Petitioners

See eee

ee _—

A-1

APPENDIX A

DECISION OF THE

ADMINISTRATIVE LAW JUDGE

(Dated January 29, 1971)

UNITED STATES OF AMERICA,

Contestant

US.

G. PATRICK MORRIS, JOAN E. IDAHO

ROTH, ELISE L NEELEY, 013820,

LYLE D. ROTH, VERA M. NOBLE, 013905,

CHARLENE S. BALTZOR, 013906,

GEORGE R. BALTZOR, JOHN E. 013907,

)

MORRIS, JUANITA M. MORRIS, ) 014126,

)

NELLIE MAE MORRIS, MILO 014128,

AXELSEN, PEGGY M. AXELSEN, 014129,

Contestees 014130,

014249,

FARM DEVELOPMENT 014250,

CORPORATION, 014251,

Intervenor 014252

Desert Land

Entries

STATEMENT OF THE CASE

These proceedings involve a group of 12 desert land

entries situated on 3,781.62 acres of public land adja-

cent to the south bank of the Snake River near Glenns

Ferry in Elmore County, Idaho. The entrymen filed

final proof papers in May 1964. The contests. were

initiated in June 1966 by the Idaho Land Office Man-

A-2

ager, Bureau of Land Management, who filed separate

complaints against each entry. Answers making gen-

eral denials were filed by the entrymen.

Since the entries were developed as a group and the

charges set forth in Paragraph V of the complaints are

identical in each case, they were combined for hearing

and decision.

A prehearing conference was held, in Boise, Idaho,

on April 4, 1967. The hearing, which involved 38 days

of testimony, commenced on June 26,1967, and ad-

journed on August 1, 1968, with sessions being held in

Boise, Idaho, and San Francisco, California. The Gov-

ernment was represented by Messrs. William Burpee,

Riley C. Nichols and Robert S. Burr, Office of the

Solicitor, U.S. Department of the Interior, Boise,

Idaho. Messrs. William F. Ringert of Boise, Idaho, and

Milo Axelsen of Nampa, Idaho, represented the Con-

testees. Mr. Ringert also represented the Intervenor.

The final brief was filed on September 2, 1969.

FINDINGS OF FACT

I. INTITIAL FILINGS

| On January 1963, G. Patrick Morris and his v-ife,

f Juanita M. Morris, Robert S. Skyles and his wife,

Charlotte M. Skyles, Calvin B. Neeley and his wife,

Margaret J. Neeley, each filed a desert land entry

application on land in the area of Sailor Creek near

Glenns Ferry, Idaho. The initial filing fee for all six

applicants was remitted to the Bureau of Land Man-

agement by Mr. Skyles. Accompanying the applica-

a en na

A-3

tions were receipts for individual water permits issued

to each applicant by the Department of Reclamation of

the State of Idaho and a statement that the applicants

intended to cooperate in the construction of an irriga-

tion system to furnish water from the Snake River for

all six entries.

On or before Feburary 21, 1963, Lyle D.Roth and his

wife, Joan E. Roth, Nellie Mae Morris and Elise L.

Neeley also filed applications for desert land entries in

the same area (Ex. G-84). G. Patrick Morris, acting as

their agent, assisted in the preparation of the applica-

tions and remitted the fees to the Bureau (Exs. G-2,

G-3, G-4; Tr. Vol. 12, p. 1864). The applications were

accompanied by receipts for individual water permits

and a schematic layout of a proposed high lift irriga-

tion system designed to deliver water from the Snake

River to their entries and to the entries of the first six

applicants.

In March or April of 1963, through the persuasion of

G. Patrick Morris, Allen T. Noble became interested in

the Sailor Creek entries and he and Morris agreed to

join efforts as a partnership to develop the entire pro-

ject (Tr. Vol. 19, pp. 2911-2915). It was about this time

that Neeley and Skyles withdrew as active particip-

ants in the efforts to obtain financing.

Of the six applications that were filed January 1963,

the only entry that was later allowed was that of G.

Patrick Morris. The status of the Skyles and Neeley

entries is not certain as the record is silent. They may

have been relinquished or they may be pending : ‘o-

wance.

A-4

Eight new applications for entry were filed by May 6,

1963. The applicants were: Vera N. Noble, John and

Lucy Noble, John E. Morris, Keith and Della Jane

Taylor, and George R. and Charlene S. Baltzor. The

fees were paid by Allen T. Noble, and he and G. Patrick

Morris assisted in the preparation of the applications

and exhibits and acted as agents for the applicants in

applying to the State for water permits. In these appli-

cations, the source of water was shown as “Sailor

Creek Company” with a plan proposed for a row-crop

farming operation. At this stage, the project comprised

18 applications embracing 5,760 acres of land.

The applications for John and Lucy Noble and Keith

and Della Jane Taylor were subsequently relinquished

and are not involved in these procedings.

On June 14, 1963, Milo and Peggy M. Axelsen each

filed applications for desert land entries at Sailor

Creek. On the same date, Nellie Mae Morris and

Juanita M. Morris relinquished their earlier applica-

tions and filed new applications covering the entries

now in issue.

