Brief for the United States — United States v. Oregon Lumber Co.

Inthe Supreme Gourtof the United States.

Ooro nn Tem, 1921.

Tue Unrrep States or AMERICA >

a 5. ?

B Orecon Lumper Company, JoserH BAR- No. 245.

. ron, Freperick H. ATKINSON, AND

a 3 Frank M. Snuxrlurr. 4

ON A CERTIFICATE FROM THE UNITED STATES CIRCUIT

COURT OF APPEALS FOR THE NINTH CIRCUIT. -

BRIEF FOR THE UNITED STATES.

STATEMENT.

eS — cinta wait at 1 in the

Vnited States District Court for the district of

regon' against the Oregon Lumber Company and

to recover the value of certain lands in that

ni os reap eons

e tes and beak. but

for the benefit of the Oregon Lumber Company, and

when the proof required under the law had been made,

would convey to the tative of the company

who would thereafter transfer company.

Answering the complaint, “the defendants made

what amounts to a general denial and also set up

three separate defenses, two of which only are rieces-

sacy to be considered for the purposes of this case.

They were in substance: (1) The amount which the

United States received from the several eritrymet as

the price fixed by law for the lands should be de-

_ ducted from any damages awarded; (2) that in Oc-

tober, 1912, the United States brought a suit in

equity seeking the cancellation of the patents to the

same lands involved in this suit; the basis of the bill

8 8 in that case uns the We as in this ese; issue was

joined, and in 1916, after hearing upon the merits,

tte bill was dismissed by the trial court for the reason

chat the United States had full knowledge of the

mattem odimpldined of more than six years prior to

eee: the filing of the bill; that no appeal was taken from

ie these defenses the United States demurred, but

3

coutt has certified to this couft; under section 289 of

the Judicial Code, the following questions (R. 2):

1. Is an action by the United States for the

value of lands as damages, against the patent-

ees for the lands for fraudulent acquisition of

the lands patented under the timber and stone

act, barred where more than six years have

elapsed after the United States, with knowl-

edge of the fraud, brought a suit in equity to

cancel the patents for the same lands, in which

equity suit- decree of dismissal was made

against the United States on the ground that

the suit was barred by the statute of limita-

tions?

2. If the foregoing question be answered in

the négative, should any damages recoverable

be reduced by such amounts as the United

States may have received from the eritrymen,

as thé price fixed by law for the lands de-

seribed in the patents?

ARGUMENT.

I.

is an action by the United States for the ¥ — of

. as damages, against the parentess

4

containing a statement of the case would be sus-

ceptible of several interpretations.

We think it plain that the court does not mean to

ask whether a suit at law brought by the Govern-

ment to recover damages for fraud in procuring pat-

ents is barred because more than six years have

elapsed since the patents were issued or the fraud

discovered. That question is settled by United

States v. Whited & Wheless, 246 U.S. 552. Neither

can the court be inquiring whether such a suit at

law can be maintained more than six years after the

institution of a suit in equity to cancel those patents,

since the statement of the case (R. 1) shows that the

suit at law was commenced in February, 1918, less

than six years after the institution in October, 1912,

of the equity suit.

The question presented to the Circuit Court of

Appeals in this case and, as we understand, upon

which it seeks the instruction of this court, is this:

Is a suit at law by the United States to recover

te value of lands, patents to which were obtained

through fraud, barred because of the fact that pre-

viously an equity suit to cancel those patents had

1 * instituted, which equity suit was dismissed on

or, in shorter form, did the bringing of. that

nach bang and its dismissal ‘because barred con-

oe cc. .

5

of them, he is bound by his election even if that

remedy be not efficactoun. Robb v. Vos, 155 U. 8.

18, 41 et seg.

Te in ecqundly- K

election unless inconsistent remedies are available;

that the pursuit of a remedy which a party may

think himself entitled to, but to which it develops

he is not, does not bar the bringing of a suit on the

remedy which does exist. Northern Assurance Co.

v. Grand View Building Association, 208 U. S. 106;

Bierce v. Hutchins, 205 U. 8. 341, 847; Southern Pac.

Co. v. Bogert, 250 U. S. 488, 490, 491; Bistline v.

United States, 229 Fed. 546.

We contend the case comes within the last stated

rule. When the United States filed its bill in equity

to secure the cancellation of the patents, it was met

with a plea by the defendants that the suit was

barred because not brought within six years from the

date the patents were issued. Act of March 8, 1891,

o. 561, § 8, 26 Stat. 1095, 1099. The Government

asserted that the suit was not barred because it was

brought within six years after it had received notice

of the fraud. Cf. Exploration Co. v. United States,

247 U. 8. 485. The case went to trial and the court

held the suit barred because the United States had

notice of the fraud more than six years before suit

was filed, He Capes: Gein ee te) a

ground.

R r 'whsa: thw int in

equity was filed the United States did not have a

N the can-

6

gelation of the patents. Hence, its eure in puysu-

ns that supposed remedy does net ber the prosegu:

‘tion of the present suit at law to recover the value

of the land.

It ig no answer to that prapasition to gay that when

‘the suit was brought the facts respeeting notice were

known, or, to be more exact, that knowledge was

chargeable to the United States. Granting that they

were known, whether those facts constityted such

natice as would aperate to set the statute af limita-

tions in mation was a question pf law, and because

the United States thought the statute not applieable,

would not militate against the prnaecution of the

present suit, its mistake being due ta an erroneous

~ Po elaborate: Suppose in the equity mit it had

heen shown that certain matter relative to the fraudu-

bent transactions of the Oregon Lumber Company

Waa on file in the General Land Offies, and because

| 9f that, the defendants had claimed that the statute

af limitations was operative; suppose, alee, that the

United States contended that this waa not such

gata constitute notice, and further it was nat enough

de it be in the General Land. Office but it must

Ee alo he Gre se to

ins on its behalf. The deter:

ed nat wold be oe ft, he ome bd

Coin tbe ie atone a

7

tended that beeause the latter had entertained ap

erroneous view of the law, its right to recover in this

action for the fraud perpetrated was barred? Asp

matter of fact, the supposed case is really the situa-

tian which developed in the equity guit,

The law has not gone go far as to deprive parties

of meritorioys claims merely because of attempts to

collect them by inappropriate action, upon which

recovery could not be had. McLaughlin v, Austin,

104 Mich. 489, 491, If the rule were otherwise, 3

mere mistake of judgment would result in depriving

one of valuable rights. Agar v. Winslow, 123 Calif.

587, 592.

The instant cage closely resembles Bistline v,

United Stqtes, 229 Fed. 546. There the United

States brought suit against Bistline to recover dam-

ages for false and fraudulent acquisition of certain

public lands patented to him. It appears that pre:

viously the United States had brought a suit in

equity to cancel the patent, but the defendant's

answer showed the lands to have heen conyeyed to

persons not made parties to the suit. Where

the bill was dismissed and the suit at law instituted.

The defendant asserted that that suit was barred —

on the bo that the United States had elected its

1 18 court held otherwise, and 28 error

of Appeals Sega 5 ꝛ0ʃdir

That action failed because it was held to be barred by

a statute of limitations; thereafter, he sued on the

notes. The doctrine of election of remedies was in-

voked in defense of this second suit but was held not

applicable (p. 1074). Cf. Stone v. Robinson, 218

S. W. (Tex. Civ. App.), 5, 6.

The statute of limitations invoked in the equity

suit merely barred the remedy but did not extinguish

the right of the Government to recover the value of

the lands. United States v. Whited & Wheless, 246

U. S. 552.

Again, the fact that the Government pursued the

equity suit to judgment when met with the plea in

bar, does not make that judgment res judicata in the

instant suit, for the sole question decided there was

the applicability of the statute of limitations. That

was no adjudication of the rights of the Government

but only of the availability of the remedy. Statutes

ol limitation affect the remedy, not the merits.

Townsend v. Jemison, 9 How. 406, 412; McElmoyle v.

Hoden, 18 Pet. 312, 326. A W not on the

‘merits is not res judicata. Cromwell v. County of

Sue 9a U. 8. 361, 852.

we suggest that there is not such

ency between a suit to recover the lands

i because of fraud and a suit to recover

for the fraud, as to bar prosecution of the

n 3 247 U. 8. 207, 211,

9

cured, an alternative prayer might be made for the

value of the lands.

The court referring to the doctrine of election of

remedies, said (p. 218):

At best this doctrine of election of remedies

is a harsh and now largely obsolete rule, the

scope of which should not be extended.

II.

If the foregoing question be answered in the negative,

should any damages recoverable be reduced by

such amounts as the United States may have

received from the entrymen, as the price fixed by

law for the lands described in the patents?

