Opinion — Booth-Kelly Lumber Co. v. United States

LE se RABANNE NEO EMRE IE LLP OEE AE BILE APIO Ay

BOOTH-KELLY LUMBER COMPANY v. UNITED

STATES.

APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE

NINTH CIRCUIT.

No. 258. Argued May 4, 5, 1915.—Decided May 17, 1915.

Judgment of the Circuit Court of Appeal cancelling patents for timber

lands on the ground of fraud affirmed, the explanations of the

grantee who claimed to be a bona fide purchaser without notice

failing to escape the effect of incontrovertible facts which showed

participation in the fraud.

203 Fed. Rep. 423, affirmed.

TuE facts, which involve the validity of patents to land

alleged by the United States to have issued as the result

of fraud in the entries, are stated in the opinion.

Mr. A. H. Tanner, with whom Mr. A. C. Woodcock

and Mr. John Van Zante were on the brief, for appellant:

There is nothing in the Timber and Stone Act to prevent

the entrymen from borrowing the money to pay the ex-

VOL. CCXXXVII—31

482 OCTOBER TERM, 1914.

Argument for Appellant. 237 U. 8.

penses of making the entries and to pay the government

price for the land. United States v. Detroit Timber Co.,

124 Fed. Rep. 393; Lewis v. Shaw, 70 Fed. Rep. 289, 294;

Hoover v. Salling, 110 Fed. Rep. 43, 47; United States v.

Richards, 149 ‘Fed. Rep. 443; United States v. Barber

Lumber Co., 172 Fed. Rep. 948, 960; United States v.

Williamson, 207 U.S. 425; United States v. Biggs, 211 U.S.

507; S. C., 32 L. D. 349; S. C., 34 L. D. 129; Larson v. Weis-

becker, 1 L. D. 422; Appeal of Ray, 6 L. D. 340; Halling

v. Eddy, 9 L. D. 337; Church v. Adams, 37 Oregon, 355;

Wilcox v. John, 21 California, 267; Norris v. Heald, 12

Montana, 282; James v. Ta‘nter, 15 Minnesota, 512;

Gross v. Hofeman, 91 Minnesota, 4; Fuller v. Hunt, 48

Iowa, 163.

Upon making his initial filing on a timber claim the

entryman may sell or agree to sell the claim, or borrow

money on it, or do as he pleases with it without violating

any of the provisions of the Timber and Stone Act. United

States v. Williamson, supra; United States v. Barber

Lumber Co., 172 Fed. Rep. 948, 960; United States v.

Kettenbach, 175 Fed. Rep. 463, 466.

A deed, though absolute in form, if intended as security,

is a mortgage, and it may be shown to be such by parol

evidence. Peugh v. Davis, 96 U. 8. 332; Brick v. Brick,

98 U. 8. 514; Cabrera v. Bank, 214 U. 8. 224, 230; Russell

v. Southard, 12 How. 139; Hall v. O’Connell, 52 Oregon,

164; Kramer v. Wilson, 49 Oregon, 333.

When the Government calls the entryman as a witness

on its behalf it is bound by his testimony unless overcome

by countervailing evidence. United States v. Barber Lum-

ber Co., 172 Fed. Rep. 948, 960; Choctaw &c. Ry. Co. v.

Newton, 140 Fed. Rep. 225, 250; United States v. Budd,

144 U.S. 154.

As to the character of evidence required by a court of

equity to set aside a patent attention is called to the

following decisions: United States v. Budd, 144 U. S.

BOOTH-KELLY CO. v. UNITED STATES. 483

237 U.S. Opinion of the Court.

154, 162; Maxwell Land Grant Case, 121 U. S. 325, 379;

Colorado Coal Co. v. United States, 123 U.S. 307,317; United

States v. Marshall Mining Co., 129 U. S. 579, 589; United

States v. Stinson, 197 U. S. 200, 204; United States v.

Clarke, 200 U.S. 601, 608.

The declarations of a person after he has parted with

the title to real estate are not admissible against his grantee

to defeat or destroy the title. Dodge v. Freedman’s Bank,

93 U. S. 379, 383; Phillips v. Laughlin, 99 Maine, 26;

Vrooman v. King, 36 N. Y. 477.

Mr. Assistant Attorney General Knaebel, with whom

Mr. S. W. Williams was on the brief, for the United States.

Mr. Justice Homes delivered the opinion of the court.

This is a bill in equity brought by the United States for

the cancellation of five patents for timber lands issued to

the four individual appellants and one Jordan, all of whom

subsequently conveyed the lands to the Booth-Kelly Lum-

ber Company. The ground of the bill is that the entries

were made pursuant to an understanding with the Com-

pany for the purpose of conveying the title to it, in fraud

of the law. The defendants, except Jordan, answered

jointly, denying the fraud, and the Company set up that

it was a purchaser for value without notice. The answer

was sworn to by the manager of the Company. After-

wards it was amended by agreement so as to allege that

the defendants Ethel and Lucy La Raut were still the

equitable owners of the land patented to them and that

their warranty deeds to the Company were in fact mort-

gages to secure repayment of advances made to them.