Il. DEVELOPMENT OF THE ENTRIES

AND FINANCING

Soon after the first six applications had been filed,

Morris began his attempt to obtain “mortage money”

to develop what is now referred to as the Sailor Creek

Project. From the outset,the applicants intended to

finance the entire operation with borrowed capital (Tr.

Vol. 3, pp. 457-458; pp. 1032 and 1034). Since the main

expense would be the construction of a high lift irriga-

A-5

tion system to pump water from the Snake River, Mor-

ris first contacted the FHA; the Small Project Loans

Division of the Bureau of Reclamation, Traveler’s In-

surance Company, and W. R. Ames Company (Tr. Vol.

7, pp. 1031 1101-1103). After Allen Noble became in-

terested in the project, he contacted Farm Develop-

ment Corporation who had built and financed an irri-

gation system for him in the Dry Lake area. On May

17, 1963, Morris wrote to Mr. B G. Miller (an officer of

Hale Brothers Associates, a parent corporation of

Farmland-Idaho and Hiller Engineering Corporation)

presenting a proposal to irrigate 6,160 acres of desert

land, which comprised the 18 desert land entries plus

400 acres that Morris had asked the State of Idaho to

put up for sale in section 16, Township 6 South, Range

9 East. In the presentation, Morris estimated a total

cost of $1,990,340 which included a water distribution

system, labor camp, roads, wells, sheds, bridge and a

$21,600 item for “payment to Skyles and Neeley.” This

last item raises an inference that Morris was proposing

that Skyles and Neeley be paid for relinquishing their

entries. There is, however, no evidence that such pay-

ment was ever made.

On May 20, 1963, Mr. Miller met with Morris and

Noble to discuss the development. The meeting re-

sulted in an informal agreement in which Hale

Brothers Associates, through their subsidiaries

Farmland-Idaho, Inc., and Hiller Engineering Corpo-

ration, would finance 100 percent of the cost of de-

velopment of the proposed Sailor Creek Project (Tr.

Vol. 4, pp. 583-584; Vol. 9, pp. 2916-2921; Vol. 11, pp.

3136-3148; Exs. G-149, A-14).

A-6

Mr. Miller and Noble then contacted Harley

McDowell (doing business as Idaho Land and Apprai-

sal Service) and hired him to prepare a feasibility

report (Tr. Vol. 37, p. 5769).

On May 21, 1963, Morris and Miller met with Mr.

Ringert to discuss the legal implications of the prop-

osal. It was proposed that Morris and Noble would

farm or supervise the farming of the entries;

that Farmland-Idaho and Hiller Engineering Cor-

poration would construct the main irrigation sys-

tem and finance the development of the project; and

that McDowell’s office would prepare the feasibility

. work, the handling of the applications and the final

proof taking. During the discussion Mr. Miller asked if

the companies he represented, or either of them, could

acquire the land. He was advised by Mr. Ringert “that

he could just as well forget about that until the entry-

men had patent and then see if he could make a deal

with them, if he wanted to at that time” (Tr. Vol. 22,

pp. 5819-5820). Mr. Ringert was retained by Hale

Brothers to investigate the formation of either a joint

venture or a corporation to carry on the proposed plans

(Tr. Vol. 22, p. 3416; Ex. G-150, Doc. U-34).

On May 28, 1963, Mr. Ringert wrote to Mr. Miller as

follows:

From our telephone conversation of yesterday morn-

ing, it is my understanding that the various parties

who have filed application for desert land entries on

lands in the Saylor [sic] Creek Project are agreeable

to your offer to conduct water from Snake River to

the property lines of the various entries at a total

A-7

price of $189.00 per acre, and that the irrigation

system will be constructed by a private water corpo-

ration with whom the entrymen will contract for

their water rights. It is also my understanding that

the water corporation will obtain firm commitments

for long term loans to the entrymen on terms agree-

able to the entrymen and that the entrymen will

agree to borrow funds from the lending institution

which makes the commitments, the loan proceeds to

be applied directly to payment of the water right

contracts. The entrymen also will agree to mortage

their desert land entries to secure such loans and

will agree to exercise best efforts promptly to obtain

patent to the lands upon which entry is made.

It is also my understand [sic] that several of the

entries are to be leased to Allen Noble during the

period in which the entries are being developed and

made ready for final proof, under a lease agreement

whereby the various entrymen shall be entitled to a

fair and equitable portion of the net returns from the

crops produced on the entries.

The foregoing should of course be contingent, as to

each entry, upon the application for the entry being

allowed by the Bureau of Land Management... .

(Ex. G-150, Doc. U-39).

The joint venture, composed of Hiller Engineering

Corporation and Farmland-Idaho, Inc., was formally

created by written agreement on July 5, 1963, and was

named “Sailor Creek Water Company” (Ex. G-80, File

I, Doc. 14, et seg.). Each entryman and the water com-

pany then entered into water right contracts in which

A-8

the company agreed to construct and operate the main

irrigation system for delivery of water and the entry-

man agreed to pay a specified amount of money for the

water rights.