Section 2 of the timber and stone act, supra, pro-

vides that one applying to purchase lands thereunder

shall file with the register of the proper district land

office a written statement in duplicate, verified by oath

of the applicant, setting forth among other things:

that he does not apply to purchase the same

on speculation, but in good faith to appropri-

ate it to his own exclusive use and benefit; and

that he has not, directly or indirectly, made

any agreement or contract, in any way or man-

ner, with any person or persons whatsoever,

by which the title which he might acquire

from the Government of the United States

should inure, in whole or in part, to the bene-

fit of any person except himself, * * *

It is further provided: |

and if any person taking such oath shall swear

ae falsely in the premises, he sball be subject to

10

said lands, and all right and title to the same;

and any grant or conveyance which he my

have made, except in the hands of bona-fide

purchasers, shall be null and void.

In the face of this express provision for forfeiture

of the purchase price, it is obvious that no claim can

be made either for its direct return, or as an offset in

a suit to recover the value of lands eure through

false swearing. 7

In Emmons v. United States, 175 Fed. 514; the

‘qliestion we presented of the right to tecovet the

purchase money paid in connection with entries

under the timber and stone act, which had been

eanceled for fraud. It was contended that no

forfeiture of the moneys could be adjudged previous

| to conviction fot perjury. The court, after quoting

~ that part of the statute declaring the purchase

8 ae said (p. 516): |

ae es are imposed upon the claimant two

he one ! he shall be subject

. er that he sh: or

e

: not. one dependent upon the other; or the

ee. 5 ee Penalty of both con-

me: A 332 258.

il

R. S. 2257 et seg.) it was necessary for the Govern-

ment to tender a return of the purchase money. The

preemption act contained, section 18 (R. S. 2262), a

provision for forfeiture strikingly similar to that in

the timber and stone act. It was said (p. 238):

* * * the provision of the section above

mentioned, that the person who makes the

false oath in the premises shall forfeit any

money he may have paid for the land, answers

in the negative the fourth question, namely,

is the United States bound to offer in the bill,

in a case like this, to return the purchase

money? The statute declares it is forfeited,

and, though the party may lose the land, he

also loses his money as a penalty of his

perjury.

CONCLUSION

Both questions certified should be answered in the

negative. :

JamMEs M. Beck,

WILIA D. Rrrer,

Assistant Attorney General.

H. L. Unprrwoop,

Attorney.

O

SUBJECT INDEX

Page

When the United Statés, with knowledge of the facts

and its rights in the premises, sued to cancel the land

patents alleged to have been fraudulently obtained, it

waived claims for the value of the land as damages

based upon the inconsistent assertion that the patents

passed title

. 1—Under the practice in the federal courts plaintiff is

doubly bound by its election. After the defects of the

statute of limitations had been pleaded against the com-

plaint to cancel patents, and even after the evidence in

support of that defense had been taken, plaintiff had an

election to continue the equity suit or to change to the

law side of the court. Adherence to the original elec-

tion until after decree is fatal to plaintiff's present

action

2—Cases cited by plaintiff

III. This is a common law action for damages in which the

United States in its proprietary capacity is suing for the

value as damages of th the land alleged to have been frau-

dulently obtained. There is no statute governing the

action and the common law measure of damages is ap-

plicable—the difference between the 2 paid and the

actual value of the land at the time of sale

IV. Conclusion

CASES CITED

Agar v. Winslow, 123 Cal. 587; 56 Pac. 422

Avila v. Manhattan Chemical Co., 32 Hun. 1

Atwater v. Whiteman, 41 Fed. 427

Bach v. Tuch, 47 Hun. 536; 126 N. V. 53; 26 N. E. 1019....

Bierce v. Hutchins, 205 U. 8. 340; 51 L. Ed. 828, 833

Bigelow on Frauds, 65

Bistline v. United States, 229 Fed. 546

Black on Rescission and Cancellation, Vol. 2, Sec. 562....

on Reseission and Cancellation, Vol. 2, Sec. 563....

a enk v. Miller, 75 Mich. 23; 42 N. W. 837.

2 sly v. 3 Life Ins Co., 143 Fed. 619;

Bo

Bogert v denten Paci Go, 228 U. S. 137; 57 L. Ed. 768 2

Bogert v. Southern Pacific Co., 215 Fed. 218

CASES CITED—Continued

Bogert v. Southern Pacific Co., 226 Fed. 500..............

Bogert v. Southern Pacific Co., r

Bolton Mines Co. v. Stokes, 82 Md. 50; 33 Atl. 49111.

Boots v. Ferguson, 46 Hun. 129; 10 N. V. S. 761;

c ON beens duesust

Bowen v. Mandeville, 95 N. V. 238) N

Bowers on the Law of Waiver, Sec. 6ù5

Butler v. Wehle, 4 Hun, 54..... ccc

Carey v. Houston & Texas Central Ry. Co., 45 Fed. 438.

Carey v. Houston & Texas Central Ry. Co., 52 Fed. 671.

v. e e eee Co., 150 U. 8. 170

ee * *ũ—“„ „„ „ „„ „„ „„ „„ „

oe ee

—— :᷑¶ ͥ nrp˙ eee eee eee eee eee ee ee eee eee ee

Conrow v. Little, 115 N. Y. 387; 5 L. R. A. 693 ; 22 N. E. 346

Corpus i

Corpus Juris, Vol. 20, T—!..!. panes vac sesases

Cromwell v. County of Sac., 94 U. S. 351, 352......-.....

ee 5 5353Z2⁵33ÿ33333333 *

ee h 5533533533333

‚— ñ H H [hk 3õ3õũ *

Elgin v. Snyder, 60 Ore. 297; 118 Pac. 280.

Ellinger’s A 114 Pa. St. 505; „ ee

Emmons v. nited States, 175 Fed. 514 A

— — ee 1

and Practice, Vol. 21, Pop. 925, 931 8

Fay v. Hill, 249 Fed. 415, 4188. ripen haps

n In re, 228 Fed. 169.

Fowler v. Bowery Sa Bank, 47 Hun. 399; 14 N. V. 8.

515; 84 N. V. 399; 4 L. R. A. 14

eeter 2

99 K9—292323*5öñ eer erereere

—Uz— eee em ee ew ee ee

— Thompson, 111 Mass. 270, 2/2. 4,

Friederichsen v. eneed, 247 U. f 207; 62 L. Ed. 1075, 1083 12

CASES CITED—Continued

Heastings v. McGee, 66 Pa. St. 36õů4141ʒũ4

Henry v. Herrington, 193 N. T. 218; 86 N. E. 29..........

Holt Mtg. Co. v. Strachan, 77 Wash. 380; 137 Pac. 1006... 10

Issenhuth v. Kirkpatrick, 258 Fed. 293.................. 9

Jacob Berry & Co., In re, 174 Fed. 409.................. 9

Jewett v. Pettit, 4 Mich. 508, at 5iIIIIIIi ... 10

wary 4 Millin ng & Elevator Co. v. Union Pac. Ry. Co.,

97 Ia. 719; 66 N. W. os PPTP Rath Meenas 10

Kennedy v. Manry, 6 Ga. App. 816; 66 S. E. 29......... 4, 10

King v. Lamborn, 186 Fed. 1ãꝶ22—ö .

Klipstein & Co., A., v. Grant, 141 Fed. 722. 9

Lawrence v. Southern Pacific Co., 177 Fed. 547........... 24

Lawrence v. Southern Pacific Co., 180 Fed. 822........... 25

Lilly Brackett Co. v. Sonnemann, 157 Cal. 192; 106 Pac. 715 14

Livingstone v. Kane, 3 John., ch. 22õꝶ4 . 6

MacArdell v. Oleott, 70 N. V. Supp. 930. 30

Mac Ardell v. Oleott, 93 N. Y. Supp. 1555 104 App. Div. 263 —

Mac Ardell v. Olcott, 189 N. Y 82 N. 1

Marcus v. National Council of Knights and Ladies of

Security, 127 Minn. 196; 149 N. W. 197.............. 8

McElmoyle v. Cohen, 13 Pet. 312, 326; 10 L. Ed. 177. 20

MeLaughlen v. Austin, 104 Mich. 489, 491; 62 N. W. 719. 20

Moller v. Tuska, AAG 10

Northern Assurance Co. v. Grand View Building 3

208 U. S. 106; Gl D Ad. 10ù 0 .ꝑ 19

Nupen v. Pearce, TPW. AAA 34

Oregon Mill & Grain Co. v. Hyde, 87 Ore. 163; 169 Pac. 791 7

Pitan v. United States, 241 Fed. 864.................. 10, 34

Pittsburg Life & Trust Co. v. No. Central Life Ins. Co.,

We . . bin baba sd oRied 34

Pomeroy’s Code Remedies, 4th Ed., Sec. 348, p. 462....... 21

Retzer v. Wood, 109 U. S. 185; 27 L. Ed. 900............. 14

Robb v. Voss, 155 U. S. 13; 39 L. Ed. 52, 62 „ 4, 7, 9

Rockefeller v. Merritt, 76 Fed. 90999. 34

Scott v. Walton, 32 Ore. 460; 52 Pac. 180. 8, 10

Sigafus v. Porter, 179 U. 8. 116; 45 L. Ed. 113, 118. 34

Simon v. Goodyear Metallie Rubber Shoe Co., 105 Fed. 573. 34

Smith v. Bolles, 132 U. S. 125; 33 L. Ed. 279 W 34

Sg ra age v. Bogert, 250 U. S. 483;

I: ES SARS SRE eT re 22, 28

Bite ol iowe'v © Carr, 191 Fed. 257, 266; 112 C. C. A. 477. 34

CASES CITED—Continued

Steinbach v. Relief Fire Ins. Co., 77 N. X. 498; 12 Hun. 640.