The bill was taken for confessed against Jordan, and both

courts found for the Government as to the land conveyed

by him. The Circuit Court of Appeals, reversing the de-

cree of the Circuit Court, found for the Government as to

OCTOBER TERM, 1914.

Opinion of the Court. 237 U.S.

the other lands also and ordered a decree for the United

States. 203 Fed. Rep. 423.

The issue is purely one of fact upon matters with regard

to which the Circuit Court seems to have been prevented

from coming fo the same conclusion as the Circuit Court

of Appeals rather by the presumption in favor of the

patents than by its belief in the testimony for the defence.

As both courts agreed about Jordan in accordance with

his own statement on the stand, we shall reéxamine only

the cases of the La Rauts.

The La Rauts were poor, two of them being in the em-

ployment of the Company, and they were connected by

marriage with the manager of the Company, Booth. As

the result of an arrangement with Booth, the nature of

which is the point in controversy, by Booth’s direction the

man who was looking out for the Company’s timber pur-

chases reported claims for the La Rauts in the neighbor-

hood of the Company’s extensive tracts. Booth directed

Dunbar, the bookkeeper of the Company, to see to the

furnishing of the money. The La Rauts were taken to

inspect the land, so that they might make the necessary

affidavits, but beyond that appear to have known nothing

and to have made no inquiries at any time. The Com-

pany paid their expenses and, through their hands, the

land office fees, the cost of publication and the purchase

price—all the bills, in short. On May 7 and 8, 1902, they

received their certificates of title and in July executed

deeds, Booth testifies, to him, certainly either to him or to

the Company. At or about the same time each received

$100 just as Jordan did, whose claim was one of the same

group and filed at about the same time. These deeds were

not recorded, and were destroyed; there is some indication

in the evidence that the destruction was at the time of a

Government investigation into land frauds, but the proof

is not clear. In 1904 the patents were issued and were de-

livered to one Alley by the Land Office. Alley secured

BOOTH-KELLY CO. ». UNITED STATES. 485

237 U. 8. Opinion of the Court.

them at the request to John F. Kelly, vice president of the

Company. The Company ever since has paid the taxes

and exercised dominion over the land. In 1907 new war-

ranty deeds were executed to the Company by the La Rauts,

Ethel and Lucy receiving $25, seemingly in connection with

their conveyances, and later Stephen and his wife $50, each.

Booth and Ethel La Raut, now Mrs. Lewis, meet the

inference naturally to be drawn from the facts thus far

stated, by testifying that it was agreed between them that

Booth would get timber claims for her and the other three,

carry them, and advance the money necessary until they

were able to dispose of the property—which would seem

to imply that they bought the land for speculation, con-

trary to their affidavits, but of course denies that they

bought for the Company. Both Ethel and Lucy La Raut

were called by the Government and both asserted that

they bought for themselves, that they still owned the

land, and that their deeds were executed only as security

for the advances that the Company had made, and there

is some corroboration of Booth as to details, but the evi-

dence for the defendants is overborne by the whole course

of what was done. A part of it is discredited by the es-

tablished falsity of similar testimony in the matter of

Jordan. The claims of Stephen A. La Raut and Alice La

Raut his wife, are disposed of by Mrs. Applestone,

daughter of Alice by a former husband, if she is believed.

She says that in 1902 her mother told her that she had

taken up a claim for Mr. Booth and was to get $100 and

that her step-father took up his claim for the same reason,

and that he said that he had received $100 also. The

story is confirmed by the behavior of the parties con-

cerned. For after Stephen La Raut and his wife had made

their last deeds to the Company, when, according to

Booth, Stephen wanted to go to Canada and to dispose of

his land, and applied to Booth, Booth turned him over to

Kelly, gave him no information as to the value of the

OCTOBER TERM, 1914.

Opinion of the Court. 237 U.S.

claims and let him sell them for fifty dollars in addition

to the hundred dollars that each had received in 1902, al-

though they clearly were worth a great deal more. Booth’s

actual conduct is inconsistent with his having entertained

a benevolent scheme, and the sum paid is hardly recon-

cilable with Stephen and his wife being owners of the land.

If the defendants’ case fails as to these two claims it

hardly can succeed as to the others, for according to them

all were taken under a single arrangement for all. And

there is further evidence that Booth’s account cannot be

accepted. We will not encumber the reports with lengthy

statement of details, but apart from evidence of other

fraudulent claims in the same group with these, the books

of the Company which were under Booth’s eye tell a dif-

ferent story from his. The ledger showed no names, but

the journal account under each name charges them with

$400, the price of the land, and $100 which each received ~

(with a small additional item for Stephen) and then on

July 31, 1902, charges the whole $500 to stumpage, the

general account of the Company for the purchase of land.

There the accounts end, and thereafter the lands were

carried on the Company’s land account. The actual ex-

penses other than the foregoing never were charged to

them at all, but all, including the later payments of $25

and $50 went without specification into the stumpage ac-

count. There are attempts to explain all this by alleged

oral statements that Booth held himself responsible, as

there is a lame effort also to get rid of the original sworn

answer, the inconsistencies of which with the subsequent

testimony we have not stated at length. We think it

enough to say that the explanations fail to escape the

effect of the incontrovertible facts.

Decree affirmed.

Mr. Justice McReyno ps took no part in the consid-

eration and decision of this case.