Payment ot the purchase price of the water right

contracts was secured by mortgages on each entry. The

mortgages secured only the deferred installments of

the purchase price and included a clause in which the

mortgagee (water company) agreed to waive any right

to deficiency judgment in the event of foreclosure. This

latter provision was made as a result of a specific

request by John E. Morris (Tr. Vol. 15, pp. 2285

through 2287). Copies of the water right contracts and

mortgages were included in the feasibility report sub-

mitted to the Bureau of Land Management on July 12,

1963, by Idaho Land Appraisal Service in support of

the applications for the 12 entries later allowed and

now in issue (Ex. G-80, Files 1, 2 and 3). Sailor Creek

Water Company paid the cost of the feasibility report.

Sometime prior to August 1963, G. Patrick Morris

decided to attend school in Chicago. Before leaving

Idaho he made an arrangement with Sailor Creek

Water Company to provide him a fixed monthly sum

for one year to be repaid from his “equity in the water

company” (Tr. Vol. 27, p. 4154; Ex. G-150, Doc. U-66).

On August 5, 1963, he was reimbursed $1,438.90 for

the expenses he incurred in connection with the project

and for his past work (Ex. G-149, Doc. H-25; Tr. Vol.

22, p. 3371). Of this amount, $1,300 was compensation

to him for the time he had spent working on the Sailor

Creek matters prior to July 26, 1963.

A-9

Pursuant to Morris’ agreement, he received 12 pay-

ments of $400 each. On the corporate books the pay-

ments were first treated as “compensation.” Later, an

agreement was prepared and signed by Morris which

provided that the $400 monthly checks were to be

repaid from his equity in the Sailor Creek Water Com-

pany

Noble also entered into an employment agreement,

dated August 10, 1963, with the joint venture in which

he was to act as a field manager for construction and

management of the proposed water system at a

monthly salary of $1,000 (Ex. C-CH).

On August 30, 1963, the Bureau of Land Manage-

ment recognized Sailor Creek Water Company as a

source of water supply for the 12 proposed land entries

which are now in issue, involving a total of 3,789.62

acres in the area of Township 6 South, Range 9 East,

Boise meridian, Idaho (Ex. G-80, File 3, Doc. 9).

On August 30, 1963, Mr. Miller wrote a memoran-

dum for inclusion in the Sailor Creek Water Company

file summarizing the situation as it then existed. The

portions of the memorandum which reveal the intent

of the company at this phase of the project follows:

From: B .G. Miller

The Sailor Creek Water Co. has been formed as a

joint venture by two of our wholly-owned subsidi-

aries, Hiller Engineering Corp. and Farmland-

Idaho, Inc. At the outset, the Water Company will

build an irrigation system to provide water from the

Snake River to 3700 acres of desert entry land in

A-10

Elmore County, Idaho. There are another 10-12,000

acres of land adjacent to the project which are sus-

ceptible to the same treatment as the first 3700

acres. The Water Company will continue to supply

water to the land as well as to acquire land and

actively farm land for its own account. Allen Noble

and Pat Morris will be admitted as one-third owners

each.

Desert entry is a right available to each resident

of a state which permits him to file upon up to 320

acres of U. S. owned desert land when he can show

that it is economically and agriculturally feasible to

bring water to the land and to cultivate it for “higher

use”. When the entry is “allowed” (i.e. feasibility

theoretically demonstrated), the entryman has as

many as nine years (including renewal) to bring «th

of his entry into crop. When he has done so, the U. S.

Bureau of Land Management will issue him a patent

granting fee title to him for the entire entry.

It is important to note that, in the interval bet-

ween “allowance” and patent, the entryman may

treat the land exactly as if title vested in him, except

that he cannot make any undertaking in this period

to sell the developed land. He may mortgage it, how-

ever, and the mortgage is enforceable against the

land in the interval before patent as well as after

patenting. However, if foreclosure occurs before pa-

tent issues, the successful bidder must be a qualified

entryman.

In May of this year, G. Patrick Morris and Allen

Noble approached Farmland as well as Ames to go

A-11

into partnership in the development of desert entries

filed by them, members of their families, and per-

sonal friends. Our proposal to them was more ac-

ceptable than our competitors’, and we began de-

tailed planning of the development. Both Morris and

Noble believe that these lands should be under

common management and possibly, at a later date,

common ownership. The intent of the Desert Entry

legislation, however, precludes any person or entity

from rights to more than one entry. While | am

confident that Morris and Noble are genuine in their

belief that, when the land proves and is patented,

they will be able to buy the land at a modest price

because of their close relationships with the entry-

ren, it seemed prudent to plan that this might not

happen. Good faith can weaken markedly when a

dollar sign gets far enough to the left of the decimal

point.

For this reason, the original partnership idea was

shelved and the joint venture was used. Farmland

and Hiller have each agreed to contribute $25,000 to

their capital accounts in the venture and stand

ready to cause HBA to lend as muchas $175,000 to it

(a total of $225,000 as discussed by the HBA Board).

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.