Stokes v. Wright, 20 Ga. App. 325; 93 S. E. 27. 1 ‘ss

Stratton’s e Ma gS Ltd. v. Dines, 135 Fed. 449, 459 5

(Certiorari denied 197 U. S. 623; 49 L. Ed. 911) 34 ee

Stuart v. Hayden, 72 Fed. 402, 411........ e 9 s

Supreme Council v. Lippincott, 134 Fed. 82444. 10

Thomas v. Lock, 66 Tex. 383; 1 S. W. 112, 114. 22

Tooker v. Alston, 159 Fed. 599... .......... sss eeeeeeees 34

Townsend v. Jemison, 9 How. 406, 412; 13 L. Ed. 406..... 20

Trenchard v. Kell, 127 Fed. 596; 142 Fed. 16............ 34

Tullos v. Mayfield (Tex. Civ. App.), 198 S. W. 1073...... 21

United States Compiled Statutes 1916, Sec. 12512. 16

United States Compiled Statutes 1916, Sec. 4672;

Act June 3, 1878, e. 151, See. 22 35

United States v. Chandler-Dunbar Water Power Co.,

152 Fed. 25; 81 C. C. A. 221; affirmed 209 U. S. 447;

33

United v. Debell, 227 Fed. 775, 779; 142 C. C. A. 299 33

2 States v. Detroit Timber & Lumber Co., 131 Fed.

50

677; 67 C. C. A. 1, 10; affirmed 200 U. S. 321;

A/ // ĩ ᷣ ↄ̃ÿÜʃrlḿ 33

Sewer *

ä 2 *

Tw. »

United States v. Minor, 114 U. S. 233, 238; 29 L. Ed. 1010. 35

United States v. Stinson, 197 U. S. 200, 204; 49 L. Ed. 724. 33

United States v. Whited & Wheless, 246 U. S. 552;

; 61

347;

‚— —— *

0 92 N. W. 381, 385.

Wheeler v. Dunn, 13 Colo. 428; 22 Pac. 827/ʒ7/ . 10

Whitman v. Citizens’ Bank, 110 Fed. 503, 512;

TT. ͤ AAA. ͤ . ĩ ' ———„—7—P6— . 14

Wilson v. New United States Cattle-Ranch Co., 73 Fed. 994 34

Wood on Limitations (4th Ed.), p. 999 12

Wood on Limitations, Vol. 1 (4th Ed.), Sec. 7, p. 25. 14

Wood on Limitations, Vol. 1 (ich Ed.), Sec. 63a, p. 304. 14

No. 245

Supreme Court of the United States

October Term,.1921

Tue UnitTep STATEs OF AMERICA,

v.

Orgecon LUAu RRR CoMPANY, JOSEPH BARON,

Freperick H. ATKINSON and

Frank M. SHURTLIFF.

On a Certificate from the United States Circuit Court

of Appeals for the Ninth Circuit ©

STATEMENT

In October, 1912, the United States brought suit

against the defendants in this proceeding to set

aside certain land patents, alleging that the United

States owned the property and that through fraud

practiced by the defendants and others in the year

1899 the lands were patented to the applicants

therefor under the timber and stone act in the year

1900. To this suit the defendants, among other

things, pleaded the statute of limitations, upon

which issue was joined, and in the year 1916, after

_trial upon the merits, the District Court dismissed

the equity suit for the reason that the United States

had had full knowledge of the matters complained

of in its complaint for more than six years before

the equity suit was instituted. No appeal was

prosecuted from this decree.* Thereafter, in Feb-

ruary, 1918, the United States filed an action at

law against the defendants, alleging the same facts

2

that had been alleged in the equity suit, except that

in the action at law it was alleged that title had

passed by the patents and judgment was asked for

the alleged value of the lands, to-wit, $65,000. The

defendants answered, and after denying the mate-

rial allegations of the complaint pleaded two de-

fenses that are brought up by this certificate: (1)

That there should be offset against the damages

claimed the sum of $16,400 paid to the United States

by the several entrymen for the lands patented; and

(2) that by bringing the equity suit and disaffirming

the patents the United States elected to pursue a

remedy inconsistent with the present action for

damages, which was thereby waived.

The certificate from the Circuit Court of Appeals

for the Ninth Circuit asks (1) whether under the

foregoing facts the action at law is barred, and (2)

whether if the action is not barred the defense pro

tanto to the measure of damages should be allowed.

It is apparent from the certificate that the plain-

tiff when it brought the equity suit had complete

knowledge of the facts and of its rights in the prem-

ises, It affords no basis for a contention that a

mistaken remedy was pursued, but presents in a

clean cut manner the question whether eighteen

years after land is fraudulently acquired the grantor

may press an action for damages for the value of

the land, when such grantor had prior thereto in-

stituted a suit to rescind the contract of sale, which

failed because the statute of limitations had run;

also whether under the timber and stone act the

amount paid by entrymen for the lands patented

can be offset against a common law claim for the

value of the land fraudulently obtained.

3

The foregoing sufficiently states the facts form-

ing the basis of the certificate of the Circuit Court,

as to which defendants make the following conten-

tions:

1— When the United States, with knowledge of

the facts and its rights in the premises, sued to

cancel the land patents alleged to have been fraudu-

lently obtained, it waived claims for the value of

the land as damages based upon the inconsistent

assertion that the patents passed title.

2— Under the practice in the Federal Courts

plaintiff is doubly bound by its election. After the

defects of the statute of limitations had been pleaded

against the complaint to cancel patents, and even

after the evidence in support of that defense had

been taken, plaintiff had an election to continue the

equity suit or to change to the law side of the court.

Adherence to the original election until after decree

is fatal to plaintiff’s present action.

3—This is a common law action for damages in

which the United States in its proprietary capacity

is suing for the value as damages of the land al-

leged to have been fraudulently obtained. There

is no statute governing the action and the common

law measure of damages is applicable—the differ-

ence between the price paid and the actual value of

the land at the time of sale.

4

While often referred to as “estoppel by election,”

the doctrine of election of remedies is based upon

waiver. Its application does not depend upon the

existence of those incidents of injury or gain that

are inseparably a part of equitable estoppel.

Robb v. Voss, 155 U. 8. 13; 39 L. Ed. 52, 62.

Kennedy v. Manry, 6 Ga. App. 816; 66 S. E.

29.

Connihan v. Thompson, 111 Mass. 270, 272.

20 Corpus Juris. 4.

An excellent discussion of the distinction is found

in Kennedy v. Manry, supra, from which we quote:

“The defense of the defendant in error does

not depend upon the equitable doctrine of estop-

pel in pais, the essentials of which we have noted

above, but rather upon the plaintiff’s election of

a remedy inconsistent with the one he now seeks

to assert, whereby he waived his right to assert,

a right which he possessed, independently of its

effect upon the other party. *

“Waiver is voluntary and intentional, and

estoppel in pais may be involuntary and uninten-

tional. Estoppel results from an act which may

operate to the injury of the other party; waiver

may affect the opposite party beneficially.

‘Waiver in a voluntary relinquishment of a right.’

French v. Seamans, 21 Misc. Rep. 722, 726; 48 N.

Y. Supp. 9, 13. ‘Waiver is a voluntary relin-

quishment of some known right, benefit, or ad-

vantage. which, except for such waiver, the party

otherwise would have enjoyed.’ Peabody v. Ma-

79 Me. 572, 585, 12 Atl. 630; Austin v.

Welsch, 31 Tex. Civ. App. 526, 73 S. W. 881;

Dailey v. Kennedy, 64 Mich. 208, 31 N . W. 125;

Cowenhoven v. Ball, 118 N. V. 234, 23 N. E. 470.

The doctrine is well stated as follows in Robb v.

Voss, 155 U. S. 13, 15 Sup. Ct. 4, 39 L. Ed. 52:

‘The benefits of ‘waiver by election’ arise where

the remedies are inconsistent, as where one ac-

tion is founded on an affirmance, and the other

upon the disaffirmance, of a voidable contract or

sale of property. In such cases any decisive act

of affirmance or disaffirmance, if done with

knowledge of the facts, determines the legal right

of the parties, once for all. The institution of a

suit is such a decisive act by a party with knowl-

edge of his rights under the facts as determines

his election in the case of inconsistent remedies.’

See, also, MeNutt v. Hilkins, 80 Hun. 235, 29 N.

V. Supp. 1047, 1049; Welsh v. Carder, 95 Mo.

App. 41, 68 S. W. 580. Waiver belongs to the

family of estoppel in a sense, and yet an estoppel

in pais has connections that are no kin to waiver.

Waiver depends upon what one himself intends

to do; estoppel depends rather upon what he

caused his adversary to do. Estoppel may carry

the implication of fraud; waiver, by election,

does not. Estoppel may arise even as between

consistent remedies; for waiver by election to

operate as a bar, the remedies must be incon-

sistent.”

Applied to litigation, election of remedies is

grounded upon the proposition that a defendant who

has injured another has some rights, among them

being the right to be subjected to but one litigation.

Its office is to prevent a plaintiff speculating on the

court’s decision until it is adverse, and then sub-

jecting defendant to another litigation based upon

the same facts. The rule goes but a short way. It

merely denies the right to pursue inconsistent reme-

dies. It is based upon the same rule that denied a

plaintiff the right to harass a defendant with several

inconsistent law suits at one and the same time

(Butler v. Wehle, 4 Hun. 54; Livingstone v. Kane, 3

Johns Ch. 224). As applied to successive litigations

its purpose is well stated in the following language

by the court in Bolton Mines Co. v. Stokes, 82 Md.

50; 33 Atl. 491:

“The obvious principle which underlies this

class of cases must, therefore, be that, when a

party has deliberately selected his form of action,

and has pursued it to a final judgment—and

whether that judgment be for or against him is

wholly immaterial—he shall not be at liberty

to again vex the same defendant with another

suit in a different form of action, for the identical

demand involved in, and passed upon by, the

antecedent litigation.”

The general rule is that an election is made

finally and conclusively when manifested by any

overt act. By the weight of authority the institu-

tion of a suit is such an act. |

eet

4

8

3

2 oes

E

*

Soe

oie

ey

Bierce v. Hutchins, 205 U. S. 340; 51 L. Ed. 828, 883.

“Election is simply what its name imports;

a choice shown by an overt act, between two in-

_- consistent rights, either of which may be asserted

at the will of the chooser alone. Thus, ‘if a man

maketh a lease, rendering a rent or a robe, the

lessee shall have the election.’ Co. Litt. 145a. So

dreach of a condition in his favor. Oakes v.

Manufacturers“ F. & M. Ins. Co., 135 Mass. 248,

7

249. In all such cases the characteristic fact is

that one party has a choice independent of the

assent of anyone else.”

Robb v. Voss, 155 L. S. 13; 39 L. Ed. 52, 62.

“The rule established by these cases is that

any decisive act by a party, with knowledge of

his rights and of the facts, determines his elec-

tion in the case of inconsistent remedies, and

that one of the most unequivocal methods of

showing ratification of an agent’s act is the bring-

ing of an action based upon such an act.”

In re Garver, 176 N. F. 386; 68 NV. E. 667, 669.

“It would hardly seem that authority is nec-

essary to support the proposition that whether

there has been an election of remedies is not

determinable by the result of the suit, but is by

its commencement.”

Oregon Mill & Grain Co. v. Hyde, 87 Or. 163;

169 Pac. 791.

_Grizzard v. Fite (Tenn.), 191 S. W. 969.

Conrow v. Little, 115 V. Y. 387; 5 L. R. A.

693, 22 V. E. 346.

Connihan v. Thompson, 111 Mass. 271.

? Ene. Pleading at. d Practice 364.

2 Black on Rescission and Cancellation, Sec.

363.

20 Corpus Juris 29.

15 Cye. 259.

Just as an election is made by the institution of

a suit, it does not depend for its eonclusiveness upon

the result of that litigation. We are not able to

undertand an argument contending otherwise, for

it an election is a conscious step to enforce a par-

8

ticular remedy taken with knowledge of the facts,

then the institution of a suit certainly would be an

election, and by the same token the election would

not depend upon the result of the first litigation. If

the result governed, there would be no need to men-

tion election of remedies in any litigation. If an

election is not made until plaintiff prevails, then the

doctrine of election will not protect a defendant |

against the harassment of continued and repeated

litigation upon one state of facts.

Bowers on the Law of Waiver, Sec. 65.

Steinbach v. Relief Fire Ins. Co., 77 N. F. 498;

12 Hun. 640.

Marcus v. National Council of Knights and

Ladies of Security, 127 Minn. 196; 149 N.

W. 197.

Bach v. Tuch, 47 Hun. 536, 126 N. F. 53; 26

N. Z. 1019.

Scott v. Walton, 32 Or. 460; 52 Pac. 180.

Henry v. Herrington, 193 N. F. 218; 86 N. E.

29.

Weeke v. Reeve, 65 Fla. 374; 61 So. 749.

We admit that there is a respectable number of

authorities holding that if the first suit is dismissed

before judgment and before the elements of an equit-

able estoppel have intervened, the election may be

recalled. We particularly direct the attention of the

court to the only conclusion that can be reached from

a careful reading of all of those authorities, and

that is (a) the authorities do not hold that there has

not been an election by instituting the suit, but (b)

they do hold that the election is not final and irre-

_ vocable but may be recalled if the suit is dismissed

before judgment and no equitable estoppel has in-

tervened, and (c) if the necessary elements of an

equitable estoppel (i. e., the position of the parties

has been changed), have intervened, or if the case

has gone to judgment regardless of the result of the

litigation, then the election may not be recalled but

is final.

Fraudulent acquirement of property constitutes

the great bulk of cases in which courts are called

upon to hold a litigant to his election of remedies.

Where a conveyance of land has been fraudulently

procured the injured vendor has his choice of two

remedies, (a) he may rescind the sale and sue to

recover his land, or (b) he may affirm the sale and

bring an action for the damages sustained. He

cannot pursue both remeides, and the pursuit of one

with knowledge of the facts waives the right to

pursue the other.

This is the rule laid down by text books treating

of this subject.

Bigelow on Frauds, 65.

2 Black on Rescission and Cancellation, Sec.

562.

Bowers Law of Waiver, Sec. 65.

It is the rule in the federal courts.

Robb v. Voss, 155 U. S. 13; 39 L. Ed. 62, 62.

Stuart v. Hayden, 72 Fed. 402, 411.

In re Fitzhugh Hall Amusement Oo., 228 Fed.

169. 5

Issenhuth v. Kirkpatrick, 258 Fed. 293.

In re Jacob Berry Co., 174 Fed. 409.

A. Klipstein ck Co. v. Grant, 141 Fed. 72.

10

Blakely v. Fidelity Mut. Life Ins. Co., 148

Fed. 619; 154 Fed. 43.

Supreme Council v. Lippincott, 134 Fed. 824.

It is the rule in the state courts.

Scott v. Walton, 32 Or. 460; 52 Pac. 180.

Elgin v. Snyder, 60 Or. 297; 118 Pac. 280.

Weeke v. Reeve, 65 Fla. 374; 61 So. 749.

Moller v. Tuska, 87 N. Y. 166.

Jewett v. Pettit, 4 Mich. 508 at 511.

Heastings v. McGee, 66 Pa. St. 384.

Boots v. Ferguson, 46 Hun 129; 10 V. F. S.

761; 53 S. C. 129.

Bowen v. Mandeville, 95 N. Y. 237.

Kennedy v. Manry, 6 Ga. App. 816, 66 8. E.

29.

Fowler v. Bowery Savings Bank, 47 Hun 399;

II N. F. S. 515; 54 NV. F. 399, 4 L. R. A. 145.

Wheeler v. Dunn, 13 Colo. 428; 22 Pac. 827.

Avila v. Manhattan Chemical Co., 32 Hun. 1.

Holt Mfg. Co. v. Strachan, 77 Wash. 380; 137

Pac. 1006.

Kearney Milling c Elevator Co. v. Union Pac.

Ry. Co., 97 Ia. 719; 66 V. W. 1059, 1060.

This doctrine has been applied in behalf of the

government in actions for damages for fraudulently

securing land patents.

; United States v. Koleno, 226 Fed. 180.

Pitan v. United States, 241 Fed. 364.

United States v. Jones, 242 Fed. 609, 616.

On one state of facts, a suit to rescind for fraud,

and an action affirming the fraudulently acquired

1¹

title and demanding damages, are incontrovertibly

inconsistent.

A further condition prerequisite to holding a

litigant to his election is that at the time of institut-

ing the first litigation there were actually available

two inconsistent remedies, one of which he chose.

There is no room in this case to discuss “mistaken”

remedies. The facts in this case as pleaded and as

certified by the lower court are that plaintiff had

full knowledge of the matters complained of when

the suit to rescind was instituted in 191 2, and had

been in possession of such knowledge at that time

for more than six years.

When the government commenced its suit to

rescind, the statute of limitations had run. The

government knew the statute had run. So knowing,

the government alleged the necessary facts of lack

of information to state a cause of suit for cancella-

tion, and commenced such suit. Issue was joined

and the question of governmental knowledge of the

alleged fraud became a part of the merits of the

case, Testimony was taken on all issues, including

that of fraud, and thereafter decree was passed

dismissing the bill because the court found that the

government had the very knowledge the government

had denied having.

Because this issue of fact was resolved against

the government the latter now contends that such

termination of the litigation proves that it had no

remedy in disaffirmance of the patents at the time

the suit was instituted. 3

The statute of limitations has been considered an

affirmative defense. In order to take advantage of

the statute as a bar, unless the complaint is subject

12

to demurrer, the defendant must invoke it as a de-

fense to the action. The complaint in the previous

suit to annul the patents was not open to demurrer,

but stated a good cause of suit, and to rely upon the

statute as a defense, the defendants were required

by the rule to plead it.

The rule is stated in 25 Cyc., p. 1401, as follows:

“The general rule is that the statute of limita-

tions must be invoked as a defense in some way

and if it has not been urged by demurrer, and

the defense is not pleaded in the answer, the

statute cannot be relied on but is deemed to have

been waived ; and this is so even though the claim

relied on is clearly barred by limitations.”

Wood on Limitations (4th Ed.), page 29:

“When a right is not of common-law origin,

but is given by a statute which prescribed the

time within which the right must be enforced, a

complaint which on its face shows that the time

limit has expired will be insufficient on demurrer.

But, where the statute merely bars the remedy

upon a right which exists at common law, the

statute must be pleaded.”

Similar language was used by the Supreme Court

in Gormley v. Bunyan, 138 U. S. 623; 34 L. Ed. 1086:

“There was no error in not allowing the

Statutes of Limitation of New York and Illinois

to be admitted in evidence, after the court had

overruled the motion of the defendants to be

allowed to plead them as a defense. The only

way in which such statutes are available as a

defense is when they are, at the proper time,

specially pleaded. 1 Chitty on Pl. 514, 515;

— on Pl. 76, note; Wilson v. King, 83 III.

”

13

A suit to annul a patent for fraud: does not fall

within the exception to the general rule which is

stated in 25 Cyc. 1403; as follows:

“Where the statute operates, not merely on

the remedy, but also extinguishes the right of

action, it need not be pleaded. For instance,

where the action is based on a statute which

makes the time of bringing the action an express

condition of the right given, plaintiff must plead

the performance of such condition, and defendant

is not required to plead the limitation in the

statute to entitle him to insist on the objection

that the action was not brought within the time

limited.”

Before the statute of March 3, 1891, was passed,

there was one primary right in the government,

namely, that its lands should be acquired by citi-

zens honestly and without fraud ; and for the breach

of this right, the government had two remedies, a

suit in equity to cancel the patent for fraud, or an

action at law for damages for the fraud.

United States v. Koleno, 226 Fed. 180.

In this case the court, in discussing the opinion

of the Supreme Court in United States v. San Ja-

einto Tin Co., 125 U. 8. 273, 31 L. Ed. 747, holding

that the attorney general had power to bring suits

to annul patents, uses this language:

“This was before the statute of limitations

cited was passed, and clearly corroborates the

assumption that the right to maintain the action

to annul a patent was not created by the statute

cited, but the statute was one purely of limita-

tion.”

14

In United States v. Whited & Wheless, 246 U. 8.

552, 62 L. Ed. 879, the question is answered as fol-

los:

“The Statute of Limitations did not create the

right of action in the government, or either of the

remedies for enforcing that right. It relates to

the remedy, and in terms applies only to one

remedy, that for annulling the patent.”

The statute of limitations here involved is an

affirmative defense, and is not available until

pleaded and proved.

1 Wood on Limitations (4th Ed.), Sec. 7, p. 25.

Retzer v. Wood, 109 U. S. 185; 27 L. Ed. 900.

Whitman v. Citizens’ Bank, 110 Fed. 503, 512;

49 C. C. 4. 122.

We contend that plaintiff in the first instance

pursued a remedy which it had when suit was com-

menced, and that by following that suit to judgment

its election became irrevocable. When the statute

of limitations is made an issue in the case, the re-

sulting. judgment, even though it turns upon the

_ statute, is a judgment on the merits.

1 Wood on Limitations (4th d.), Sec. 63a, p.

304.

Lilly Brackett Co. v. Sonnemann, 157 Cal.

192; 106 Pac, 715.

Wheeler v. Castor, II N. D. 847 ; 92 N. W. 381,

Garvie’ v. Green, 9 8. D. 608; 70 N. W. 847,

858.

Uinger’s Appeal, 114 Pa. St. 505; 7 Atl. 180.

15

The decision in the equity suit was passed only

after the case had been fully tried and submitted.

The plaintiff knew of the fraud of which it com-

plained more than six years before instituting suit.

Having the privilege of choosing between two reme-

dies, one of which was perfectly safe against the

defense of the statute of limitations, plaintiff elected

to pursue a suit for rescission, which could only be

commenced by averring that plaintiff did not learn

of the fraud for many years. That plaintiff so

pleaded is cogent proof that plaintiff made its elec-

tion of remedies with entire knowledge of the statute

and its possible effect on the litigation. Plaintiff is

bound by its election.

Stokes v. Wright, 20 Ga. App. 325; 93 8. E. 27.

Black v. Miller, 75 Mich. 23; 42 V. W. 837.

suit, or to change to the lawside of the court. Adherence to

the original election until after decree is fatal to plaintiff's

present action.

Both by Congressional Act and by Supreme

Court rule a sort of locus penitentiae has been cre-

ated which removes any possible harshness of the

doctrine requiring an election between inconsistent

remedies, and yet retains the wholesome purpose of

the doctrine of election.

Rule 22 was promulgated before the equity suit

was at issue:

16

“If at any time it appear that a suit com-

menced in equity should have been brought as

an action on the law side of the court, it shall be

forthwith transferred to the law side and be

there proceeded with, with only such alteration

in the pleadings as shall be essential.”

Thereafter and during the year before decision

in the cancellation suit, Congress passing the fol-

lowing:

“In case any of said courts shall find that a

suit at law should have been brought in equity

or a suit in equity should have been brought at

law, the court shall order any amendments to the

pleadings which may be necessary to conform

them to the proper practice. Any party to the

suit shall have the right, at any stage of the

cause, to amend his pleadings so as to obviate the

objection that his suit was not brought on the

right side of the court. The cause shall proceed

and be determined upon such amended pleadings.

All testimony taken before such amendment, if

preserved, shall stand as testimony in the cause

with like effect as if the pleadings had been orig-

inally in the amended form.”

U. S. Compiled Statutes 1916, Sec. 1251a.

If plaintiff is not bound by the election mani-

fested by instituting the suit to cancel patents be-

cause there existed a good defense of which plaintiff

knew, but the invocation of which was optional with

defendants (something we do not concede) the plain-

tit was again put to its election after defendants

invoked the defense of the statute.

| The equity rule and the statutory provision, we

submit, were passed for the purpose of preserving

to a defendant the protection afforded by the doc-

trine of election of remeides, and in express recog-

17

nition of the value of that doctrine, but with the

view to permitting a plaintiff to save himself from

any of the harsh effects of that doctrine if he did so

in such manner as to subject the defendant to but

one litigation.

Friederichsen v. Renard, 247 U. S. 207; 62 L. Ed.

1075, 1083.

In this case a man, who had been induced by

fraud to exchange property with another, sued to

rescind the contract. While this suit was pending

he cut some timber from the property which he had

received in exchange. When this developed, of course

it meant that he had by his conduct estopped him-

self to rescind the contract, and thereupon the court

ordered the case transferred to the law docket with

permission to amend and proceed as in an action at

law. The decision gives full effect to Equity Rule 22

and the Act of March 3, 1915, above referred to. The

court held that the proceeding on the law side was

not the institution of a new suit, but was a mere

incident in the progress of the original case.

“It is settled upon reason and authority that

the conversion of a suit in equity into an action

at law or vice versa is not alone sufficient to con-

stitute the beginning of a new action, and that,

with respect to the Statute of Limitations, it is a

mere incident in the progress of the original

case.

And further grounded its decision upon the

statement:

“The ‘amended petition’ was not filed by pe-

titioner’s counsel of their own motion, but on the

order of the court, entered in its discretion, to

promote the ends of justice.

18

“Thus, we are brought to the conclusion that

since the two remedies asserted by the petitioner

were alternative remedies, and since the order

made, requiring the conversion of the suit in

equity into one at law, was entered by the court

sitting in chancery, for us to affirm the judgment

of the circuit court of appeals that the petitioner,

in obeying the order of the trial court, made a

fatal choice of an inconsistent remedy, would be

to subordinate substance to form of procedure,

with the result of defeating a claim which the

mdents stipulated had been sufficiently

established to justify a verdict against them.

This we cannot consent to do.”

This case serves to accentuate the point we have

been urging throughout this brief, to-wit, the doc-

trine of election of remedies is not based upon catch

phrases or doctrinaire reasoning, but it is based

upon the principle that a defendant may not be

vexed by repeated litigations upon the same state of

facts, and to that end the court will permit, and, in

the rescission suit, would have permitted the case to

be shifted to that side of the court which the facts

seemed to warrant. (Fay v. Hill, 249 Fed. 415, 418;

Equitable Trust Co. v. Denver & R. d G. Co., 250

Fed. 3827, 340.) There is no objection to that upon

the basis of election. The objection here is that the

plaintiff did not do that which the law said it could

do, but it speculated upon what the court would do,

refused to obey the road sign so plainly posted by

Equity Rule 22 and the Act of March 3, 1915, and

then when the case went against it undertook to do

that which the law says its cannot do, to-wit, it un-

- dertook to subject the defendant to a second and

_ inconsistent litigation upon the same facts.

19

CASES CITED BY PLAINTIFF

Northern Assurance Co. v. Grand View Building

Assn., 203 U. 8. 105; 51 L. Ed. 109.

In an action to recover upon an insurance policy

the court held that a waiver of conditions appearing

upon the face of the policy could not be proved by

parol in an action at law. Thereafter a suit in

equity was brought to reform the contract so that

it would conform to the terms claimed in the waiver

and for recovery upon the policy as reformed. The

right to bring the second suit was upheld and, in-

deed, there was no election of remedies involved

because both suits proceeded upon the theory of

affirmance of the contract.

Bierce v. Hutchins, 205 U. 8. 840; 51 L. Ed. 828.

Plaintiff sold personal property on a contract

which left title in the plaintiff. Thereafter he

brought suit to enforce a lien against the property,

but dismissed before judgment. Later he brought

aà suit to recover the property. It was very properly

held that there was no election because a remedy to

enforce a lien had never existed as the plaintiff him-

self owned the property.

Bistline v. United States, 229 Fed. 546.

This case does not support plaintiff’s contention.

It was a suit to cancel patent in which defendant’s

answer disclosed that the land had been transferred

to an innocent purchaser before suit. Under the

statute the government had no right against the in-

nocent holder. The government did not know the

facts when the suit was instituted. The suit was im-

mediately dismissed. The suit was started without

knowledge of the facts, which alone takes it out of

the principle of election of remedies.

Agar v. Winslow, 123 Cal. 587; 56 Pac. 422.

In this case plaintiff, holding title to property

as trustee, brought an action in unlawful detainer.

It appeared that prior to that time he had instituted

an action in ejectment but the defendant was in

possession of the property under a subsisting lease

and there never was a right to sue in ejectment.

Therefore the court held that that attempt was to

pursue a remedy which never had existed and there-

fore would not bar the right to pursue a remedy to

which the plaintiff was entitled. The case is clearly

distinguishable from the one at bar.

McLaughlin v. Austin, 104 Mich. 489, 491; 62 V. W.

719.

Here a lien for labor and material was filed

against a contractor when the debt was due from the .

building owner. It did not involve inconsistent

remedies against the same person. A lien asserted

against A could not constitute an election between

inconsistent remedies against B.

__McElmoyle v. Cohen, 13 Pet. 312, 326; 10 L. Ed. 177.

Townsend v. Jemison, 9 How. 406, 412; 13 L. Ed. 194.

- Cromwell v. County of Sac., 94 U. 8. 351, 352.

The instant case doés not involve res adjudicata

nor whether the statute of limitations applicable to

_ litigation is the law of the forum or the leg loci con-

o>"

Tullos v. Mayfield (Tex. Civ. App.), 198 S. W. 1073.

Careful consideration of the foregoing case will,

we believe, be conclusive that it is not authority for

the contention that an election is not conclusive if

the suit in which it is made fails because of the

successful defense of the statute of limitations

pleaded in the answer, and which is made an issue

that is decided after a trial upon the merits. In this

case there had been tried a suit in trespass to try

title to recover the superior title to land which had

been sold and for Which purchase price notes were

given. This suit failed because of the statute of

limitations. Thereafter an action was instituted on

the notes, and as stated by the court it was “an en-

tirely different cause of action.” To our mind the

distinction is very clear. To invoke the doctrine as

of election of remedies the suits involved must have

been based upon one cause of action. There is a

very keen distinction between a cause of action and

remedial right (Pomeroy’s Code Remedies, 4th Ed.,

Sec. 348, page 462). In the Tullos ease the court.

points out very clearly that the notes were not in-

volved in the first law suit.

There is, however, another distinction which, to

our mind, destroys the value of this case as an

authority for plaintiff. When the right is created

by statute no remedy exists unless the plaintiff

brings his cause of action within the conditions

created by statute, and as to such a complaint it is

not necessary for the defendant to plead the statute

of limitations as a defense. Where, however, the

right claimed by plaintiff is one which existed inde-

pendent of statute, then the statute of limitations

becomes a defense that must be pleaded and proved.

In the first instance the remedy does not exist until

the plaintiff pleads and proves the condition prece-

dent imposed upon him by the statute creating the

right, and if he cannot so plead and prove the rem-

* edy did not exist when his suit was filed. In the

second instance the remedy does exist when the suit

is filed and continues to exist until the defense is

established.

At common law the action of trespass to try

title to real estate did not exist, but in Texas it is a

statutory right (21 Ency. Pl. & Practice 925, 931;

Thomas v. Lock, 66 Tex. 383, 1 8. W. 112, 114).

Thsrefore we submit that the Texas case comes

within the rule, that where the right claimed exists

only by virtue of statute, the statute of limitations

ceases to be a defense to be pleaded, but the initial

pleader must bring his case strictly within all of the

conditions of the statute, which are conditions prece-

dent to the right, and if he cannot do so the right

. itself does not exist.

ee It was asserted in the court below, and we pre-

sume will be asserted here, that this court has in a

recent decision practically repudiated the doctrine of

election of remedies. We think this was not the

intention of this court, and that our position in this

regard is supported by the history of that litigation.

The decision referred to is

. Company v. Bogert, 250 U. S. 483;

63 L. Ed. 1099.

In our judgment this case belongs in that class

of cases holding that if the plaintiff did not have a

_ choice between two eixsting remedies there was not

an election. This case does not repudiate the doc-

_ trine of election of remedies and does not approve

23

the principle that would permit a plaintiff to specu-

late upon the court’s decision until he loses and then

come into court and assume a position entirely in-

consistent with that first taken. It is true the court

uses this language:

“There is no basis for the claim of estoppel

by election; nor any reason why the minority who

failed in the attempt to recover on one theory

because unsupported by the facts should not be

permitted to recover on another for which the

facts afford ample basis.”

But it is to be noticed that the court does not say

that a plaintiff may successively come into court

upon inconsistent theories. In view of other ex-

pressions in the opinion it is very plain that the

court decided nothing more than that if the remedy

first pursued had never in fact existed a fruitless

pursuit of that remedy would not constitute an elec-

tion that would foreclose a remedy that did exist.

The case was a suit by minority stockholders in

their rights as individuals to charge the Southern

Pacifie Company as trustee of certain stock which

that company as majority stockholder had obtained

against the rights of the minority stockholders,

There had been a great deal of litigation preceding

the case which finally reached the Supreme Court,

and from which we have quoted. The facts were

that the Houston & Texas Central Railway Com-

pany was dominated by the Southern Pacific Com-

pany as the holder of a majority of its stock. The

Houston Company had a number of bond issues

outstanding secured by mortgages upon its property,

and in suits to foreclose these mortgages the mort-

gagor had interposed defenses. In 1888 a reorgan-

24

‘ization agreement was entered into, by the terms of

which the Houston & Texas Central Railroad Com-

pany was organized. New bonds were issued and

under the decree foreclosing the mortgages a trustee

was appointed who should work out a scheme of dis-

tributing the stock in the new company to the extent

ut least of determining the assessment to be paid by

those who received the stock. The reorganization

agreement, however, provided that the Southern

Pacific Company should receive all of the stock not

taken up by the minority stockholders upon a basis

more favorable than that offered to the minority

stockholders. After this decree was entered it was

assailed by the minority stockholders unsuccess-

fully, and thereafter suits were brought in the state

court of New York unsuccessfully. Finally a suit

was brought in the state court which was removed

to the federal court and resulted in the decision of

the Supreme Court above cited.

We deem it advisable to present the history of

this litigation, and in doing so, to separate our ref-

erence to these cases into those originating in the

federal court and those originating in the state

court, and in turn the decisions of the federal court

will be divided into those initiated in the litigation

finally determined in this case and those which pre-

ceded this litigation.

Lawrence v. Southern Pacific Co., 177 Fed. 547.

After unsuccessful litigation in the state court

of New York an action was there instituted and

upon motion removed to the federal court. It first

appears in the federal reports upon a motion to

remand, which was denied. (See 165 Fed, 241.)

25

This was in 1908. In 1910 the case came up upon a

motion to dismiss because the defendant, Houston &

Texas Central Railway Company, had not been served

and a trustee had died. The case is important be-

cause it sets forth the purpose for which the suit was

brought and makes plain that it was not a suit by

the minority stockholders representing themselves

and to recover something for themselves individ-

ually, but was a suit brought in behalf of the cor-

poration, of which they were minority stockholders,

Lawrence v. Southern Pacific Co., 180 Fed. 822.

This was a renewal of the motion to dismiss in

the case last cited because the suit was in behalf of

the corporation and the corporation was not made

defendant. The court again states its view as to the

purpose of this suit in the following language:

“The plaintiff does not seek to recover a share

of the profits of any of the transactions of the

corporation or its majority stockholders. He

does not seek to obtain damages, nor is there

any theory shown upon which he can prove dam-

age to his property, nor as to which an account-

ing would result in a decree in which compensa-

tion could be computed upon the plaintiff’s rights

as distinguished from his ultimate position as a

stockholder in the absent corporation. It would

seem to be necessary to hold, therefore, that this

action cannot proceed without the presence of the

Houston & Texas Central Railway Company as

a party thereto. Nor can it be urged that this

railway company can be aligned as anything but

a defendant, and therefore entitled to representa-

tion upon any trial. It is the real party in in-

terest if the sales of its property were invalid,

and it is accused of the wrong-doing by which its

property was sold.”

26

And because the court entertained this view an

order of dismissal was entered. An attempt was

made to appeal this case direct to the Supreme

Court of the United States, where it was held that

an appeal from the order of dismissal would not lie.

(Bogert v. Southern Pacific Co., 228 U. S. 137; 57

L. Ed. 768). After the decision in the lower court

Lawrence died and Bogert was substituted as ad-

ministrator of his estate.

Bogert v. Southern Pacific Co., 215 Fed. 218.

A new complaint was filed after the decision of

the Supreme Court refusing to review the order dis-

missing for want of parties (the case referred’ to

above as reported in 180 Fed. 822), and in this new

complaint for the first time the plaintiff asserted

that the wrongful acts complained of were the posi-

tive acts of the parties defendant and based plain-

tiff’s right to an accounting upon allegations of

injury to his own property. The decision is im-

portant in that for the first time the action is based

upon a right in the plaintiff individually and not in

the corporation for which he sued as a minority

stockholder. Also this decision sets forth chrono-

logically the various law suits preceding it.

Baogert r. Southern Pacific Co., 226 Fed, 500.

ere the court grants to plaintiff the relief asked

ne in the earlier case last above referred to, holding

that the Southern Pacific Company was a trustee

for the interests of the minority stockholders; that

tthe foreclosure decree was valid insofar as it passed

a clear title to the Southern Pacific Company and

left to future determination the amount to be paid

27

by the minority stockholders, but held that this

future act when performed was so unfair that it

opened the way for the individual stockholders to

assert that the Southern Pacific Company was a

trustee for them.

Bogert v. Southern Pacific Co., 244 Fed. 61.

In this case the Circuit Court of Appeals affirmed

the conclusion reached by the District Court in the

case last above cited, and denied the plea that

plaintiff should not be permitted to prevail because

he had made an inconsistent election in earlier

cases, pointing out that the claims in the various

suits were not inconsistent or opposite; that the

earlier cases were not brought by plaintiff individ-

ually but were brought in behalf of a corporation,

the recalcitrant majority of which declined to bring

the suit.

“The grievance alleged in these prior suits

was a corporate grievance, viz: that the fore-

closure of the mortgages on the railway com-

pany’s various lines had been brought about

fraudulently by the Southern Pacific Company.

The merits were not passed upon in any of these

cases, each being dismissed on the ground that

the decree of foreclosure could not be attacked

collaterally because there was no proof of fraud,

and in the last case supra ease the railway

company was an indispensable party.

“Then it is argued that the complainant is

concluded by virtue of an election between incon-

sistent remedies, to-wit, because the earlier suits

of which he was a promoter, proceeded on the

ground of fraud, whereas this suit goes on the

ground of an implied trust. But there was no

election. These claims were not opposite and

irreconcilable.”

28

This view of the Circuit Court of Appeals, which

was approved by the Supreme Court in the principal

case of Southern Pacific Company v. Bogert, 250

U. S. 483; 63 L. Ed. 1099, which is now under discus-

sion, should put an end to the contention that the

Supreme Court in its decision in any way departed

from its long maintained position as to election of

remedies. Some language used by the Supreme

Court indicates its approval of the view of the

Circuit Court of Appeals that the earlier suits were

representative suits and therefore not to be charged

as an election by the individual.

“The minority stockholders do not complain

of a wrong done the corporation or of any wrong

done by it to them. They complain of the wrong

done them directly by the Southern Pacific, and

by it alone. The wrong consists in its failure to

share with them, the minority, the proceeds of

the common property of which it, through major-

uy seach holdings, had rightfully taken control.

*

“This suit was not begun until July 26, 1913;

and not until that time was there a proper at-

tempt to assert the specific equity here enforced ;

namely, that the Southern Pacific received the

stock in the new Houston Company as trustee

for the stockholders of the old. * * *

“The Southern Pacific also urges that the suit

must fail because the old Houston Company is

an indispensable party and has not been joined.

The contention proceeds upon a misconception of

the nature of the suit. Since its purpose is

merely to hold the Southern Pacific as trustee

for the plaintiffs individually of the property —

which it received, the old Houston Company

is in no way interested and would not be even a

proper party.” ; 1

29

The cases in the federal court preceding Bogert

v. Southern Pacific Company in no instance asserted

a personal right in the minority stockholders. We

refer to them.

Carey v. Houston & Texas Central Ry. Co.,

45 Fed. 438,

A year after confirmation of the sale under fore-

closure of the properties of the Houston & Texas

Central Railway Company, Carey and other minor-

ity stockholders in that railway company instituted

a suit for the purpose of impeaching this decree, and

the above decision reports the case upon an appli-

cation for injunction pendente lite. The case is

important only in that it sets forth the issues ten-

dered by the plaintiffs and the facts surrounding

the original decree and foreclosure.

Carey v. Houston d Texas Central Ry. Co.,

52 Fed. 671.

This case reports the case last cited at trial on

the merits and dismisses the bill, holding that there

was no fraud in the original foreclosure sale. It is

to be noted that in each of these cases the proceed-

ing was one to retain title to the property in the

Houston & Texas Central Railway Company and

not to establish any personal right in plaintiffs.

Carey v. Houston & Texas Central Ry. Co.,

150 U. S. 170; 37 L. Ed. 1041.

This is the same case referred to in the last two

eitations on appeal to the Supreme Court. The

appeal was dismissed because it was not appealable

direct to the Supreme Court of the United States.

30

The decision is interesting chiefly because it points 5

out that the effort of plaintiffs was to intervene in

the original foreclosure suit and make defenses that

the corporation through its majority control refused

to make.

Carey v. Houston & Texas Central Ry. Co.,

161 U. 8. 115; 40 L. Ed. 638.

This case is upon appeal from decree of the

Circuit Court of Appeals affirming the decree of the

Circuit Court dismissing plaintiff’s bill above re-

ferred to as appearing at 52 Fed., page 671. The

court in dismissing the appeal points out that this

suit by Carey is not an independent suit but is to

be considered as a part of the original foreclosure

suit, and as such we deem that it could not be held

to be an election of remedies based upon decree in

that suit.

The foregoing cases indicate the effort made by

the minority stockholders to secure redress by inter-

vention in the original foreclosure litigation, and

plainly show that here there was no election, as the

suits were all a part of the original litigation and

the effort of Carey was made in behalf of the

corporation.

The litigation in the state courts of New York

is found in Gernsheim v. Olcott, 7 N. F. Supp. 872,

which was a suit brought in behalf of the corpora-

tion, and two appeals of that case ( Gernsheim v.

- Olcott, 10 N. Y. Supp. 438, Gernsheim v. Central

Trust Co., 16 V. V. Supp. 127) and in MacArdell v.

Olcott, 70 N. Y. Supp. 930, which again was a suit

in behalf of the corporation, and two appeals thereof

(MacArdell v. Olcott, 93 V. F. Supp. 799; 104 App.

31

Div. 263; MacArdell v. Olcott, 189 V. F. 368; 82

N. ZE. 161). In the last mentioned case in the appel-

late court, the opinion holds the action to be a

representative action in behalf of the corporation,

and answered the contention that it was a personal

action to impress a trust with this statement, refer-

ring to the complaint:

“It does not comprehend within its scope the

cause of action by minority stockholders to

impress a trust upon property acquired by a

majority stockholder, which appellants are now

urging.”

We have gone to the above length in the case of

Bogert v. Southern Pacific Company, and of the

cases leading up to that decision, because we feel

that those earlier cases point out conclusively that

the Supreme Court was not departing from the

established rule of law that an election of one of

two co-existing and available remedies that are

opposite and inconsistent is a waiver of the other.

That court had so held in earlier cases, and that is

the holding of the state and federal courts gener-

ally. It is apparent, especially in the light of the

decision of the Circuit Court of Appeals which it

was reviewing, that what the court decided is:

(a) the Bogert case did not involve election of rem-

edies because Bogert had never theretofore elected,

all previous suits and actions having been brought

in behalf of the corporation; (b) there was no elec-

tion of remedies because the several proceedings

which preceded the Bogert case were not irreconcil-

able with the Bogert case; and (c) the case came

within the well recognized exception that exists

where the first effort is to pursue a remedy that

85 never had existed because the Houston & Texas Cen-

tral Railway Company had never had a right to

disaffirm the reorganization.

f Otherwise stated, the situation is analagous to a

case where a defendant is charged with negligence,

injuring one party and killing another. The former

is appointed administrator of the latter’s estate and

litigates his claim. Whatever the result of that

litigation, it cannot affect the right of the party

injured to assert his individual claim for damages,

although this claim is based on the same negligent

act as that on which the administrator predicates

his right to recover.

The assertion by Lawrence and Bogert of a claim

alleged to exist in favor of the Houston & Texas

Central Railway Company could not estop them to

assert a claim arising in favor of Lawrence indi-

vidually.

In the case at bar the United States in its

proprietory capacity is plaintiff. The United States

in the same capacity was plaintiff in the previous

case. The same ucts are alleged as the foundation

ot plaintiff’s right of recovery in this case as were

alleged in the former litigation. The same injury

is relied on as the consequence of these acts, to-wit:

the fraudulent acquisition of United States lands.

Under the facts plaintiff had an election of reme-

dies. It could claim either lands or damages; it

was certainly not entitled to both. With full knowl-

edge of the facts and with the knowledge that de-

tendant was pleading the statute of limitations, and

with the right to have the case, therefore, go to the

law docket in order to save defendant that injury

- which the law says he should not be subjected to a

| 3³

when it enforces the doctrine of election of remedies,

and yet preserve to plaintiff an insurance against

loss because of any uncertainty as to the course it

should pursue, plaintiff elected to follow to judg-

ment the remedy of rescission.

III.

This is a common law action for damages in which the

United States in its proprietary capacity is suing for the value

as damages of the land alleged to have been

obtained. There is no statute governing the action and theses

common-law measure of damages is applicable—the difference

between the price paid and the actual value of the land at the

time of sale.

That this is a common-law action, existing inde-

pendent of statute, has been decided by this court. 1

United States v. Whited & Wheless,

246 C. S. 552; 62 L. Ed. 879.

United States v. Koleno, 226 Fed. 180.

The rights of the United States, suing as a

landed proprietor, should be determined by the

same rules that would govern if both parties were

private litigants.

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

49 L. Ed. 724.

United States v. Detroit Timber & Lumber

Co., 131 Fed. 668, 677; 67 C. C. A. 1, 10;

affirmed 200 U. 8. 321; 50 L. Ed. 499. 2

United States v. Chandler. Dunbar Water

Power Co., 152 Fed. 25; 81 C. C. A. 221;

affirmed 209 U. 8. 447; 52 L. Ed. 881.

United States v. Midway Northern Oil Co.,

232 Fed. 619, 631. j

United States v. Debell, 227 Fed. 775, 779;

142 C. C. A. 290.

3 34

State of Iowa v. Carr, 191 Fed. 257, 266;

112 C. C. A. 477.

The measure of damages in an action for frau-

8 dulently acquiring title to land is the difference

ae between the price paid and the value of the land.

<= Sigufus v. Porter, 179 U. S. 116; 45 L. Ed.

ee 118, 118.

oe King v. Lamborn, 186 Fed. 21.

SB Nupen v. Pearce, 235 Fed. 497.

Atwater v. Whiteman, 41 Fed. 427.

Bae «= Glaspell v. No. Pac. R. R. Co., 43 Fed.

a Smith v. Bolles, 132 U. S. 125; 33 L. Ed. 279.

5 Wilson v. New United States Cattle - Ranch

5 Oo., 73 Fed. 994.

8 Rockefeller v. Merritt, 76 Fed. 909. :

ote Simon v. Goodyear Metallic Rubber Shoe Co.,

105 Fed. 573. ;

Trenchard v. Kell, 127 Fed. 596; 142 Fed. 16.

Stratton’s Independence, Ltd., v. Dines, 135 5

Fed. 449, 459. (Certiorari denied 197 U. S.

623; 49 L. Ed. 911.) :

Pitteburg Life & Trust Co. v. No. Central Life ‘

Ins. Co., 140 Fed, 888. ?

Tooker v. Alston, 159 Fed. 599.

Chandler v. Andrews, 192 Fed. 548.

: 5 This rule had been applied in an action by the "

3 Pitan v. United States, 241 Fed. 364.

n

: As we understand the position of plaintiff, it is

: that a different rule should obtain because ‘of the

ET Ce ee RT na

35

provision of the timber and stone act which we

quote:

4 * and if any person taking such oath

shall swear falsely in the premises he shall be

subject to all the pains and penalties of per jury,

and shall forfeit the money which he may have

paid for said lands, ana all right and title to the

same; and any grant or conveyance which he

may have made, except in the hands of bona fide

purchasers, shall be null and void.”

Sec. 4672 L. S. Comp. Stat. 1916; Act June 3,

1878, c. 15h sec. 2.

This act has been construed to relieve the gov-

ernment from the necessity of tendering back the

purchase price in suits to cancel patents fraudu-

lently obtained (Causey v. United States, 240 U. S.

399, 402; 60 L. Ed. 711; United States v. Minor,

114 U. S. 233, 238; 29 L. Ed. 1010), but such suits

come within the purview of the statute.

The point here involved is not touched by Emmons

v. United States, 175 Fed. 514, cited by plaintiff.

That was an action to recover the moneys paid by

entrymen on entries which had been canceled by the

department for fraud. Under the statute the for-

feiture carried loss of the money paid.

It is our position that this statute covers purely

a statutory remedy for forfeiture and is applicable

only to proceedings under the statute, which deals

entirely with cancellation of the patent. In a suit

to cancel a patent for fraud undoubtedly the govern-

ment would not have to pay back the money which

had been paid by the entrymen, and we apprehend

that this statute was passed with a view to prevent-

ing the necessity of tendering back the purchase

36

price in such suits. The case at bar is not an action

upon the statute, but is a common law action for the

recovery of damages, and the rule in the federal

courts as well as the state courts has uniformly

been that the measure of damages in an action of

this kind is the difference between the price paid for

the land and the actual cash market value thereof.

CONCLUSION

We submit that both questions should be an-

swered in the affirmative.

WZLLACR McCamant,

W. Lam THompson,

Attorneys for Defendants.